KaloBios Surges Seven-Fold After Investment From Martin Shkreli

  • Stake comes after drug company planned to wind down operations
  • Turing CEO facing drug-price criticism sees value in KaloBios

Martin Shkreli, the Turing Pharmaceuticals LLC executive who drew criticism in August over a dramatic jump in a prescription drug price, made headlines Thursday for a different kind of price increase: a seven-fold surge in the shares of a microcap pharmaceutical company.

Shares of KaloBios Pharmaceuticals Inc. surged more than 600 percent after the company said yesterday an investor group led by Shkreli had acquired a stake of more than 50 percent. The investment comes a week after KaloBios said it planned to wind down its operations.

KaloBios, which has dropped from $64 a share since going public in early 2013, reached a low of 90 cents a share on Nov. 12. The South San Francisco, California-based company said last week that discussions about possible strategic transactions had ended and it was unlikely a viable alternative would surface.

For Shkreli, it was the “right price, right time and right opportunity” to take a stake, he said by phone on Thursday. “I contacted the company probably about last week and I asked them to call me back. They didn’t call me back. I called again, very politely, and they didn’t call me back a second time, so I decided to buy 50 percent of the company in my personal account and they decided to call me back.”

“Being the majority owner of the company, the way I look at that is they work for me now,” said Shkreli, chief executive officer of privately held Turing. In a filing to the Securities and Exchange Commission today, Shkreli disclosed that he holds more than 2 million shares of KaloBios.

KaloBios was up 398 percent, or $8.23, to $10.30 at 4 p.m. in New York, after soaring as much as 611 percent.

KaloBios is “very undervalued,” Shkreli said. He added that his “hope is that the stock will go to $100.” He said he plans to start clinical trials of a drug KaloBios has been evaluating for treatment of chronic myelomonocytic leukemia.

“If the drug works and helps keep this leukemia at bay, my investment in this company will soar,” he said. “If the drug doesn’t work, maybe my investment will fail.”

A representative of Primecap Management Co., which at 13 percent had the largest stake as of Sept. 30, didn’t return a call for comment.

Shkreli and Turing brought a storm of criticism this summer after a decision to raise the price of a decades-old medicine by 55-fold overnight. Democratic presidential candidate Hillary Clinton subsequently vowed to reform the drug industry, sending the biotech sector plummeting. Last month, Turing was warned by New York’s attorney general that the distribution network for the rarely used drug may violate antitrust laws.

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