AutoZone Billionaire Pumps Fortune Into Cancer Fight
In the 15 years since J.R. “Pitt” Hyde was diagnosed with prostate cancer, the founder of AutoZone Inc. (AZO) has devoted the largest single portion of his billion-dollar fortune to searching for a cure.
Hyde, now 68 and cancer free, teamed up with Mitch Steiner, the surgeon who removed his prostate, to form GTx Inc. (GTXI), a biomedical company based in Memphis, Tennessee. GTx has yet to put a new drug on the market since its 1997 launch and the stock, which closed yesterday at $3.49, has been volatile. It hit its 52-week low of $2.31 in March and its 52-week high of $6.57 in June.
“Biotech is a vast departure from retailing for sure,” Hyde said in a telephone interview. “It’s a business not for the faint of heart.”
This month GTx began the process to enroll patients in the third and final phase of study for its most advanced experimental medicine Ostarine, designed to increase muscle mass and fitness in cancer patients. The company began a mid-stage study this summer for its other drug candidate Capesaris, a hormone therapy for prostate tumors without the side effects of existing treatments.
Ostarine showed promise among select patients in earlier studies, said David Nierengarten, an analyst with Wedbush Securities Inc. in Los Angeles. Lung cancer patients getting it did better on a stair climbing test than those on a placebo, while the higher risk of death among those who lost significant amounts of weight seemed to lessen in those getting Ostarine. The final studies are needed to confirm the benefits.
“We think it has a better chance than maybe some other drugs in phase 3 clinical trials because it has actually worked in phase 2 so far,” said Nierengarten, who has an “outperform” rating on GTx with a 12-month target price of $13.
Capesaris “is the first new hormone treatment for prostate cancer in quite some time,” Nierengarten said. “The current treatment options have a lot of side effects associated with them hopefully the GTx compound won’t have.”
Even if the trials go well, Food and Drug Administration approval likely wouldn’t come for Ostarine until 2014 at the earliest and 2015 at the soonest for Capesaris, said Steiner, 50, who is GTx’s CEO.
“All your risk and all your capital is front-end loaded unlike the retail business I grew up in where if you didn’t make money every quarter you were toast,” Hyde said. “You’ve got to take a long view in this business.”
At yesterday’s close, Hyde’s stake in GTx was worth about $65 million.
John Pontius, Hyde’s money manager who is president of Pittco Management LLC, said Hyde’s investment in GTx is “by a wide measure, the largest single investment he has made since he was diagnosed with prostate cancer.
“His AutoZone stock is probably worth a little more than his GTx stock today,” Pontius said, but those shares were purchased years ago and there is a large imbedded gain in that stock. Hyde’s stake in AutoZone was worth about $83 million at yesterday’s close.
Hyde turned what was an estimated $485 million net worth in 1996 into a billion-dollar fortune through investments in managed funds, venture capital and real estate, he said.
‘Learned From Sam’
After graduating from the University of North Carolina at Chapel Hill with a bachelor’s degree in economics in 1965, Hyde joined his family’s wholesale grocery business, Malone and Hyde Inc., in Memphis, building it from a regional company to the third largest of its kind in the U.S. He was invited to join the board of Wal-Mart Stores Inc. (WMT), where he soaked up business lessons from the chain’s founder, Sam Walton.
“I got to be tutored by the master,” Hyde said. “A lot of the things we incorporated into AutoZone, I learned from Sam.” He served on the board from 1978 to 1983, according Greg Rossiter, a Wal-Mart spokesman.
He also learned from Wal-Mart that it might be time to think about exiting the wholesale grocery business.
“The highest percentage of our business was in small towns,” Hyde said. “In some small towns, we might be supplying every grocer in town. Obviously seeing the potential of Wal-Mart opening these huge stores in small towns, they were certainly going to take a huge bite out of the apple.” He sold Malone and Hyde in 1988 to Fleming Cos.
Hyde saw an opening in providing auto parts for the do-it-yourself market and opened the first AutoZone, then called Auto Shack in July 1979 in Forrest City, Arkansas, with four stores in Memphis following a few days later. The chain now has 4,500 stores, with $7.4 billion in fiscal- year 2010 revenue.
Hyde still serves on the AutoZone board but stepped down as CEO in 1996, the year he had surgery for prostate cancer. He also serves on the board of Memphis-based FedEx Corp. (FDX), devoting half his workday to business and the other half to philanthropy. Off hours, he goes fly-fishing and skiing in Aspen, Colorado, where he owns a home. In 2001, Hyde and five other Memphis investors purchased a 30- percent stake in the National Basketball Association franchise, the Memphis Grizzlies, an investment Hyde said was prompted more by a desire to help Memphis than by a passion for sports.
GTx, the biotech company “is the one area where I am directly involved in operations,” said Hyde, who serves as non-executive chairman.
‘Dream Come True’
After his own successful surgery for prostate cancer, Hyde began donating money for Steiner’s research at the University of Tennessee before they launched GTx. Hyde has been cancer-free since his surgery, Steiner said.
Steiner called Hyde’s investment in GTx “a dream come true” because it rescued his research from the cash-starved academic field.
“In academics, you have to get a grant and you’re lucky to get an $80,000 or $100,000 grant which is only going to cover a fraction of what you need,” said Steiner. “You need to put in 20 years or 30 years of your life to see something move very little. In industry, you can really move it because you have the resources and the people and you pay them well.”
Over the years, Steiner taught Hyde about science and Hyde taught him about business.
“With Pitt having had prostate cancer, he gets it, he understands it,” said Steiner. “Having a combination of the surgeon and the grateful patient, it’s just a very unusual mix.
“It’s high risk but it’s high reward,” Steiner added. “All you need is one. Once you get one, boom, you are instantly a player.”
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