KaloBios Emerges from Bankruptcy, Buys Tropical Disease Drug
July 01 2016 - 8:00AM
Dow Jones News
KaloBios Pharmaceuticals said Friday that it had emerged from
chapter 11 bankruptcy and had acquired the rights to buy a tropical
disease drug.
The company filed for bankruptcy protection not long after its
ousted chief executive, Martin Shkreli, was arrested on securities
fraud charges unrelated to KaloBios. At the time of his arrest, Mr.
Shkreli was trying to land the rights to the drug,
benznidazole.
Benznidazole is an established treatment for Chagas disease,
which is a parasitic infection. It is designated as neglected and
in need of attention as a public health matter by U.S. regulators,
meaning it might qualify for an FDA voucher of the type that in the
past has sold for as much as $350 million.
KaloBios bought the drug from Savant Neglected Diseases LLC for
an upfront payment of $3 million and a warrant to purchase 200,000
shares of KaloBios stock. The agreement also includes potential
milestone and royalty payments.
Mr. Shkreli paid $3.2 million in November 2015 for a controlling
stake in KaloBios, and saw the value of that holding grow to more
than $48 million before his arrest. The criminal charges, which he
denies, involve allegations he hid losses in hedge funds he managed
with the help of money from a public company.
Mr. Shkreli has been widely criticized for increasing the price
of another vital drug, Daraprim, by fiftyfold. Before the criminal
charges, which he denies, he alarmed advocates for rare-disease
treatments when he told investors he intended to price benznidazole
in line with hepatitis C treatments that can cost as much as
$94,000 per course of treatment. In Latin America, where most cases
of Chagas disease are found, benznidazole treatment costs $60 to
$100, according to the Drugs for Neglected Diseases Initiative.
KaloBios's reorganization plan was confirmed by Delaware
bankruptcy court on June 16 after it was "overwhelmingly" accepted
by creditors.
The company obtained $11 million in exit equity financing, which
comes on top of a $3 million debtor-in-possession loan, which has
been converted into KaloBios shares. Both loans came from Black
Horse Capital LP, Black Horse Capital Master Fund Ltd., Cheval
Holdings Ltd. and Nomis Bay Ltd.
Black Horse Capital managing member Dale Chappell joined the
Board along with two others, which are designees of the investors.
Board member David Moradi has stepped down.
KaloBios's stock price took a beating after Mr. Shkreli's arrest
and the company's bankruptcy filing. KaloBios shares, which reached
a high of $39.50 a share in November, closed at $4.49 a share
Thursday on the over-the-counter market.
Write to Austen Hufford at austen.hufford@wsj.com and Peg
Brickley at peg.brickley@wsj.com
(END) Dow Jones Newswires
July 01, 2016 08:45 ET (12:45 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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