Covid 19 coronavirus: The hedge fund manager behind a long-shot pill

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An experimental drug being developed by a tiny biotech company offers a glimpse of hope at a time of crisis: a twice-a-day pill that could be prescribed to someone as soon as they test positive for coronavirus, attacking the disease before they become seriously sick.

Like all early-stage drugs, it is a long shot.* Less than 10 per cent of medicines that clear the phase one stage of human testing end up making it to market.

However, if the medicine, codenamed EIDD-2801, does end up working, it would be a crowning achievement for Wayne and Wendy Holman, the husband and wife team behind Miami-based Ridgeback Biotherapeutics. It would also be a remarkable turn of events for Dr Holman, who came to prominence in 2014 during the SAC Capital insider trading scandal.

"One thing I often say to people involved is, 'If we fail, no one will remember what we do here'," he said in an interview. "If we succeed, everyone will remember."

Dr Holman, who worked for a division of SAC Capital, Steve Cohen's now defunct hedge fund, between 2003 and 2006, was never accused of wrongdoing. Rather, he was dragged into the scandal by Mathew Martoma, another former SAC employee, who is serving a nine-year sentence for securities fraud and conspiracy.

Martoma alleged, unsuccessfully, that the trades at the centre of the government's case had been made on the basis of Dr Holman's expert advice, rather than inside information. Dr Holman had already left the division of SAC by the time of the trades in question but continued to advise the hedge fund on its healthcare holdings.

The SAC Capital scandal would end up mushrooming into one of the biggest insider trading cases in history. In 2013 the hedge fund pleaded guilty to insider trading charges, paid a record $1.8bn in penalties and had to return money to outside investors. In 2016 Cohen was barred from managing outside money for two years.

Dr Holman left Cohen's company in 2006 to set up his own investment fund, Ridgeback Capital, which lists the couple's $28m Miami home as an address on securities filings.

'We've funded every penny ourselves'

Wayne Holman on their work on a Covid-19 treatment
In 2014 Holman, a former investment manager, formed Ridgeback Biotherapeutics with Dr Holman as her co-founder and scientific adviser. The company has already developed an Ebola drug, which is awaiting regulatory approval.

In January, when the coronavirus outbreak was in its infancy, the Holmans spotted a medicine that others in the biotech industry had missed. Discovered by researchers at Emory University in Atlanta, EIDD-2801 had been intended as a drug for rare encephalitic viruses, but has also shown promise at tackling coronaviruses such as Sars and Mers.

"Wendy met the folks [at Emory] before anybody knew anything was brewing with coronavirus," Dr Holman said. "Ridgeback were the only ones who understood this drug, and that were immediately willing, able and ready to do the work."

On March 23 Ridgeback announced it had licensed the drug from Emory and agreed to conduct the necessary clinical trials. In early April a scientific journal published a study showing that the medicine was able to hamper the virus's ability to replicate itself in human lung cells in test tubes, while also hindering the replication of other coronaviruses in mice.

Scientists at Merck, the large US pharmaceuticals company, were impressed by the animal study and contacted Emory about acquiring the rights to the drug but discovered they had been beaten to it by Ridgeback.

By that point the Holmans had already studied the medicine in phase one trials that try to determine whether a drug is safe for human consumption.

On May 2 Merck announced a collaboration deal with Ridgeback. The terms of the agreement, which is pending regulatory clearance, were not disclosed.

Merck was interested in EIDD-2801 because it is a tablet, whereas other antiviral drugs for Covid-19, such as Gilead Sciences' remdesivir, are administered using intravenous infusion. Theoretically, that means EIDD-2801 could be given to patients as soon as they test positive and before they end up sick in hospital. Not only would that change the course of the pandemic that has killed almost half a million people, it means a much larger market for the drug.

The rapid chain of dealmaking has led to accusations the Holmans are "flipping" the drug in an attempt to make a quick profit. Dr Holman bristled at the allegation, pointing out that the couple have used their own personal fortune to fund the clinical trials so far. In addition to the phase one trial, they have started enrolling patients in two phase two trials: one for hospitalised patients and another for outpatients who have tested positive.

"All of the money we've used to develop 2801 came from Wendy and myself — we've funded every penny ourselves," he said. "We didn't want to spend time raising money [from outside investors] and very few were interested at the time."

However, when Merck did express interest, Ridgeback was keen to do a deal. Part of the reason was that Dr Holman already knew Merck's top scientist, Roger Perlmutter, one of the longest-serving heads of research and development in the industry.

"We weren't looking to partner with anyone, but as we got more public attention, people reached out," he said. "If Roger wants to help develop a potentially life-saving drug for [Covid-19], you talk to Roger."

Dr Holman said Merck's involvement meant the drug would end up costing less if it were successful. "Merck has substantial manufacturing capacity to make this in large scale at the lowest possible cost," he said. "If this works, then there is going to be a tremendous amount of need globally."

Ridgeback has said it intended to manufacture 4.5m doses by the autumn to ensure there was enough supply if the trials generated positive results.

Even by the standards of the US biotech industry, which has shown an ability to develop drugs at breakneck speed, Ridgeback has achieved a lot in a short space of time. Within 20 days of licensing the drug from Emory, it started phase one trials, with phase two trials beginning two months later.

The Holmans worked hard — 16 hours a day, according to Dr Holman — but they were also lucky. They managed to quickly secure a clinical site in the UK for the phase one study because there was spare capacity due to the coronavirus pandemic, which had resulted in many trials being postponed.

Ridgeback's drug is a nucleoside analogue that tricks viruses into using the wrong building blocks, leading to a series of mutations that cause the virus to form a weak chain.

Some scientists have raised concerns about the safety of the drug, which can cause mutations in bacteria. Although that does not necessarily mean it will do the same in humans, some mutagenic drugs can increase the chance of someone developing cancer.

Ridgeback and Merck say this is less of a risk with EIDD-2801 because it is intended to be given to patients for a short period of time — just five days — but Merck will have to perform carcinogenicity studies to satisfy medical regulators.

Rick Bright, the former government scientist-turned-whistleblower, has previously said he faced political pressure to give government funding to the Holmans but resisted because he was worried about the drug's safety.

Dr Bright's attorney, Lisa Banks, told the Financial Times that he had come under "significant pressure to deviate from scientific and contractual review processes". But she also added that his views on the potential dangers of EIDD-2801 had evolved following the success of the phase one trial.

"He is encouraged to see that the drug has now been evaluated in human clinical studies and that Merck has found the data to be supportive of further development for the drug," she said.

There is little doubt that if EIDD-2801 is ultimately successful, it will become a best-selling medicine with the ability to slow the march of coronavirus, and potentially future pandemics.

In a recent note, analysts at Morgan Stanley said investors "underappreciate" the drug, adding: "[It] has blockbuster potential if successful. Covid-19 patients could take this [tablet] after initial diagnosis to reduce disease severity and risk."

However, the brutal laws of drug development mean the odds are stacked against EIDD-2801, and even Dr Holman acknowledges the difficulties that Ridgeback and Merck face.

"We have got through the riskiest part and . . . with data that was better than we hoped," he said. "[But] we know precious little [about Covid-19], so it's very difficult to design and run clinical trials. That's the most difficult part."

Written by: David Crow
© Financial Times