December 21, 2015
By Alex Keown, BioSpace.com Breaking News Staff
SOUTH SAN FRANCISCO – Fallout continues over the arrest of former Turing Pharmaceuticals Chief Executive Officer Martin Shkreli. This time, the taint of his arrest has impacted Bay Area’s KaloBios Pharmaceuticals , the company Shkreli took over in November.
This morning KaloBios announced it had terminated Shkreli as CEO. Shkreli, who was charged last week with seven counts of securities fraud, securities fraud conspiracy and wire fraud conspiracy, also resigned his position on KaloBios’ board of directors.
Although the company is no longer associated with Shkreli, his toxic reputation has prompted the University of California at Davis and Moffitt Cancer Center in Florida to suspend a planned drug trial sponsored by KaloBios, Bloomberg reported.
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.
Additionally, KaloBios had planned to pause enrollment in its Phase II trial of KB004 in certain hematologic malignancies. KB004 is a non-fucosylated mAb that targets EphA3 in hematologic cancers and solid tumors. KB004 is designed to kill tumor cells through multiple mechanisms, including antibody-directed cellular cytotoxicity (ADCC), direct apoptosis or disruption of the tumor stem cell environment and the vasculature that feeds it.
Now that Shkreli has been charged, the future of KaloBios may be in doubt. 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.
When Shkreli was helming MSMB Capital Management, Capers said he made a number of risky investments and then lied to his investors as to how the investments were doing. After founding Retrophin Pharmaceuticals, he used funds from that publicly traded company to pay off his hedge fund investors, Capers said.
The criminal case has been assigned to United States District Judge Kiyo Matsumoto. If convicted, Shkreli and Greebel each face a maximum sentence of 20 years’ imprisonment, according to the U.S. Attorney’s Office
On his Twitter account, Shkreli said he is confident he will prevail against the allegations, which he called baseless. He released a statement saying the Retrophin lawsuit should have been a private civil affair. Regarding the practices of his former hedge fund, Shkreli said the deals he made involved “complex accounting matters” that federal authorities “fail to understand.”
