KaloBios Takes Measures to Limit Shkreli's Shareholder Rights
July 07 2016 - 9:00AM
Dow Jones News
KaloBios Pharmaceuticals on Thursday said it had reached an
agreement with ousted Chief Executive Martin Shkreli to limit his
shareholder rights, a week after the rare disease drugmaker said it
had emerged from bankruptcy.
Mr. Shkreli, who holds 50.3% of the South San Francisco-based
biotech firm's shares according to FactSet data, was arrested in
December on securities-fraud charges unrelated to KaloBios. Soon
after, the company filed for bankruptcy protection, fearing the
turmoil surrounding Mr. Shkreli created an "imminent threat" to its
liquidity.
On Thursday, the company said it signed a governance agreement
with Mr. Shkreli, including an option for the company to repurchase
his shares as well as provisions significantly restricting his
actions as a shareholder.
"This agreement is another step in the company's pursuit of
revitalizing its reputation," said Chief Executive Cameron Durrant.
"KaloBios is building a company committed to transformational
ideas, like transparent and responsible pricing, to drive change.
This agreement, combined with our recent emergence from bankruptcy,
helps to hit the reset button and move forward."
Mr. Shkreli, also formerly the CEO of Turing Pharmaceuticals,
was widely criticized for increasing the price of anti-parasite
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 Chagas disease treatment
benznidazole in line with hepatitis C treatments that can cost as
much as $94,000 per course. In Latin America, where most cases of
Chagas disease are found, benznidazole costs $60 to $100, according
to the Drugs for Neglected Diseases Initiative.
In the agreement with KaloBios, for 180 days following June
30—the company's effective emergence from its chapter 11 bankruptcy
proceedings—Mr. Shkreli may not sell his shares to any third party
for less than $2.50 a share or a 10% discount to the prior two-week
volume-weighted average price, whichever is greater. Additionally,
KaloBios has right to buy any or all of Mr. Shkreli's shares at the
market discount price for 180 days after Aug. 30.
For "a limited time," the company can also refuse to purchase
shares that Mr. Shkreli proposes selling. The agreement bars him
from transferring any shares to his affiliates or associates unless
they agree to be subject to the same terms.
Mr. Shkreli can't nominate directors to the board and has agreed
to vote his shares in proportion to the votes of the company's
public stockholders.
The agreement also prohibits, for the next two years, Mr.
Shkreli or his affiliates from purchasing any stock or assets of
the company; participating in any proposal for any merger, tender
offer or other business combination; seeking to control or
influence the management, board or policies of the company; or
submitting any proposal to be considered by stockholders.
Mr. Shkreli paid $3.2 million in November 2015 for a controlling
stake in the struggling biotech firm, became its CEO and saw the
value of that holding grow to more than $48 million before his
arrest a month later. The criminal charges involve allegations he
hid losses in hedge funds he managed with the help of money from a
public company.
Mr. Shkreli couldn't immediately be reached for comment.
Write to Anne Steele at Anne.Steele@wsj.com
(END) Dow Jones Newswires
July 07, 2016 09:45 ET (13:45 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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