The Short-Seller Who Started a Biotech Firm Gets Ousted by His Board

Not long ago we profiled a controversial young biotech short-seller who flipped and took the ultimate long position—starting his own publicly traded company and becoming its chief executive. The question about Martin Shkreli, 31, was whether after making a name for himself betting on biotech stocks to fall, he had undergone a conversion or was using his knowledge to game the biotech field.

After a rocky few months marked by erratic public statements from Shkreli, his board of directors at Retrophin, an orphan-disease drug maker, apparently got antsy. On Tuesday, the board abruptly fired him.

The shakeup wouldn’t have shocked readers of Bloomberg Businessweek’s profile last April of the brilliant, self-trained biologist with a penchant for grandiosity and immature behavior. Subordinates referred to Shkreli as “the boy genius.” From an investor’s perspective, though, things looked different:

“He’s ‘a high-risk, high-reward play,’ says Alan Geller, a retired oil trader and investor in Retrophin. Geller, who invested with Shkreli back in his hedge fund days, says this is what makes Retrophin so compelling. … ‘He’s definitely a genius,’ Geller says. He’s also “’a little flaky. I’m betting he’s going to make a billion dollars rather than blow up.’”

Geller may now be rethinking his wager.

In a boilerplate announcement, the Retrophin board said it had appointed Chief Operating Officer Stephen Aselage as interim chief executive “effective immediately” to replace Shkreli. “The Retrophin board is grateful to Martin for his creativity, energy, and vision over the past three years. In a remarkably short time, he built a world-class management team and created a thriving biopharmaceutical company that has improved the lives of patients with rare diseases,” said Steve Richardson, chairman of the Retrophin board. When contacted by e-mail and asked for elaboration, an outside company spokesman said Retrophin had no additional comment.

An avid user of Twitter, Shkreli used the site to declare: “Rather upset at my inane BOD [board of directors] who was overly focused on irrelevant innuendo but also can now pursue a NewCo.” The latter reference apparently alludes to Shkreli’s plan to start a new company, which might prove challenging given the nature of his departure from Retrophin. Shkreli did not return a message seeking comment.

Reuters provided this background:

“Retrophin, which currently markets hypertension drug Vecamyl and metabolism treatment Chenodal among others, is developing drugs for a number of rare diseases including rage disorders, schizophrenia and infantile spasms. The company in May acquired the U.S. marketing rights to a potentially lucrative drug for treating a rare kidney disease, and raised its full-year forecast. Shkreli said on a conference call after the deal that the drug, Thiola, then sold for $4,000 a year per patient, would be priced closer to rival drug penicillamine, which costs $80,000 to $140,000.

“The company said earlier this month that Chief Financial Officer Marc Panoff and board member Jeffrey Paley had stepped down. Shkreli, 31, owns about 11 percent stake in the company and is the second biggest shareholder as of Sept. 22.”

Retrophin, which trades on Nasdaq, was down 7.5 percent, to $8.34 a share, during afternoon trading.