KaloBios Loses CFO, Board Members and Accounting Firm in Wake of Martin Shkreli Indictment
December 29, 2015
By Alex Keown, BioSpace.com Breaking News Staff
SAN FRANCISCO – KaloBios Pharmaceuticals is shedding executives who came to the company after Martin Shkreli acquired control of the company in November. Two more Shkreli connections, Tom Fernandez and Marek Biestek resigned from the company board of directors on Sunday.
Both Fernandez and Biestek have long histories with Shkreli, dating back to the hedge fund Shkreli once controlled. That hedge fund, MSMB Capital, which is now defunct, is at the center of a federal case against Shkreli, who was arrested earlier this month on securities fraud charges. Additionally, Fernandez also worked with Shkreli at Retrophin , when Shkreli helmed that company, Reuters reported this morning. Shkreli was ousted from Retrophin last year and is now being sued by that company.
Another Shkreli associate, Chris Thorn, KaloBios’ interim chief financial officer, resigned from KaloBios before Christmas. Shkreli, who became chief executive officer of KaloBios in November, was terminated on Dec. 21 following the federal indictment.
Not only have some of Shkreli’s associates left KaloBios, but so too has the company’s accounting firm. MarketWatch reported Marcum LLP was taped by Shkreli just a few weeks ago. Marcum was also the firm that provided auditing services for Retrophin, according to the report. The previous auditing firm, EY, which was formerly Ernst & Young, resigned from KaloBios services after Shkreli took over, MarketWatch said.
KaloBios also took another hit following Shkreli’s arrest. On Dec. 18, the company received a letter from Nasdaq Stock Market which said the board planned to delist KaloBios’ shares, primarily citing Shkreli’s criminal troubles, but also citing the company’s non-compliance in filing a 10-Q for the quarter that ended Sept. 30.
On Dec. 21, KaloBios announced it had terminated Shkreli as CEO. He also resigned as a member of the company board of directors.
The taint of Shkreli’s arrest also prompted the University of California at Davis and Moffitt Cancer Center in Florida to suspend a planned drug trial sponsored by KaloBios. The two centers were to study the experimental leukemia therapy KB003.
KB003 is a KaloBios “Humaneered” recombinant monoclonal antibody that neutralizes soluble granulocyte-macrophage colony-stimulating factor (GM-CSF), a critical cytokine for the growth of certain hematologic malignancies and solid tumors. The company was looking to begin Phase I clinical trials for the treatment of chronic myelomonocytic leukemia.
Whether or not the trial will proceed now that Shkreli has been terminated as KaloBios CEO remains to be seen. Before Shkreli acquired controlling interest in KaloBios, the company was close to shuttering. On Nov. 16, KaloBios announced the company would shut down its operations and liquidate its assets. That decision came just days after the company announced it was slashing 61 percent of its workforce in order to shift resources to development of lenzilumab, or KB003, toward treatment of chronic monomyelocytic leukemia (CMML). The compound is an anti-GM-CSF mAb originally tested for asthma, but was not effective in clinical trials. The company’s IND in CMML, an orphan oncology indication, has been cleared by the U.S. Food and Drug Administration, and had been initiating a Phase I trial and expects to start dosing patients before the end of the year.
According to the indictment against Shkreli, he and his partners, including attorney Evan Greebel, orchestrated three interrelated fraudulent schemes—a scheme to defraud investors and potential investors in MSMB Capital; a scheme to defraud investors and potential investors in MSMB Healthcare; and a scheme to defraud Retrophin, the company Shkreli founded. The indictment said Shkreli’s scheme, which caused his investors to suffer a loss of more than $11 million, was carried out over a five-year period, from 2009 to 2014.
While chief executive officer of Retrophin Pharmaceuticals, Martin Shkreli used the company as his “personal piggy bank” to pay off investors, U.S. Attorney Robert Capers said in a press conference following Shkreli’s arrest.