But they still needed to solve the problem of Key’s main product. It treated asthma by combining a bronchodilator and a cough suppressant, which turned out to be “an illogical combination because with asthma you don’t want to suppress a cough — you want the patients to cough up the sputum,” says Frost.
They feared that problem might cause the Food and Drug Administration to take the drug off the market in the United States. “At that time, a drug that was not approved in the United States couldn’t be sold abroad because they didn’t want companies dropping bad drugs on third-world markets,” Frost said.
That would interfere with Key’s sales to Japan, “which was our life’s blood.” Frost said Jaharis — “who had a pretty good nose for opportunity” — learned that the bronchodilator component, theophylline, was the important ingredient for asthma suffers. A small trial in Florida showed theophylline did very well, but only within a narrow “therapeutic window” — too much was toxic, too little had no benefit.
Key decided that the drug worked best as a time-release capsule, which they marketed under the name Theo-Dur. Sales soared and made Key a hugely successful company. “At a certain point, it became the leading drug for asthma in the country,” Frost says.
It’s this tale of Theo-Dur — a drug inherited during the takeover of a nearly bankrupt company — that prompts Zaias, the fellow dermatologist, to say that Frost is “unbelievably clever and very lucky.”
Jaharis said it wasn’t luck at all. “We were working our fannies off to make that company successful.”
All during the Key years, Frost remained a dermatologist, overseeing department operations at Mount Sinai and caring for patients during one or two half-days a week. “I loved taking care of patients, and dermatology was a very important part of my life.” He specialized in “niche areas,” such as treating ichthyosis, severely dry skin, something he had researched since his NIH days. “I had a lot of patients from around the world.”
At least three nights a week, Frost and Jaharis met for dinner at a restaurant to discuss business. Frost usually brought his wife along. She had become principal of West Lab, an innovative public elementary school run in conjunction with the University of Miami, which was to be her job for a quarter-century.
Key kept growing. It formed a partnership with a large Japanese company and gobbled up other pharmaceutical businesses. One deal Frost recalls fondly was with the industry giant, Pfizer, which paid Key to market Theo-Dur under another name. “They put a thousand-man sales force to work on it and took out four-page ads, and we never did anything like that. We came up with a strategy that emphasized the pharmo-kenetics” that doctors would understand. Pfizer “came up with a very ordinary hum-drum marketing approach that did nothing.”
Pfizer’s sales of the drug peaked at about $2 million annually — a fraction of Key’s sales. That was proof to Frost that they could do well against even the biggest competitors.
Frost acknowledges his medical background was a major advantage in assessing pharmaceutical acquisitions, but he was investing in other areas as well, such as banking. He often connected his stakes to people he trusted, such as veteran banker Michael Weintraub. One example: In 1985, he made a quick $5.6 million when Pan American Banks, where Weintraub was vice chairman, was sold to NCNB.