Brash Biotech CEO Gets Comeuppance
Martin Shkreli, the hip-hop-loving, short-selling, drug-price-inflating, 32-year-old biotech chief executive, seemed to be daring the world to come after him. The world, or at least the U.S. Department of Justice, has now obliged.
As Bloomberg News reported, federal agents arrested Shkreli early this morning at his Manhattan home on charges of securities fraud. The allegations against the controversial executive don't have to do with his most notorious caper—namely, raising the price of a life-saving medication from $13.50 a pill to $750. Instead, the federal case against Shkreli involves accusations that he illegally fleeced a biotech company he started in 2011 called Retrophin. Shkreli allegedly used Retrophin stock to pay off investors he owed money for losses they'd suffered at a separate hedge fund he ran.
Shkreli loves to provoke outrage, as his insult-filled Twitter feed amply illustrates. Beginning more than a decade ago, in his early 20s, he made enemies in the biotech industry by "shorting," or betting against, the shares of small drugmakers. Then, with Retrophin, he tempted the fates by turning around and joining the very industry he'd spent years attacking. He made the ultimate long bet, and seemed for a time to be succeeding, as Retrophin grew in market cap and made a lot of money for Shkreli and his investors. Eventually, though, he was ousted by his board and sued by directors who accused him of playing what amounted to a shell game with the company's stock and cash.
When Shkreli was at his peak at Retrophin, before the Federal Bureau of Investigation began sniffing around, Bloomberg Businessweek profiled the wunderkind, posing the question of whether the self-described wheeler-dealer had "undergone a conversion, as he claims, to creating value and saving lives. Or is he using what he learned about biotech—a field notorious for empty promises—to game the field?"
The profile quoted a longtime investor as saying of Shkreli, “he’s definitely a genius.” This investor also described the executive as “a little flaky. I’m betting he’s going to make a billion dollars rather than blow up.” Now that bet looks dubious.
Shkreli’s lawyer and a spokesman for Retrophin didn’t immediately respond to requests for comment on his arrest.
Controversy swirled around Shkreli after he raised the price more than 55-fold for Daraprim, a treatment for a parasitic condition known as toxoplasmosis, which can be deadly for unborn babies and patients with compromised immune systems, including those with HIV or cancer. His current company, Turing Pharmaceuticals, bought the drug, moved it to a closed distribution system, and jacked up the price. Shkreli became a target for criticism in Congress and the 2016 presidential campaign. Donald Trump called him a “spoiled brat,” and the BBC dubbed him the “most hated man in America.”
As Bloomberg News reported this morning, Shkreli initially responded to the criticism by saying he would lower the Daraprim price and then changed his mind again. When Hillary Clinton tried one more time last month to get him to cut the cost, he dismissed her with the tweet “lol.” At a Forbes summit in New York this month, wearing a hooded sweatshirt, he said if he could have done it over, “I probably would have raised the price higher,” adding, “my investors expect me to maximize profits.”