Nasdaq to Delist KaloBios in Wake of Martin Shkreli Arrest

It seemed as though things couldn’t get much worse for Martin Shkreli after the New York Times published an article condemning the Turing Pharmaceuticals CEO for raising the price of Daraprim from $13.50 per tablet to $750. The 5000 percent price increase left people to describe Shkreli as a “morally bankrupt sociopath,” a “scumbag,” and “everything that is wrong with capitalism.”
The BBC even speculated that he “may be the most hated man in America.” The 62-year old drug is used to treat toxoplasmosis, a parasitic infection that can cause brain damage in babies and people infected with AIDS. However, things took a turn for the worse when Shkreli was arrested Thursday, December 17 on unrelated fraud charges.

Shkreli arrest

The New York Times reports that he was arraigned in Federal District Court in Brooklyn on securities fraud and wire fraud charges. These accusations harken back to Shkreli’s time as a hedge fund manager and his first biopharmaceutical company Retrophin (NASDAQ:RTRX). Official explained his crimes as a quasi-ponzi scheme, where Shkreli used money from his company to pay investors in his hedge fund his lost money.

In a statement, Shkreli’s spokesperson said he was confident that Shkreli would be cleared of all charges. However, even if this is the case, the damage caused by this incident has extended well beyond Shkreli.

The fate of KaloBios

In November, Shkreli gained control of California biotech company KaloBios (NASDAQ:KBIO). The company had been struggling and, in mid-November, announced its intention to dissolve after a string of clinical failures. Shkreli purchased a majority of cheap shares and took over as CEO. On Monday, December 21, however, it was announced that Shkreli was terminated as CEO and had resigned from the board the previous Thursday.
Now, FierceBiotech reports that Nasdaq intends to delist the company, naming the exec’s fraud and looting charges as one of several reasons for the decision. The company reports receiving a letter from Nasdaq on Friday, December 18, stating that it has until December 28 to appeal the decision. If KaloBios fails to act, it will face suspension on December 30.

Layoffs at Turing Pharmaceuticals

Privately-held Turing Pharmaceuticals has also felt the impact of Shkreli’s arrest. Shkreli resigned from his position as CEO on Friday, December 18. On Tuesday, December 22nd, interim CEO and Chairman of the Board Ron Tilles shared a press release announcing staff layoffs and a search for new company leadership. According to the statement: “the company has realigned its business priorities and has taken actions to streamline its operations including a reduction in workforce. . . . In addition, the company announced it has launched the search for a permanent CEO with strong experience in the pharmaceutical sector and plans to expand its board to include new, independent members.”
Regardless of the eventual outcome of Shkreli’s arrest, its impact has already been felt throughout the biopharmaceutical market. In 2016, industry followers will watch to see what happens to Shkreli, the one-time pharmaceutical poster boy whose fall from grace has been quick, severe and, in some ways, emblematic of the industry as a whole.
Securities Disclosure: I, Morag McGreevey, hold no direct investment interest in any company mentioned in this article.