Business

Phillip Frost’s New Vision

Philip Frost, IVAX
Philip Frost, IVAX

Billionaire physician-entrepreneur Phillip Frost has a $47 million house, a $60 million airpland - and a determination to make a lot of new deals.

At 69, after earning more than a billion dollars building and selling Miami companies, Phillip Frost is a long way from retirement.

“I’m going to take it one deal at a time, and I plan to do this until I run out of steam.” How long might that be? “I’m enjoying it. . . . Someone else determines how long the steam lasts.”

In a rare interview, the developer of Key Pharmaceuticals and IVAX talked about the many ambitious deals he’s been doing recently, including taking a major stake in an Israeli biotech company and a telecom firm that makes little antenna boxes to boost cellphone reception in difficult coverage areas.

Forbes lists him as No. 278 among the richest Americans, and No. 3 in the pharmaceutical industry. His reputation among investors is such that he can move stocks, at least those with low trading prices

When he told The Miami Herald he hoped to build up the Ladenburg Thalmann investment bank so his 15-story building “will turn out to be too small for the firm,” the stock shot up 30 percent the next trading day, to $1.30.

Last week, after the announcement he had purchased 14.7 percent of a tiny Plantation company, Dreams, the firm’s stock doubled within 30 minutes, from 17 cents to 35 cents, before closing the day at 26 cents.

STRICTLY BUSINESS

His personality is low-key, focusing strictly on business, virtually never talking about the private side of his life, which includes a $47 million Star Island mansion and a $60 million private plane the size of a commercial airliner.

“Even when he’s angry, you’re never going to see he’s upset,” says Norman Braman, the Miami car dealer who serves with Frost on the University of Miami board of trustees. “He always maintains a very cordial, quiet way about him, but underneath him is a roaring volcano, one that never sleeps,” looking for new ways to make money.

A Miami Beach dermatologist, Frost and Mike Jaharis, a lawyer, took over struggling Key Pharmaceuticals in 1972. Banker Bill Allen recalls lending them $500,000 to take over the company and meet payroll. They sold the company to Schering-Plough in 1986 for $600 million. Frost pocketed $100 million.

The next year, he started IVAX, concentrating at first on generic drugs and then expanding into branded drugs with plants and offices around the world, employing 10,000. Late last year, Frost arranged for the company to be sold to the Israeli-based Teva Pharmaceutical Industries. When the deal closed in January, Frost walked away with $599 million in Teva stock and $517 million in cash.

Speaking recently in his bayview office, Frost stopped only once during an hour-long conversation to check his computer to see how his stocks were doing.

“My business philosophy has always been to think as internationally as possible,” he said.

That’s reflected in two deals he’s done this year. In the first, he led a group of investors putting $15 million into Protalix, an Israeli biotech company developing a way to make proteins for pharmaceutical products in cultured carrot cells.

Such biotech ambitions can be costly and risky, but Frost says the best thing about Protalix is that it already has a competitor, Genzyme, that’s so successful that its stock valuation is $17 billion. What’s more, Genzyme’s technology is much more complicated and requires cultured growth in specially cooled rooms.

Protalix uses simpler vegetable cells, at room temperatures, with disposable plastic bags - meaning the proteins can be made considerably cheaper. “They have some very smart people who know how to get it done,” says Frost.

ISRAELI CLIMATE

Frost is using a shell he purchased, Orthodontix, that will change its name to Protalix and allow the Israeli firm to move quickly to public trading as an American stock.

Frost is also finding other deals in Israel, which he describes as an “extremely user-friendly environment for new businesses,” with good general tax rates, special tax holidays for new manufacturing and matching government grants for scientific firms.

He’s a general partner in an Israel venture capital fund and has purchased a stake in a young Israeli company, Cell Vine, which enhances signals for cellphones by using small boxes to boost signals in hard-to-reach places, such as large buildings or subways. He may eventually help Cell Vine go public by folding it into a U.S. shell, as he did with Protalix.

Closer to home, last week he bought $2 million worth of shares - at 6.4 cents each - in Dreams, a Plantation sports memorabilia company. By the end of the trading day after his participation was announced, his investment was worth $8 million - a 400 percent profit.

‘It’s growing, with good management and a lot of prospects,” he says. He heard about the company from a good friend, Plantation dermatologist Richard Greene. “His son and son-in-law are the principals in the company.”

The entrepreneur, who turns 70 on Saturday, feels at ease discussing such business decisions, but when asked a personal question, about his travel habits, his face stiffened.

Noting he had recently purchased for his personal use an Airbus ACJ Prestige, which sells for about $60 million, he was asked whether there was any particular place he liked to go.

“No,” he said, looking slightly pained.

So where do you travel?

“Here and there.”

Mostly to Europe?

“I try to stay here [in South Florida] as much as I can.”

But you bought this jet? Don’t you like to travel

“Just when I absolutely need to.”

Neil Flanzraich, Frost’s longtime right-hand man at IVAX, says Frost is “completely unassuming, unpretentious” and doesn’t like to talk about himself.

GREEN THUMB

“He loves gardening. Of course, he has a lot of staff, but you can actually see him out there in the mornings” working on his yard, says Flanzraich. “He weeds.”

Frost’s lawn surrounds his 28,000-square-foot, eight-bedroom, 10-bath Star Island house. The interior has art everywhere, imported marble and ancient Hebrew artifacts. He shares the house with his wife, Patricia, who for many years was the principal of Henry West Laboratory School, a joint UM-Miami-Dade Public School project for elementary kids.

Together, they have amassed a huge art collection. They are reported to have switched their collecting tastes in recent years, moving from modern American to older European. To clear their walls, they donated more than 100 paintings to the Smithsonian, which the Washington museum called a “key part” of its early 20th century collection.

Frost is on the Smithsonian’s board of regents; Patricia has chaired an advisory group, the Smithsonian National Board. Their $33 million contribution to the University of Miami School of Music has caused the school to be named after them, and their name, too, is on the art museum at Florida International University, where they gave $3 million and the state matched with another $3 million.

When asked about his philanthropic strategies, Frost says simply: “We just try to spend it wisely in interesting ways to deal with unmet needs.”

FROST’S VIEWS

Other Frost views:

* On business in South Florida: The key is having a top education system to develop the business and scientific minds needed. “I think they’ve come a long way,” he says of the area’s educational institutions. “But they have a long way to go.”

While some bemoan the fact that South Florida’s top firms get sold to outside corporations, Frost not surprisingly doesn’t see that as a negative.

“It’s a feather in our cap,” a measure of entrepreneurial success. “The key is have a constant string of new companies coming along to replace the ones that are lost. Ideally, you’ll have four or five coming along for every one that gets lost.”

* On America’s healthcare problems and the 47 million uninsured: “Something obviously has to be done, but I don’t think either party has come up with a reasonable or thorough enough solution. For the amount we spend in this country, we should be able to cover everyone with good quality healthcare. . . .

“I think there is a lot of waste. There are too many tiers in the healthcare system, too many levels of people making profit on the money spent so that the actual delivery of care is small compared to the total amount spent. Something must be done to streamline the process.”

As for himself, Frost says he has more deals in mind, but he wasn’t ready to talk about them. One deal waiting to happen is eXegenics, a shell company Frost and a group spent $8.6 million to purchase 51 percent - to establish a way to take public some promising firm.

At the end of the interview, Frost asked about The McClatchy Co., The Miami Herald’s new owner. As usual with this physician-entrepreneur, he was not making idle chitchat, as he ended with a solicitation: “Tell them if they’re ever interested in any investment banking . . .”

FROST’S MAJOR INVESTMENTS Teva Pharmaceutical Industries (TEVA) Vice chairman of the board, Frost owns at least $600 million in stock.

Ladenburg Thalmann (LTS) He’s now the principal owner of the investment banking firm, with 31.5 percent of the stock, worth about $56 million.

Vector Group (VGR) The Miami-based company sells cigarettes and has secondary businesses, including real estate services. In July, Frost acquired 3.6 million shares, worth about $601 million.

When a reporter said some readers expressed surprise that a medical doctor would invest in a cigarette company, he replied: “Well, first of all they’re more than just cigarettes. And besides, they are one of the few companies doing research to help those people who do smoke cigarettes.”

Continucare (CNU) A Miami firm offering primary care physician services. A quiet, long-time vestment, Frost is on the board and with 44 percent, is the principal shareholder with about $55 million in stock.

Castle Brands (ROX) Makes and sells liquor. On the board, he owns shares worth about $3.5 million.

Northrop Grumman (NOC) The Los Angeles aerospace company. On the board, he owns stock worth at least $3.4 million.

SOURCE: Securities and Exchange Commission filings. PHILLIP FROST Age: 69. Education: University of Pennsylvania, Albert Einstein College of Medicine. Occupation: Dermatologist. Practiced for many years in Miami Beach. Chairman of Mount Sinai Department of Dermatology 1972-1990. Kept medical license active until 2000. Wife: Patricia, former elementary school principal. Children: None. Home: Star Island, eight bedrooms, 10 baths, 28,000 square feet. Listed market value: $47.4 million. Plane: Airbus ACJ Prestige, about $60 million. Major philanthropy: He and Patricia donated $33 million to the University of Miami school of music.

Board memberships: Ladenburg Thalmann, chairman; Teva Pharmaceutical Industries, vice chairman; American Stock Exchange, co-vice chairman; Continucare, a Miami physician services firm; Northrop Grumman, an aerospace company; Castle Brands, a developer and marketer of liquor; Cellular Technical Services, a telecom firm; Smithsonian Institution; University of Miami. Key dates: 1972 - Takes over financially troubled Key Pharmaceuticals. 1985 - Oversees construction of 4400 Biscayne Blvd. at reported cost of $25 million. 1986 - Key Pharmaceuticals sold to Schering Plough for $600 million. Frost gets about $100 million. 1987 - Starts IVAX. 1995 - IVAX buys 4400 Biscayne for $6 million. January 2006 - Teva Industrial Pharmaceuticals buys IVAX for $7.4 billion. Frost receives $599 million in Teva stock and $517 million in cash. July 2006 - Becomes chairman of Ladenburg Thalmann. September 2006 - Frost repurchases 4400 Biscayne from Teva for $18 million.

SOURCES: Miami Herald archives, Who’s Who in America, Miamidade.gov, Miami Herald research

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