WASHINGTON – The controversy surrounding President Trump's nominee for health secretary – involving the biotech stock he bought at a discount along with Rep. Chris Collins – took root in, of all places, Hillary Clinton's U.S. Senate office.
It was December 2005, and Collins – at the time just a Clarence businessman involved in a biotech firm called ZeptoMetrics – went to visit Clinton. He brought along one of his company's clients, a New Zealand businessman named Simon Wilkinson. They wanted to tell her about a big idea that Wilkinson's company was chasing: a treatment for the deadly anthrax virus.
But Clinton got called away – so Collins and Wilkinson talked. Wilkinson, a Royal New Zealand Navy officer turned finance guy turned biotech entrepreneur, told Collins that maybe, just maybe, his company's research could lead to treatments for AIDS and a host of other diseases besides those caused by anthrax.
Hearing that, Collins wanted to invest. He asked Wilkinson to change his travel plans and come to Buffalo. There, Collins helped recruit financial support that kept Wilkinson's tiny biotech firm alive for more than a decade even though none of its experiments have yet turned into commercial products.
"Chris is a major evangelist for this company," said Tom McMahon, president and CEO of CUBRC Inc., a Buffalo research and development firm that years ago invested in Wilkinson's company, now called Innate Immunotherapeutics.
Collins' preaching turned to trouble, though, for Rep. Tom Price, the Georgia Republican that Trump nominated to be health secretary. Collins was later elected to the House of Representatives, and while in Congress, he told Price about Innate. Price invested in the company. He and Collins both got a 12 percent discount in a private stock sale last year – a deal that Democrats attack as inappropriate.
"We need answers to this regarding whether you and Congressman Collins used your access to non-public information when you bought (stock) at prices that were unavailable to the public,” Sen. Patty Murray, D-Wash., told Price at a recent confirmation hearing.
What went unexplained at that hearing, though, is that by putting money down on Innate Immunotherapeutics, Price and Collins made more of a bet than an investment.
They bet that, after years of struggle and failure, Wilkinson's company had developed a product that could help people with multiple sclerosis – and maybe other horrific illnesses.
Collins buys in
To hear Wilkinson tell it, his relationship with Chris Collins began as many business relationships do: with one company selling products to another.
Wilkinson formed his company – then called Virionyx – in 2000. Three years later, it started buying HIV proteins from ZeptoMetrics, one of several companies that already had made Collins a millionaire.
The two men did not meet until December 2005, when they hoped to enlist Clinton's support for another one of Wilkinson's ventures that Collins' company was involved in: a treatment for anthrax.
Four years after the deadly virus was mailed to several media outlets and U.S. Senate offices, Wilkinson and Collins thought the U.S. Department of Defense might be interested in that new anthrax treatment. And they thought Clinton could make the Pentagon pay attention.
When she didn't show up, Wilkinson took the time to muse about his company's future. Virionyx was developing a technology that could conceivably cure a range of ills, he said. It just needed money to fund its research.
"I told him we were raising funds for the company, and that started off our journey together," Wilkinson said in a telephone interview from New Zealand, where he lives.
That journey quickly took Wilkinson to Buffalo. With Collins' help, he met a core of investors that laid money down on Virionyx.
That core of investors still props up Wilkinson's company, which changed its name to Innate Immunotherapeutics in 2009.
Collins owns 17 percent of the company's stock and is the company's largest investor. His adult son and daughter rank in the top five. Glenn Arthurs, managing director of the UBS investment firm in Buffalo, ranks eighth. An investment firm run by local businessman Paul Harder, a longtime friend of Collins, ranks 11th. CUBRC ranks 17th.
Many of those investors stuck with Wilkinson's company through a lot of tough times.
His company's AIDS treatment never got off the ground because other companies got to the market first with drugs that turned AIDS into a treatable condition.
His company's anthrax treatment failed because it couldn't attract U.S. government support, said Wilkinson, Innate's managing director and CEO.
A treatment for severe acute respiratory syndrome – or SARS, a virus that killed 774 in a worldwide epidemic in 2002 and 2003 – went nowhere because the epidemic ended.
"SARS never came back," Wilkinson said. "We were definitely disappointed. We've still got some lovely antibodies to SARS in the freezer."
Amid all those troubles, Wilkinson's company had at least two "near-death experiences," he said.
For salvation – and the money to keep going – Wilkinson looked to Buffalo as well as New Zealand and Australia, where the company is now headquartered. At least six times, the company turned to private investors in those places to raise funds.
"Chris and the group of sophisticated investors in upstate New York have been absolutely critical to our company moving forward," Wilkinson said. "Without that entire group's ongoing support for the company, I doubt very much that we would be here today."
A miracle drug?
The investors who have stuck with Wilkinson's company – and those who bought in recently – did so for a reason.
Innate Immunotherapeutics is developing what could be a miracle drug.
"It could have an increasing number of applications across a broad range of diseases," said McMahon, of CUBRIC, who, along with his wife, invested in the first of two private stock placements that Innate Immunotherapeutics had last year.
The company is developing the technology that Wilkinson explained to Collins in Clinton's office more than a decade ago, before Collins was elected to office. It's working on a way to induce the human body's innate immune system to fight back when attacked.
After all its failures of a decade ago, Wilkinson's company focused its efforts on seeing whether that new technology can help patients with secondary progressive multiple sclerosis.
At the same time, Innate says on its website that its technology eventually could fight everything from influenza to malaria to Alzheimer's to cancer.
Some researchers at Roswell Park Cancer Institute see hope in Innate's research, too. Dr. Kunle Odunsi, chair of Roswell's Department of Gynecologic Oncology, met Wilkinson when he visited Buffalo again in 2009 and ended up collaborating with Innate on tests with mice to see if the company's technology could be used to combat ovarian cancer.
"While this research in ovarian cancer is at very early stages, we are pleased to move forward with this area of research based on the scientific evidence that this agent may help to improve treatment outcomes and quality of life for some cancer patients," the cancer research hospital said in a statement.
No one is more optimistic about Innate's future than Collins, who maintained his business interests after winning election as Erie County executive in 2007 and to Congress in 2012.
“Congressman Collins has remained committed throughout his relationship with Innate Immunotherapeutics because he strongly believes the technology they have developed has the potential to save millions of lives,” his spokesman, Michael McAdams, said in a prepared statement.
Innate found itself in need of money again last year. It needed to fund the latest round of tests on its multiple sclerosis treatment, so once again it turned to the investors who had propped up the company for years, along with a relatively new one: Rep. Tom Price.
Price first invested in Innate in 2015, and his participation in Innate's two private stock sales last year might have gone unnoticed if Trump hadn't chosen him to be health and human services secretary.
"I think the first time I heard that a gentleman named Tom Price had invested was after the U.S. media started reporting it," Wilkinson said.
The media reported it for several reasons.
Price and Collins are members of Congress. They took part in "private placements" – private Innate stock sales where a select group of investors in the United States, New Zealand and Australia got to buy shares at a 12 percent discount. And they did that while Collins was pushing legislation that could benefit biomedical firms such as Innate by speeding clinical trials of new drugs.
What's more, buying those shares had made Price and Collins richer – on paper, at least. The Innate stock they bought for 18 cents a share closed at 76 cents a share on Friday.
Yet there are reasons to think that this stock run-up may be a mirage.
The Australian branch of Motley Fool, the investment website, advises investors to steer clear of Innate's stock. Tom Richardson, an editor and writer there, noted that Innate has just one product at Phase II of the drug testing process – meaning it has one more entire phase to successfully complete before it can start selling that product.
"Evidently with multiple hurdles to jump, no revenues, and significant costs ahead, it looks an extremely speculative investment prospect and one to watch from the sidelines in my opinion," Richardson wrote last week.
Given the company's history, Robert Galbraith, senior researcher at the Public Accountability Initiative, a Buffalo think tank that has studied Collins' links to the company, can't believe that so many big Buffalo names poured money into Innate.
"It makes you wonder: Is Chris Collins that gifted a salesman?" he asked. "This company sounds like a total dud."
In reality, though, an investment in Innate is a big gamble. The company's multiple sclerosis drug is currently undergoing trials in Australia.
If the trials go well, Innate probably will get sold to a major pharmaceutical firm at a big profit, said Wilkinson, Williamsville financial planner Anthony Ogorek and other financial sources.
"If the data's good, I have a very high degree of confidence that we will be able to enter a significant transaction with Big Pharma that will be very rewarding for the shareholders," Wilkinson said.
But what if the drug trials fail?
"That would probably terminate the company," Wilkinson acknowledged.
Results probably won't be known until August. In the meantime, Wilkinson said he is bemused at the sudden attention being lavished on his tiny company, which still has only 12 employees, most of them in New Zealand.
He is highly critical of news stories that allege Collins and Price got a "sweetheart deal," noting that there is nothing unusual about companies offering private stock sales at a slight discount to their loyal investors.
Yet he also acknowledged that in part, the run-up in Innate's stock price is tied to that very media coverage he criticizes.
And that fact leaves him saying something that Trump, Price and Collins have not been heard to say in recent weeks.
"God bless the U.S. media," Wilkinson said.