NantHealth saw its stock price close down 23 percent on Monday, on the heels of a report from STAT showing how Dr. Patrick Soon-Shiong used philanthropy to boost his health technology company.
NantHealth’s stock closed on Monday at $5.50 a share, an all-time low since the company went public last June. Monday also represented the company’s highest volume of investor trading since mid-December.
The STAT investigation found that the vast bulk of a $12 million donation that Soon-Shiong made to the University of Utah for a genetic research project was funneled back to NantHealth. That’s because of a cleverly-worded contract that the University of Utah concluded left it no choice but to pay NantHealth $10 million to perform genetic sequencing work.
The company counted the genetic tests done for the University of Utah in a tally it gave investors of orders it had received for its signature diagnostic tool, known as GPS Cancer. In fact, the tests for the University of Utah involved only sequencing for preclinical research. They did not have anything to do with the central function of GPS Cancer, which is to sequence patient tumors and recommend promising treatments.
University officials told STAT they did not know why the tests would be counted as GPS Cancer.
Including the Utah test in the count of GPS Cancer orders ended up inflating, by 50 percent, the interest customers were showing in the GPS Cancer tool, STAT found. Soon-Shiong is the CEO and majority owner of NantHealth
Attorneys at New York-based Rosen Law Firm on Monday announced they were investigating “potential securities claims” stemming from STAT’s reports on behalf of the company’s investors and put out a request for NantHealth investors to contact them. Such calls rarely result in a class action suit. (Tax law experts told STAT they did not think the University of Utah deal violated securities law.)
Steven Harper, an analyst at Cantor Fitzgerald, defended the company in a note to investors on Monday, reiterating the firm’s assessment that the company’s stock is at better value than its price suggests. Harper wrote that his firm has no problem with how NantHealth classified the Utah sequencing orders, since the company did not report that work as revenue and disclosed that decision.
The company has been losing tens of millions of dollars in recent quarters and its stock price has been in a tailspin since its public debut. It has yet to report its earnings from the fourth quarter of last year.
NantHealth is slated to present on Tuesday at Cowen & Company annual health care conference in Boston.