KaloBios (KBIO) Stock Slammed after CEO Shkreli Arrested for Securities Fraud
Shares of KaloBios Pharmaceutical Inc. (KBIO) were trading down -11.84 or -50.19 percent to $11.75 per share in Thursday’s premarket after news that KaloBios Chief Executive, Martin Shkreli was arrested on securities fraud charges by federal agents at his home in New York early this morning. KaloBios stock closed at $23.59, down -1.265 or -5.09 percent in Wednesday’s regular trading session.
South San Francisco, California based KaloBios Pharmaceutical Inc. is a biopharmaceutical company focused primarily on the development of monoclonal antibody therapeutics for the treatment of a variety of diseases.
KaloBios Pharmaceutical’s 32-year old Chief Executive, Martin Shkreli was taken into custody by the FBI from his home in New York early this morning. Shkreli, who is also the Chief Executive of Turing Pharmaceuticals, first gained notoriety and became the poster boy for greed in September after his firm bought the manufacturing license for Daraprim, a decades old drug for the treatment of toxoplasmosis. Shkreli then went ahead and suddenly raised the price from $13.50 per pill to $750 per pill.
The arrest had nothing to do with drug prices, however and was related to an investigation into securities fraud while Shkreli was manager of hedge fund MSMB Capital Management and as Chief Executive of biopharmaceutical company Retrophin. Shkreli started Retrophin in 2011 and was subsequently ousted from the company in 2014 and later sued by its board of directors.
Federal prosecutors in New York are charging Shkreli with taking stock from Retrophin and using the proceeds of its sale to pay off debts from unrelated business dealings. In addition, prosecutors are accusing Shkreli of running a complicated shell game after his failed hedge fund, MSMB Capital took a multimillion dollar loss.
Allegedly, Shkreli made secret payoffs and set up fraudulent consulting arrangements conspiring with New York lawyer Evan Greebel, who was also arrested for his part in the scheme. Retrophin sued Shkreli in August, accusing Shkreli of misusing company funds, saying that he had arranged numerous transactions between MSMB investors and Retrophin.
Retrophin is asking for $65 million as well as unspecified amounts of Shkreli’s past compensation. Shkreli responded to the lawsuit, saying, “The $65 million Retrophin wants from me would not dent me. I feel great. I’m licking my chops over the suits I’m going to file against them.”
KaloBios stock has been on a roller coaster since Shkreli made his first investment in the company in November. The stock has soared from $1.97 per share to a high of $45.82 later that month. The stock has subsequently sold off sharply and with today’s action could be headed back to under $3.00 per share, where the stock was trading in early November.
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