Martin Shkreli’s Replacement at Turing Pharma Has a Questionable Past

20 Jan 2016 | Author: | No comments yet »

Martin Shkreli fired by KaloBios Pharmaceuticals.

Martin Shkreli, the former hedge fund manager under fire for buying a pharmaceutical company and ratcheting up the price of a life-saving drug, is escorted by law enforcement agents in New York Thursday, Dec. 17, 2015, after being taken into custody following a securities probe.Reviled pharmaceuticals bigwig Martin Shkreli has been fired from a company he ran for just one month, days after he resigned from another one of his companies after his arrest for alleged securities fraud.

In his first interview since bailing himself out on federal fraud charges, pharmaceutical warlord Martin Shkreli told the Wall Street Journal that he was only a big dumb butthead on the internet as a grand social experiment, which given the outcome, seems like it ended up being a very bad experiment.By demonstrating total disregard for the patients that drug companies serve, pharmaceutical bad boy Martin Shkreli, former CEO of Turing Pharmaceuticals, is trying his hardest to destroy the reputation of the industry. A seven-count indictment unsealed in Brooklyn federal court Thursday charged Shkreli with conspiracy to commit securities fraud, conspiracy to commit wire fraud and securities fraud. (The Associated Press) TRENTON, N.J. The California-based KaloBios Pharmaceuticals announced Monday that Shkreli was “terminated” as CEO and resigned from the board, offering no further comment. — In barely 24 hours, Martin Shkreli went from an egotistical pharmaceutical boy wonder running two small drug developers and live-streaming his daily activities to unemployed and facing securities fraud charges that could land him in prison for years.

Kalobios shares rose from less than a $1 to a high of nearly $40 under his brief leadership, but its stocks have stopped trading in the wake of Shkreli’s legal drama. His extreme indifference to the patients whose lives are upended by his massive price hikes allowed the media to cast him as a “greed is good” Wall Street villain.

The young honcho from Sheepshead Bay, Brooklyn rose to notoriety this year after Turing bought a lifesaving AIDS pill and immediately jacked its price from $13.50 to $750 per pill. His cavalier attitude may turn the full force of public opinion against the pharmaceutical industry, which is otherwise doing great work in treating and curing life-threatening diseases like cancer. Following his arrest, Shkreli resigned from his role at Turing and was released on $5 million bail – the terms of which mean he cannot leave the state of New York. Shkreli’s timing is ironic since it comes just as a new generation of breakthrough drugs is working its way through the arduous pharmaceutical trial process. But, in a reading of the indictment against him, Bloomberg’s Matt Levine argues that Shkreli caught the law’s attention because he couldn’t help but be Shkreli as a motherfucker: Still, I can’t shake my sense of amazement that Shkreli seems to have gambled on redemption and won.

If you believe the allegations in today’s indictment, he lost (or stole) all of his investors’ money, then lied to them to string them along, Ponzied it up by raising new money to keep them happy, and then finally found an investment that allowed him to pay off his earlier investors, with profits all around. Among the hacked tweets posted on Shkreli’s account were offers to donate hundreds of thousands of dollars to charity, and to give away the Wu-Tang album to the next follower who retweeted him. Meanwhile, Valeant, a legitimate company with a different business model, drew scrutiny for its own pricing by increasing prices 200 percent to 500 percent.

Amid mounting criticism from patients, doctors and politicians, Shkreli pledged to lower Daraprim’s price, but later reneged and instead offered hospitals a 50 percent discount — still amounting to a 2,500 percent increase. After several of social media accounts were apparently hacked Sunday and filled with crude messages, Shkreli tweeted: “I was hacked–I now have control of this account.” As Cleveland Clinic CEO Toby Cosgrove said on CNBC last month, “We worked hard to reduce costs across the system by $10 million, and all our efforts got offset by price increases from Valeant totaling $11 million.” Two years ago Gilead caused an uproar when it announced its new Hepatitis C drug, Solvaldi, would cost $84,000 for a 12-week treatment, which put it out of reach of many patients.

Patients normally take most of the weeklong treatment at home, so they still face the 5,000 percent price increase, though Turing is offering financial aid to those who can’t afford the drug. Senate Committee on Aging held hearings on these enormous increases on Dec. 9, during which senators from both parties denounced the unconscionable price increases on decades-old drugs. Many are still viewable on Twitter under “martin shkreli hacked.” His You Tube account, where he’s frequently live-streamed himself working on his home computer, talking to himself and eating, also was hit with posts belittling him and hasn’t been active since Sunday. The pharmaceutical industry’s rationale that it needs high prices to afford the research has been turned on its head by Valeant’s business model of spending less than 3 percent on research & development (R&D) and paying less than 3 percent in taxes.

KaloBios Pharmaceuticals Inc. is a faltering drug company whose shares skyrocketed after Nov. 19, when Martin Shkreli disclosed a huge stake and became its CEO and board chairman. Pearson, a former management consultant, says 3 percent is sufficient because Valeant R&D is much more efficient than the big pharmaceutical companies. As a longtime medical technology executive, I find this assertion preposterous, because no pharmaceutical company can create breakthrough drugs for just 3 percent of revenues. The company announced it would shut down right before Shkreli and a group of investors swooped in with cash and pledges of financing to keep it going.

When President Obama’s former chief of staff Rahm Emanuel was putting together ACA back in 2009, he negotiated deals with leading pharmaceutical companies. Now the chickens are coming home to roost for the government and private health plans as pharma makers regularly increase prices 6 percent to 10 percent — and many go far higher. Second, the industry’s research-driven business model is under pressure from short-term investors arguing to abandon research in favor of simply acquiring drugs from start-ups. This is a hedge-fund guy masquerading as a pharma exec.” Frazier is following the mission established by founder George Merck, who declared, “Medicine is for the people. It is not for the profits.” All pharmaceutical companies should adopt that motto before the U.S. government, in response to public outrage, contravenes ACA to set strict price controls.

Commentary by Bill George, a senior fellow at Harvard Business School and the former Chairman and CEO of Medtronic and previously served on the board of Novartis.

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