An Unstable Biotech Company Gets Weirder and WeirderPaul M. Barrett
When last we checked in with the psychedelic goings on at drug manufacturer Retrophin, the biotech’s board of directors had ousted its precocious founder and chief executive officer for alleged stock-related irregularities. Now the supposedly canned CEO says that he has done nothing seriously wrong, he’s still the boss, he’s still on the board, and he’s the victim of an unjustified putsch.
Investors seem understandably troubled. Retrophin’s stock was down nearly 2 percent at midday, trading at 10.79.
A quick recap: Martin Shkreli started Retrophin from scratch a few short years ago. At Bloomberg Businessweek, we’ve taken a special interest in the 31-year-old’s adventures because he first made a name for himself as a short seller, betting on biotech stocks to fall. In founding Retrophin, had he undergone a conversion? Or was he using his knowledge of the biotech industry to game the field?
Retrophin’s board abruptly dumped the executive on Sept. 30. The directors concluded that Shkreli had committed stock-trading irregularities and further violations of securities rules, people familiar with the company told Bloomberg Businessweek at the time. The violations included grants of Retrophin stock to certain recipients in the absence of a shareholder-approved distribution plan, failures to disclose stock grants, and grants of stock above limits imposed by the plan that was eventually put in place, the people said. (The shakeup fits with our profile in April of Shkreli and his immature conduct.)
Shkreli acknowledges that his personal style is, to put it politely, off-beat. He insists though, that Retrophin isn’t coming clean about what’s happening at the company or with him.
First, Shkreli says in an interview and a follow-up e-mail that he hasn’t been fired; he’s been put on “leave.” Technically, he’s still CEO, he says, and his employment agreement prevents the board from firing him for anything short of a felony conviction. He says he is negotiating—not particularly amicably—over his departure from Retrophin. And he adds that he’s planning to start a biotech that he’ll own and control. (A Retrophin spokesman confirms that Shkreli was involuntarily put on leave, not fired in a formal legal sense.)
Second, the once and current CEO says that the real reason the board is trying to get rid of him is that he proposed to award substantial bonuses to certain employees who had identified valuable deals for Retrophin. “These employees saved the company and undoubtedly created hundreds of millions of value,” he tells me. “To pay them their fair compensation is something my greedy board of directors is refusing to do.” The company has not identified the bonus issue as a reason for pushing Shkreli out.
Third, Shkreli acknowledges that he has clashed with members of the board over his personal profits from securities trades he made while serving as CEO, his use of corporate funds to make long and short investments on behalf of Retrophin, and the oversight of a company stock-option plan. These issues, according to Shkreli, are minor and ought to be easily resolved. “The theme of using tiny grievances and errors to blame me and usurp my control continues,” he says. Finally, Shkreli adds, “I would love to make a very simple settlement with the company and extract myself from this toxic situation.”
On that aim, he might find common ground with board members who have lost faith in his leadership.