Hedge Fund Chief Shkreli Juggles Ire for Biotech Missteps With Passion For Rare-Disease Startup Retrophin
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perfectly legal. Weismann doesn’t dispute him on that point. “We’re not asking to ban hedge funds,” she says. “But there’s no transparency. That’s troubling.”
Neoprobe, which has since changed its name to Navidea Biopharmaceuticals, is expecting a verdict from the FDA later this year. The agency has not responded to Shkreli’s petition. Still, Navidea’s stock has been under pressure: Shares have fallen from $5.48 last June, when Shkreli started harassing the company on Seeking Alpha, to $3.29 today. Navidea did not respond to e-mail and phone requests for comment.
Shkreli has made ten short recommendations so far on Seeking Alpha, all of them accompanied by blistering comments. On Cambridge, MA-based Zalicus, (NASDAQ: ZLCS), which is testing anti-inflammatory drug, he declared: “This asset is worthless. It’s worse than worthless—it will eat up $10 to $20 million in cash as the [study] reads out in the next year.” Of Seattle-based Oncothyreon (NASDAQ: ONTY), he suggested that its experimental lung cancer vaccine “is not a well-designed drug and is likely to be inert in humans. “
Zalicus declined to comment in an e-mail to Xconomy. Oncothyreon, which raised $47 million in an underwritten stock offering on March 29, also declined to comment.
Because MSMB does not have to report every trade it makes, it’s hard to determine just how much the fund has made on Shkreli’s short bets. As a whole, MSMB returned 20 percent in 2011, according to an investor presentation obtained by Xconomy.
But Stephen Brozak, president of WBB Securities in Clark, NJ, believes MSMB’s returns are less important than the doubts Shkreli might be raising among other investors. “When you’re dealing with stocks that are not well known, perception can be devastating to the extreme,” Brozak says. “The biotech and medical device world is fragile. It requires the munificence of investors not for one quarter, not for one year, but perhaps for as long as 10 years. If someone yells ‘fire,’ what do you think the effect will be?” WBB is an investor in Navidea, Brozak says.
Shkreli sometimes becomes so disgusted with companies that he goes to extremes to try to fix their management issues. When Lexington, MA-based AMAG Pharmaceuticals announced last July its plan to merge with Allos Therapeutics, Shkreli thought the merger was such a bad idea he made an unsolicited bid to buy the company. He offered AMAG $18 a share on August 3, 2011—a 25 percent premium to the company’s closing price the day before—then led an effort to overthrow the board and have CEO Brian Pereira ousted.
Shkreli had never been a Pereira fan. The CEO, a physician by training, had been attempting to advance the company’s lead product, ferumoxytol to treat iron deficiency, ever since he was named CEO in 2006. Shkreli and other critics of AMAG’s proposed merger with Allos suggested there were few synergies between the two companies. Allos sells a drug to treat T-cell lymphoma. “When [Pereira] joined AMAG, he had not one day of experience at any corporation at all, which I thought was unacceptable for a CEO,” Shkreli says. “I think the decisions he made told that story very clearly.”
Shareholders voted down the Allos acquisition plan, and in November, Pereira stepped down. But MSMB is still trying to buy the company. A spokeswoman declined to comment, instead pointing to a series of SEC documents pertaining to the battle for control. In one such filing, dated November 17, 2011, AMAG urges its shareholders to revoke any consent they or their brokers might have given to MSMB’s takeover attempt. “MSMB Capital’s own statements in filings made with the SEC indicate that MSMB Capital does not understand AMAG’s existing business,” AMAG said in the filing. “MSMB Capital has not given AMAG stockholders a clear and concrete path as to how MSMB Capital intends to improve AMAG’s performance or realize value for your investment….”
Shkreli declined to comment further on AMAG due to “ongoing discussions” with the company. MSMB currently owns 1.2 million shares of AMAG worth a total of about $20 million, according to Bloomberg.
When it comes to larger pharmaceutical companies, MSMB doesn’t generally hold enough shares for Shkreli to throw his weight around. But that doesn’t stop him from trying. In a letter to some shareholders of New York-based pharmaceutical giant Pfizer in December 2010, Shkreli said he was pleased to see former CEO Jeffrey Kindler retire, but that he believed “Pfizer’s board of directors has been largely composed of the same value destroyers for more than a decade.” He suggested that the company discontinue its policy of promoting insiders to executive roles and instead consider outsiders with track records of “creating or preserving value.”
Shkreli says he’s still a Pfizer shareholder and is largely pleased with the company’s recent progress under CEO Ian Read, a 34-year veteran of the company who was promoted to CEO in 2010. But in true Shkreli fashion, he can’t help tossing out one remaining gripe about the company. “I don’t see them acquiring biotech companies, I don’t see them making any proteins in the clinic that are of any use,” he says. He acknowledges that Pfizer’s acquisition of Wyeth in 2009 brought some biotech molecules to its pipeline, but he still wishes the company would do more. “It doesn’t seem like they’re creating novel proteins, which is sad.”
In an e-mail, a spokeswoman for Pfizer points to the company’s recent efforts to fine-tune its biotech partnering strategy. “Pfizer is more strategic, focused and creative in its deal structures to help ensure the appropriate balance of risk and reward,” she says. “For example, in December 2011, Pfizer completed the acquisition of Excaliard Pharmaceuticals, which included an upfront payment, and contingent payment if certain milestones are met.”
Shkreli had some early training in the art of being outspoken. He started his collegiate career at Columbia University, but transferred to New York’s Baruch College to pursue … Next Page »