Martin Shkreli’s pharma company files for bankruptcy

Boyish US entrepreneur arrested for securities fraud earlier this month

Martin Shkreli is accused of losing money for investors and lying about it. Photograph: Reuters

Martin Shkreli is accused of losing money for investors and lying about it. Photograph: Reuters

 

KaloBios Pharmaceuticals, which Martin Shkreli rescued from liquidation last month, filed for bankruptcy after his arrest knocked the biotechnology company’s brief revival off course.

KaloBios filed for Chapter 11 reorganisation on Tuesday, according to a statement on the website of the US Bankruptcy Court in Wilmington, Delaware. The  California-based company plans to use the bankruptcy to buy some time to implement its restructuring plans, according to court papers. The company said last week that Nasdaq was planning to remove the stock on Wednesday, citing Mr Shkreli’s December 17th arrest on securities fraud charges related to another company, as well as KaloBios’s failure to file a quarterly financial report.

Mr Shkreli, who is best known for raising the price of a drug at a different comppany from $13.50 (€12.36) to $750 overnight, was fired by KaloBios after the arrest and has denied wrongdoing. “KaloBios perceived an imminent threat that, absent a bankruptcy filing and the imposition of the automatic stay, a significant portion of its liquid assets were at risk,” the company said in court papers. It cited Mr Shkreli’s arrest, Nasdaq’s delisting notice, and the departures of its accounting firm, chief financial officer and two board members as challenges that have disrupted its ability to restructure out of court.

Leukaemia drug

The petition filed on Tuesday in Delaware lists $8.37 million in assets and $1.94 million in debt, according to court papers. KaloBios’s largest unsecured creditors include the University of Miami and Ernst and Young.

The aim in restructuring is to allow it to focus limited resources on the development of the experimental leukaemia drug lenzilumab, according to the filing.

KaloBios said in a statement on Tuesday that it had appealed the delisting and would have a hearing on February 25th.

Will Briganti, a Nasdaq spokesman, declined to comment beyond confirming the date of the appeal.

Trading in the shares was halted soon after Mr Shkreli’s arrest. KaloBios now has two directors left after Mr Shkreli, Tony Chase, Tom Fernandez and Marek Biestek resigned. The stock plummeted 53 per cent in early trading on December 17th in the minutes after news of Mr Shkreli’s arrest broke and before it was halted by the exchange.

Mr Shkreli, 32, is accused of repeatedly losing money for investors and lying to them about it, as well as illegally taking assets from one of his companies, Retrophin, to pay off some of those investors.

Mr Shkreli took over KaloBios last month, when shares of the company were trading at less than $1.

Bloomberg