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July 1, 2016

KaloBios Emerges from Martin Shkreli's Shadow with Exit from Chapter 11

  • KaloBios—the company briefly owned and run by Martin Shkreli late last year before his arrest last December—said today it has emerged from Chapter 11 bankruptcy protection, with a newly acquired pipeline treatment and $14 million in new equity financing.

    The company said it won confirmation on June 16 from the U.S. Bankruptcy Court in Delaware that its reorganization plan was accepted by its creditors and other stakeholders.

    KaloBios said it acquired rights from Savant Neglected Diseases to develop benznidazole for Chagas disease, in return for paying Savant $3 million upfront plus issuing the company a warrant to purchase 200,000 shares of KaloBios common stock.

    KaloBios also agreed to pay Savant undisclosed milestone payments and royalties in connection with the development and potential approval and commercialization of benznidazole. The company added that it may receive a Priority Review Voucher if benznidazole is approved.

    “The Company has risen from the ashes with a great deal of hard work and new thinking on how a biopharmaceutical company can operate and a clear vision to move forward as a successful, positive leader in our industry," Cameron Durrant, M.D., KaloBios chairman and CEO, said in a statement. "As one of the few companies solely focused on neglected and rare diseases, KaloBios will continue to move swiftly and apply itself to the real task of bringing patients crucial treatments they need, but to which they may not have access.”

    Dr. Durrant added that KaloBios will continue addressing drug pricing—the issue for which the company’s former CEO Shkreli became notorious and sparked a political furor when, as CEO of Turing Pharmaceuticals, he raised the price of the AIDS drug Daraprim from $13.50 to $750 per tablet. Shkreli was arrested in December on Retrophin-related charges but has denied wrongdoing—and on June 6, he pleaded not guilty to an additional federal charge that he concealed control of Retrophin stock through employees and consultants.

    In April, Dr. Durrant and KaloBios announced the company had adopted a new “responsible” pricing model for drugs they said would be “affordable for patients and payers and transparent for stakeholders, while delivering a “reasonable” return for the company taking the risk of bringing products to patients.

    In addition, KaloBios said it has been recapitalized with exit equity financing of $11 million, plus a $3 million debtor-in-possession loan funded in May. The debtor-in-possession loan has been converted into shares of KaloBios common stock following the exit from bankruptcy.

    “This additional liquidity provides a firm base to support the Company's operations going forward,” KaloBios said in a statement.

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