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Hedge fund manager stands to profit on ‘flip’ of taxpayer-funded coronavirus drug

Emory University’s coronavirus pill EIDD-2801 highlights financial speculation on drugs developed with public investment

Rick Bright, former director of the Biomedical Advanced Research and Development Authority, at a House Energy and Commerce subcommittee hearing on May 14. (Greg Nash/The Hill/Bloomberg News)
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Clarifications: A previous version of this story gave inadequate prominence to the role of Wendy Holman, the chief executive of Ridgeback Biotherapeutics; it now introduces her by noting her professional status. In addition, this version places greater emphasis on the company’s prior experience developing an Ebola drug and includes mention of the experience of its employees in developing pharmaceutical products. The company, which declined to answer questions during the reporting of the story, said after publication that it will continue to be closely involved in the development of the coronavirus therapy, as the story now indicates.

Ridgeback Biotherapeutics had no laboratories, no manufacturing facility of its own and a minimal track record when it struck a deal in March with Emory University to license an experimental coronavirus pill invented by university researchers with $16 million in grants from U.S. taxpayers.

But what the tiny Miami company did have was a growing team with experience in pharmaceutical development and research and a willingness from its wealthy owners — chief executive Wendy Holman and her husband, hedge fund manager Wayne Holman — to place a bet on the treatment in the midst of the coronavirus pandemic. That wager paid off with extraordinary speed in May when, just two months after acquiring the antiviral therapy called EIDD-2801 from Emory, Ridgeback sold exclusive worldwide rights to drug giant Merck.

The rapid turnaround of rights to a publicly financed drug highlights the frenzy of financial speculation that has accompanied the spread of the coronavirus around the world. Congress and the Trump administration have authorized more than $7 billion for research and industry subsidies in a desperate hunt for therapies and vaccines.

The perception that companies are profiteering during a global medical crisis — especially in cases where inventions were funded by taxpayers — poses political dangers to the pharmaceutical industry.

Demands are increasing in Congress and around the world that drug companies set affordable prices on coronavirus treatments and vaccines and distribute them equitably. Yet the role of middlemen like Ridgeback puts pressure on companies to increase prices, by adding extra costs. It also raises questions about who is financially benefiting by securing monopoly licensing rights to publicly financed inventions.

Ridgeback, which has one other drug in development for Ebola, was a relatively obscure entity when it snapped up EIDD-2801 from Emory in a deal signed March 19. The university, without disclosing terms, said in a news release that Ridgeback “will be responsible for conducting the necessary trials to bring EIDD-2801 to licensure.”

Within days of securing Emory’s licensing deal, the company mounted a campaign to win hundreds of millions in government funding to develop the drug, according to a whistleblower complaint by Rick Bright, former director of the Biomedical Advanced Research and Development Authority, as well as emails obtained by The Washington Post. After failing to secure the government contracts, Ridgeback launched a human safety trial of the drug in the United Kingdom and transferred rights to Merck in late May.

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In addition to an upfront payment of undisclosed size from Merck, Ridgeback will receive unspecified “milestone” payments and a share of net proceeds if the drug is approved, the companies said. Merck will conduct future clinical trials, apply for regulatory approvals and manufacture the drug, which has been shown in lab and animal studies to cripple the virus by interfering with viral RNA. Ridgeback said it will remain involved in developing the drug.

Specialists in drug development called Ridgeback’s turnaround unusually rapid.

“I would think that universities … would not normally transfer products to basically a house-flipper,” said Aaron S. Kesselheim, a physician at Brigham and Women’s Hospital in Boston and professor at Harvard Medical School. “I wouldn’t think they would have to engage with speculators, like it appears that Ridgeback Biotherapeutics is.”

Wayne Holman, who holds a medical degree from New York University, is a hedge-fund manager with a long track record of investing in pharmaceutical stocks. He founded his fund Ridgeback Capital Management in 2006. Wendy Holman, chief executive of Ridgeback Biotherapeutics, is a former investment manager who was named to President Trump’s advisory council on HIV/AIDS in 2019.

The Holmans live on Miami’s exclusive Star Island, where they bought two mansions for a combined $47 million in 2014 and tore one of them down. Ridgeback Capital’s headquarters is in a small office building not far away in Coconut Grove, near a private school where Wendy Holman serves on the board of trustees. Ridgeback has one other drug in development that has been supported with $25 million in government contracts, a potential Ebola treatment invented by a division of the National Institutes of Health. The couple did not respond to requests for comment.

EIDD-2801 is among hundreds of projects underway around the world to develop treatments and vaccines to combat the coronavirus amid signs that covid-19, the disease the virus causes, will become a stubborn, endemic illness that lingers in human populations for many years. If it works and is found to be safe, it likely would become a strong rival to Gilead’s remdesivir, the first antiviral to treat the coronavirus, which must be given intravenously.

“EIDD-2801 has several attributes including oral availability, broad antiviral activity versus multiple coronavirus strains, notably SARS-CoV-2, as shown in preclinical studies, and early clinical results showing that it is well-tolerated from a study conducted by Ridgeback,” Merck said in an email.

But the path to Merck’s portfolio of early-stage drugs has grabbed attention.

“Molecule-flipping is a good characterization of what it is,” said James Love, director of Knowledge Ecology International, a nonprofit watchdog group that tracks public investments and intellectual property.

Hunting through scientific papers and forging alliances with academic laboratories is often done by small firms backed by venture capitalists. Start-ups looking to profit by securing rights to new molecules and nurturing their early-stage development are an ingrained part of the ecosystem of drug development. The goal typically is to push a drug far enough through the approval pipeline — a process that often takes years — until a larger company buys the rights and completes commercialization.

With the coronavirus creating huge demand, that activity is accelerating, say specialists in drug licensing and intellectual property.

“Merck is much better positioned and funded to move the drug through development,” said Joseph A. DiMasi, director of economic analysis and research at the Tufts Center for the Study of Drug Development, which receives drug industry funding. “It is the speed with which this has happened that is extraordinary. That speed in the context of a pandemic is a good thing.”

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The flood of government money is spurring attention to diseases that have been neglected by large drug companies. Vaccines and therapies for viruses do not hold the promise of large, lucrative drug sales because they are not taken as regular treatments for chronic conditions. Many virus outbreaks disappear on their own, making it risky for companies to spend on research. To plug the gap, U.S. government agencies support academic research, or invent and develop drugs directly in government labs.

“When it was limited to things like Ebola and SARS, you didn’t see as much as engagement by the private sectors. These were normally backwater areas in neglected disease,” said Love. “People now are rushing in and scaling up.”

Emory had secured pledges of $30 million in government contracts from science and defense agencies in the past five years to develop EIDD-2801 but tapped just more than half of the available funds, an Emory spokeswoman said. The university did not respond to questions about how it picked Ridgeback.

“Emory is proud that we invented EIDD-2801, and we appreciate the partnerships and government support that makes it possible to provide therapies that will benefit society,” Nancy Seideman, Emory’s vice president for academic communications, said in an email. “Any royalties that we receive — if anything — are channeled directly back to serving our educational and scientific mission.”

In instances where taxpayer-financed drugs make it to market via exclusive licensing deals — which typically have undisclosed terms — debates have sprouted around monopoly pricing.

Liberal members of Congress and consumer advocates have demanded that taxpayers’ investments be factored into government contracts for development of coronavirus treatments and vaccines, and that terms of licensing deals be disclosed to the public. But Democratic proposals to place constraints on prices for covid-19 therapies did not make it into the $3 billion in emergency subsidies for the drug industry that lawmakers approved in March.

Some companies with experimental medicines backed by public investment have been the subject of intense financial speculation. Investors have gambled that Gilead’s drug remdesivir, which has been proven to modestly improve outcomes, will produce a windfall for the company. The company’s stock has been subject to volatile swings in the past three months.

Remdesivir was developed with at least $70 million in public investment, according to advocates, and a debate has begun about costs and access before Gilead has even set a price.

Even finding a covid-19 vaccine won’t be enough to end the pandemic

Moderna is developing a leading vaccine candidate that is co-owned by the NIH. Government interest in the vaccine has not stopped a boost in the company’s stock of nearly 200 percent since the end of February.

EIDD-2801, which was invented as an influenza drug and has demonstrated effectiveness against multiple viruses in lab dishes, works similarly to Gilead’s remdesivir by interfering with viral RNA. But it has the advantage of being a pill, which means it could be taken by people in their homes, soon after symptoms appear. If the drug proves to be safe and effective, it could prevent countless hospitalizations and deaths and reduce the spread of infection.

Drugs in its class have been known to cause genetic mutations that lead to birth defects, but Merck said when it licensed the drug last week that it was “well-tolerated.” Wayne Holman has said the drug can safely be used for a short course of treatment to fight a viral infection.

As for potential pricing, “Merck and Ridgeback are committed to ensuring that any medicines we develop for SARS-CoV-2 will be accessible to patients globally,” Merck said in an email. It would not discuss specifics.

The deal between Emory and Ridgeback was inked by the university’s Drug Innovation Ventures at Emory (DRIVE), a nonprofit tech-transfer corporation led by Emory scientist George Painter, who holds patents related to the drug. Highly accomplished in both laboratories and boardrooms, Painter is the former chief executive of Chimerix, a North Carolina drug company, and a high-ranking official in antiviral research at the former Glaxo Wellcome. Painter did not respond to interview requests.

On March 20, the day after the Ridgeback licensing contract was completed, Painter and other scientists at the University of North Carolina, Vanderbilt University and Emory posted a preliminary scientific paper on the preprint website showing EIDD-2801 thwarted SARS-CoV-2 in human cells and in mice infected with other types of coronaviruses. The peer-reviewed journal Science Translational Medicine published the paper on April 6.

At Vanda Pharmaceuticals, a biotechnology firm headquartered in Washington, D.C., founder and chief executive Mihael Polymeropoulos saw the scientific results in the journal and had his company contact Emory about a potential licensing opportunity. It was too late.

“They came back and they said they had already done a deal with this company, Ridgeback,” Polymeropoulos said. “This deal must have happened in record speed.”

The chief operating officer at Emory’s DRIVE told the Daily Report, an Atlanta trade publication, that the licensing contract, which normally would take four to six months to complete, was negotiated and signed in two weeks after a “mad scramble” by university and Ridgeback lawyers rushing to respond to the coronavirus.

Ridgeback’s involvement burst into the broader public sphere in early May, when Bright, the ousted head of BARDA, filed his explosive whistleblower complaint. Bright alleged that he clashed with Robert Kadlec, the Health and Human Services assistant secretary for preparedness and response, over demands that he award BARDA contracts to well-connected companies. HHS has said it “strongly disagrees” with Bright’s allegations.

In his complaint, Bright cited attempts to secure money for EIDD-2801 — first by Painter in November 2019, and then by Wendy Holman in early April — among episodes of alleged political pressure.

Bright said he rejected requests to fund EIDD-2801 because Emory had already received pledges of $30 million from the National Institute of Allergy and Infectious Diseases and the Department of Defense to cover development of the drug, including human safety testing. Without first seeing safety results, Bright said, it did not make sense to back the drug with new infusions of federal cash.

Wendy Holman’s pleas for government money in early April — less than two weeks after Ridgeback secured rights to the drug from Emory — are contained in emails she wrote to government officials. The full emails, excerpts of which were cited in Bright’s whistleblower complaint, were previously disclosed by the journal Science and were obtained by The Post. Holman said in one email to BARDA that she had been in personal contact with Kadlec, who wanted the project to move forward.

“We need this approval to start the clinical trial for EIDD-2801 as soon as possible,” Wendy Holman wrote to a BARDA contracting official on April 7, just days before Ridgeback planned to launch its first human safety trials. “Lives are literally depending on it, Dr. Kadlec is pushing us to move fast, but we can’t without this authorization.”

“To avoid any delay in executing this clinical trial, Ridgeback must receive approval … as soon as possible” to incur expenses in anticipation of a contract, Holman wrote to a related agency within the Office of the Assistant Secretary for Preparedness and Response on April 3. “We desperately need guidance on this.”

Bright said in his complaint that Ridgeback had been seeking $100 million to further the drug’s development. In an April 13 email, a BARDA official said the proposal from Ridgeback could obligate the government to pay the company more than $300 million. The contract official objected to the outlay because Ridgeback had not followed proper application procedures.

Ridgeback went away empty-handed by the time Bright departed in late April. It started its safety trial on April 10, testing the EIDD-2801 drug against a placebo in 122 healthy volunteers in England, according to its disclosure on It hired a contract research organization called Covance to conduct the study. The NIH said in an email that Ridgeback conducted the study at its own expense.

In an interview with The Post on April 15, before the controversy erupted, Wayne Holman talked up the drug and made it clear that Ridgeback would be seeking partnerships and investment from the private sector.

“Treating orally and early can change the course of this pandemic. Not only would it treat the person that is sick, but it should theoretically reduce the infectiousness of that person, and the time period they are infectious to others,” he said. “We have inbound interest from pharma companies.”