Turing is NOT Pharma

  • by: |
  • 09/22/2015

It's easy to claim Turing Pharmaceuticals 5000 percent price hike of Daraprim is another example of how biopharmaceutical firms do business.

Easy, but untrue.

Here's Adam Feurstein of the Street.com explaining why he nominated Martin Shkreli as one of the worst biotech CEO's of 2014

Someone thought a smart but attention-addled man-child with a Don Bailey obsession and a Twitter account  could be a biotech CEO. They were wrong

In a previous post, Adam explains:

In the weeks before his ouster as the CEO of Retrophin (RTRX - Get Report) , Martin Shkreli was buying relatively small amounts of the company's shares on the open market and using his personal Twitter account to convince investors to do the same.

But while talking up Retrophin's prospects publicly and buying some of the stock, Shrekli was selling privately a much larger portion of his drug company holdings. Without public disclosure, Shkreli received almost $3 million in gross proceeds by selling "forward contracts" on his Retrophin stock in early September, according to a filing with the Securities & Exchange Commission made public Monday night.

Shkreli has not been accused of breaking any securities laws during his time at Retrophin. Last August, Retrophin's board admonished Shkreli for a series of inappropriate Twitter posts and the discovery that company employees were using alias Twitter accounts to promote Retrophin stock and make short-sale recommendations on other biotech stocks.

The new disclosure detailing Shkreli's selling of Retrophin shares comes at a delicate time. The former hedge fund manager has tried to restore his credibility and tamp down talk about his behavior and executive decision-making by blaming Retrophin's problems -- and his exit -- on the company's board and reporting by the media. At the same time, Shkreli is trying to raise outside investor money to finance a new company, Turing Pharmaceuticals.

Here's how Shkreli received almost $3 million in proceeds by selling Retrophin shares with delayed public disclosure:

On Sept. 9, Shkreli and an unnamed third party entered into a "prepaid forward contract" under which Shkreli promised to hand over 123,000 shares of Retrophin in two years. In exchange, the third-party buyer paid $1.07 million in cash to Shkreli -- an amount equivalent to 68% of the present value of the pledged Retrophin shares."

Again, courtesy of Feurstein on June 13 2011:

"As Neoprobe prepares to seek U.S. approval for its lymph node mapping agent, a New York hedge fund manager has shorted the stock and is taking an unusual step to prevent the company from getting a review by regulators.Martin Shkreli ofMSMB Capital Managementfiled a citizen petition with the U.S. Food and Drug Administration last week requesting Neoprobe's Lymphoseek be denied a review due to "severe deficiencies and flaws" in the conduct of two phase III clinical trials. Betting against FDA drug approvals is a well-worn (and often profitable) strategy in Wall Street's biotech trading canon. Shkreli, however, is pushing new boundaries by seeking to directly influence the FDA review process in his favor."

In 2013, Shkreli asked to speak before an FDA panel to argue against the approval of Lorcaserin, a weight loss drug made by Arena Pharmaceuticals Inc.  He had short positions in both Neoprobe and Arena

And here's an item that occured around the time Shkreli was raising $90 million for Turing.  

Retrophin Inc. founder Martin Shkreli, replaced last year as chief executive officer of the biopharmaceutical company, is under investigation by U.S. prosecutors in Brooklyn, New York, for possible securities law violations, according to a person familiar with the matter."

With this as background, it might be a better use of the Fourth Estate's time to ask the following questions:

How did Shkreli raise 100 percent of the $90 million Series A funding for a company with one product which, even at the highly inflated price of $750 a pill would generate less than $40 million in revenue?  

At Shkreli sought to drive down the share price of his company's stock in order to get exclusive marketing rights for a product at about a 90 percent discount. While Chief Investment Officer of MSMB He did the same thing in his effort to buy AMAG Pharmaceuticals in 2011 at a bargain basement price.  Here's what he said after badmouthing AMAG and driving down the share price:. “Over the past four years, the AMAG board of directors, presided over an 80% decline in the value of AMAG stock.   A letter the SEC sent to Shkreli reveals that the Turing CEO is very good a departing from the facts in explaining his investment activities.  
How do we know that Shkreli will not do the same with Turing?

A notorious short seller, is it possible that one way Shrekli is using to finance the offering is to use the price hike to short all other biotech stocks?

 Should the focus be on limiting the ability of short sellers and patent trolls to create drug companies that are essentially financed and designed to make money by a) bashing the core technologies of other companies as well as your own and b) buying up the marketing rights of one drug and using that, not the actual benefit of the drug, be the reason for huge price hikes?   

One other point worth further discussion.   In many cases health plans and PBMs have, by putting important medicines in the highest cost sharing tier, have in effect hiked drug prices by 5000%.   Isn't that wrong too? 

Finally, here's a good history of the way he wound up creating Turing. 

Shkreli, fresh off Retrophin firing, says Turing Pharmaceuticals will be public by year-end The Deal Pipeline March 5, 2015 Thursday"


Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.

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