KaloBios Gets Loans Aimed at Reducing Shkreli Stake
March 11 2016 - 4:40PM
Dow Jones News
KaloBios Pharmaceuticals, which has been trying to shake off the
shadow of ex-CEO Martin Shkreli, has lined up bankruptcy financing
that is premised on tamping down his stake in the company.
Mr. Shkreli, who prompted a public outcry last year for raising
the price of a lifesaving medication by 5,000% while at Turing
Pharmaceuticals, had been in the CEO seat at KaloBios for less than
a month when he was arrested on fraud charges unrelated to
KaloBios. Denying guilt, he posted his stock holdings in KaloBios
to secure the bond that has kept him out of jail.
The criminal case against Mr. Shkreli has weighed on KaloBios's
bankruptcy.
While Mr. Shkreli invoked his Fifth Amendment right last month
against self-incrimination to avoid answering U.S. lawmakers'
questions about pricing practices in the drug industry, KaloBios
was trying to get back on its feet financially in bankruptcy court.
Mr. Shkreli resigned from the company's board, and new directors
took steps to safeguard against Mr. Shkreli having a say in the
major decisions facing KaloBios.
Financing outlined in papers filed Thursday with the U.S.
Bankruptcy Court in Wilmington, Del., would help fund a deal that
Mr. Shkreli started, which KaloBios is now trying to close.
KaloBios is seeking a priority review voucher, a ticket for a
speedy trip through the federal regulatory process, for a drug it
would like to produce.
Such vouchers have sold for hundreds of millions of dollars. It
remains to be seen whether KaloBios can land a voucher if it gets
the rights to benznidazole, an established treatment for Chagas
disease.
Loans to help the deal along and get KaloBios out of bankruptcy
are being offered by Black Horse Capital LP, an investment fund
with an interest in the biotechnology sector. The financing is
conditioned upon a requirement that Mr. Shkreli not have voting
control of more than 20% of the common stock of KaloBios once it
exits bankruptcy.
In November, when he bought control of KaloBios, Mr. Shkreli
held more than 50% of the company's shares. That percentage may
have been diluted by a private placement that raised $8.2 million
in December. However, investors in that private placement have
filed suit in bankruptcy court to reclaim the money on the basis
they should have been clued in about the criminal problems headed
in the direction of KaloBio's then-CEO.
Mr. Shkreli's notoriety aside, the priority review voucher
program has drawn fire from groups like Doctors Without Borders and
the Drugs for Neglected Diseases Initiative. There is no
requirement that companies that get vouchers develop drugs or make
them affordable, which critics say can lead to an unearned windfall
to profiteering pharmaceutical companies.
Judge Laurie Selber Silverstein has cleared KaloBios to try to
get to a deal with Savant Neglected Diseases LLC, which owns
benznidazole.
Black Horse Capital's financing proposal is open to competition
and subject to court approval. Terms of the financing allow Black
Horse to get stock in the reorganized KaloBios, but other investors
that want to make a better offer for the stock, or invest alongside
Black Horse, will have an opportunity, court papers say.
(Dow Jones Daily Bankruptcy Review covers news about distressed
companies and those under bankruptcy protection. Go to
http://dbr.dowjones.com)
Write to Peg Brickley at peg.brickley@wsj.com
(END) Dow Jones Newswires
March 11, 2016 16:25 ET (21:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
Humanigen (CE) (USOTC:HGEN)
Historical Stock Chart
From Jul 2024 to Jul 2024
Humanigen (CE) (USOTC:HGEN)
Historical Stock Chart
From Jul 2023 to Jul 2024