As quickly as KaloBios Pharmaceuticals Inc. (NASDAQ: KBIO) shot up, it is dropping after its newly named chief executive, Martin Shkreli, has found himself in hot water. Shkreli has been in the news a fair amount this fall, whether it’s jacking up the price of an AIDS drug, buying a highly acclaimed one-of-a-kind Wu-Tang Clan album, or taking over KaloBios.
The heat is on now as the FBI arrested Shkreli regarding an investigation of securities fraud.
Ironically, KaloBios and Turing Pharma — Shkreli’s other company — are not the focus of the investigation but rather Retrophin Inc. (NASDAQ: RTRX) is. Prosecutors reportedly have charged him with taking shares from Retrophin to pay off other unrelated business debts. It’s worth noting that Shkreli founded Retrophin back in 2011.
Many people will hail this arrest as karma for hiking the price of Daraprim or just being too greedy. Some CNBC analysts are going as far as calling him “Dr. Evil.” Regardless, the attention brought on by Hillary Clinton and social media outrage probably did not help Shkreli at all in this instance.
Previously, Shkreli bought the rights to Daraprim, a drug used in AIDS treatment for toxoplasmosis, or blood parasites. After this purchase, he hiked the drug price by about 5,500%. This preceded the great upheaval in the health care sector. And as a result many people, investors, regulators and politicians began to question how to properly value drugs and treatments.
As for KaloBios, it appears that Shkreli wanted to keep this business in operation when he took a major stake in the company and the shares skyrocketed from $0.90 per share in mid-November to over $30.00 by the beginning of December. There were reports that Turing’s CEO is in talks with KaloBios about continuing operations, considering its development of cancer drugs. According to the release, “the company is in discussions with Mr. Shkreli regarding possible direction for the company to continue in operation.”
Shares of KaloBios closed Wednesday down 5.1% at $23.59, with what is listed as a consensus analyst price target of $5.00 (from just one analyst) and a 52-week trading range of $0.44 to $45.82. In early trading indications Thursday, the stock was down over 50% at $11.03, and after the opening bell the stock appeared to be halted.
Retrophin shares closed Wednesday at $21.35, with a consensus price target of $36.00 (from only two analysts) and a 52-week range of $11.87 to $37.04. The stock was down 1.2% to $21.09 early Thursday.
It seemed a bit puzzling that any stocks would have risen being tied to news of involvement by Shkreli. It seems that what goes up in what may be irrational exuberance can come down as fast or faster.
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