One of Martin Shkreli’s former companies has emerged from Chapter 11 bankruptcy and is pledging to ditch its notorious ex-chief’s price hike plans for a rare disease drug.
California-based biotech KaloBios (KBIO) was teetering on the edge of financial ruin last year before Shkreli gave it a $1.6 million jolt to stave off its collapse. He was named KaloBios’ CEO for his troubles but was fired about a month later, in December 2015, shortly after his arrest on wire and security fraud charges.
Shkreli—whose bombastic style and affinity for stirring the pot has earned him the derisive “pharma bro” moniker—no longer has “any sort of formal relationship” with the company and has a diminishing financial stake in it, current KaloBios CEO Cameron Durrant stressed in an interview with Fortune on Friday. Durrant added that Shkreli’s modus operandi of acquiring (and then raising the price of) niche products with few competitors in order to corner certain therapeutic markets will not persist. “We are looking to price based on the principles of access, affordability, and a reasonable return on our investment.”
Shkreli originally became infamous for his other former company Turing Pharma’s 5,000% price hike for a drug used by cancer and AIDS patients. But before his arrest, he said he’d use KaloBios as a vehicle to nab another niche drug, this time for treatment of the parasitic infection Chagas disease, and dramatically increase its price to the $60,000 to $100,000 range after helping it win FDA approval (the drug is approved in other countries and is provided to patients in the U.S. on a special and selective basis).
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Those plans were thrown into disarray after Shkreli’s arrest and subsequent ousting from the company, and KaloBios was ultimately forced to declare Chapter 11. But the biotech announced today that it has emerged from bankruptcy and landed a deal to buy the Chagas treatment, benznidazole, for $3 million. And it’s planning to hew to the responsible pricing model that it pledged several months ago.
Durrant declined to give any estimates of how much the company may charge for the drug if it ultimately receives FDA approval. But he added that a “reasonable return” would be determined through conversations with various stakeholders, including insurance companies, drug benefits managers, and patients.
Shkreli also had another financial incentive in mind when planning his benznidazole acquisition. Since the drug isn’t approved in the U.S. and there are a dearth of products to treat Chagas disease, it would likely win KaloBios one of the FDA’s coveted “priority review vouchers” if it were to clear the regulatory finish line.
These vouchers are meant to spur innovation and can be used to expedite the review process for a drug. But companies can also hawk them to other firms—often for tens or even hundreds of millions of dollars. And there’s been considerable speculation that Shkreli’s plan was to do exactly that all along.
KaloBios may still sell a review voucher if it wins one. But Durrant says that money from the transaction would largely be re-funneled into R&D.