An Analysis of the Investment Success of Dr. Phillip Frost

by Troy Bayer
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Submitted by Troy Bayer as part of our contributors program.

Most Americans would list Bill Gates, Steve Jobs, or Warren Buffett as the most successful businessmen and investors in America. However, Dr. Phillip Frost also deserves consideration on this list based on his enormously successful investment track record.

Dr. Frost is a pharmaceutical entrepreneur and investor. A Forbes-listed billionaire, Dr. Frost is currently the CEO of Opko Health (OPK), a multinational holding company, and chairman of Teva Pharmaceuticals (TEVA), the world’s largest generic drug manufacturer. He also serves in various supporting roles for non-profit foundations, educational and research institutions, and for-profit entities such as Ladenberg Thalmann Financial Services (LTS) and The Frost Group. Like Warren Buffett and George Soros, many investors and analysts closely monitor the investments of Dr. Frost due to his long track record of success. Dr. Frost has made a career of reviving struggling companies, as well as establishing successful businesses of his own. These entrepreneurial ventures have led to great advances in the health care industry, product expansion to the international marketplace, and billion-dollar acquisitions, all of which highlight the enormous impact Dr. Frost has had on the business community throughout his career.

Dr. Frost was born in 1935. Before making his name in investing and company-building, Dr. Frost earned a B.A. in French Literature from the University of Pennsylvania in 1957 and M.D. from the Albert Einstein College of Medicine in 1961. From 1963 to 1965, he served as a Lieutenant Commander with the U.S. Public Health Service at the National Cancer Institute. He then accepted a post as Professor of Dermatology at the School of Medicine, University of Miami. In 1972, he was named the Chairman of the Department of Dermatology at Mt. Sinai Medical Center of Greater Miami, where he remained until 1990.

Dr. Frost’s pharmaceutical career started in 1972, when he and then-attorney Michael Jaharis purchased a struggling company known as Key Pharmaceuticals. Dr. Frost and Jaharis turned Key Pharmaceuticals around, and Schering-Plough Corporation acquired the company for $826 million in 1986. When sold, Key Pharmaceuticals had annual revenues of $150 million. Dr. Frost then founded Miami-based pharmaceutical maker IVAX Corporation in 1987, with the goal of developing generic pharmaceuticals and veterinary products. It is estimated that Dr. Frost profited $175 million from the acquisition.

In 1987, Dr. Frost founded IVAX, a company that specialized in the production of generic drugs. Under his leadership, IVAX became a global player in the pharmaceutical sector, selling its brand of generic drugs in Latin America, Central and Eastern Europe, and at one point, was even the largest generic company in the United Kingdom. Dr. Frost served as Chairman and CEO of IVAX until January 2006, when IVAX was sold for $7.4 billion to Israel-based Teva Pharmaceuticals. When Teva acquired IVAX, Dr. Frost was named Vice Chairman. In March 2010, he was elected as the Chairman of the Board of Teva, and was reelected to the position in May 2012.

In 1990, Dr. Frost founded North American Vaccine by combining American Vaccine Corporation and assets of Bio Chem Pharma. Over the next 10 years, North American Vaccine developed three licensed products and a deep development pipeline, which was acquired by another pharmaceutical giant, Baxter, in an all-stock transaction valued at approximately $370 million. During his tenure at North American, Dr. Frost served as Director, Vice-Chair and principal shareholder.

In April 1992, Dr. Frost diversified his focus with a $1.5 million investment in the Whitman Education Group, good for a 33% equity stake in the company, and later acquired an additional 19% stake for a controlling interest of 51%. Over the lifespan of his investment, revenue at Whitman grew from $3.8 million to $105.4 million. The company’s success attracted a suitor, Career Education Corporation (CECO), and was acquired for $230 million in CECO stock, which appreciated significantly following the sale. It is estimated that Dr. Frost profited $169 million from the CECO acquisition.

Dr. Frost is a self-made billionaire with a distinguished track record of successful investments. His financial achievements and notable investments include:

– Continucare: $16.8 million invested, grew to $170 million
– Dreams: $2 million invested, grew to $15 million
– Whitman Education: $6 million invested, grew to $175 million
– Key Pharmaceuticals: $5 million invested, grew to $180 million
– Rolapitant: $29 million invested, grew to $190 million
– IVAX: $100 million invested (including open market purchases), grew to $1.5 billion
– ChromaDex (CDXC): A combination of personal and corporate investments, all up at least 200%. Currently owns over 15 million shares, accounting for 16.5% ownership in the company
– North American Vaccine: $10 million invested, grew to $140 million
– Pershing Gold Corporation (PGLC): Through his Frost Gamma Investment Trust, Dr. Frost joined a private placement along with Coeur d’Alene Mines (CDE) to purchase 1.5 million shares at roughly $500,000. With these holdings, Dr. Frost owns 34% of total holdings at a value in excess of $15 million.

In 2001, Dr. Frost was named Ernst & Young National Entrepreneur of the Year. He has also served as Governor and Co-Vice-Chairman of the NYSE Amex stock exchange (formerly AMEX) since 2005. In 2006, Dr. Frost formed The Frost Group, a private investment firm.

In March 2007, Dr. Frost became the CEO and Chairman of Opko Health (OPK), formed from the merger of Acuity Pharmaceuticals, Froptix Corporation and eXegenics. Opko Health remains Dr. Frost’s primary profession and largest personal investment, accounting for almost half of his wealth. Opko is currently working to launch a revolutionary diagnostics test that will allow doctors to identify disease-specific antibodies in a patient’s bloodstream in just minutes. This technology could reduce the need for laboratories and lead to earlier diagnosis of diseases such as Alzheimer’s, Parkinson’s, and Pancreatic and Lung Cancers. Dr. Frost estimates that this diagnostics tool could bring in more than $3.6 billion in annual revenue.

Dr. Frost is currently the chairman of Ladenburg Thalmann (LTS), and also serves as a director of several other publicly traded companies, including Castle Brands (ROX) and Continucare Corporation (CNU). In addition, Dr. Frost had previously been a director for Northrop Grumman, SearchMedia Holdings (IDI), and Protalix BioTherapeutics (PBTH), where he was one of the first and largest investors. He also serves as Chairman of the Board of PROLOR Biotech (PBTH), a development stage biopharma company.

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