February 1, 2016
By Alex Keown, BioSpace.com Breaking News Staff
SAN FRANCISCO – Struggling KaloBios , which filed for bankruptcy at the end of 2015, is seeking permission to pay employee bonuses, The Street reported this morning.
KaloBios is seeking judicial approval to pay eight workers up to $378,000 in bonuses over the next year as part of an employee retention plan, The Street said this morning. The company filed a motion with the court on Jan. 26. In the motion, KaloBios said none of the individuals who would receive the bonuses are associated with Martin Shkreli, the disgraced former chief executive officer who was indicted on seven counts of securities fraud in December. KaloBios said that given the highly competitive nature of its industry and the well-publicized ousting of Shkreli from the company, the bonuses are necessary, The Street reported.
“The debtor believes that this employee bonus plan is necessary given the extraordinary demands and stress being placed on the debtor’s employees as a result of recent events and the debtor’s restructuring effort,” the motion said, as reported by The Street. “Further, although relatively modest, the program sends the appropriate signals of confidence and appreciation to the debtor’s employees and is designed to incentivize the debtor’s employees to remain with the debtor during this challenging period.”
On Dec. 29, KaloBios filed for Chapter 11 bankruptcy protection in U.S. Bankruptcy Court in Delaware, estimating assets of $8.37 million and debts of $1.94 million. The filing came a few weeks after Shkreli was indicted by the federal government. By filing Chapter 11 bankruptcy, KaloBios will have time to reorganize its now shaky leadership structure, restructure its debt, or possibly look at divesting itself of its assets—a move it was about to make earlier this year before Shkreli and his partners acquired hundreds of thousands of shares of common stock. The bankruptcy filing came a month after KaloBios announced the company would shut down its operations and liquidate its assets.
The bankruptcy filing comes on the heels of the company’s appeal to the Nasdaq Stock Exchange’s decision to delist its shares. However, earlier this month KaloBios withdrew its appeal to the Nasdaq.
The company has a promising leukemia treatment in its pipeline. Lenzilumab, or KB003, a treatment of chronic monomyelocytic leukemia, 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 (FDA), and had been initiating a Phase I trial and expects to start dosing patients before the end of the year.
Before Shkreli’s fall from grace and during his short tenure as CEO of KaloBios, the company had sought to acquire a benznidazole program for the treatment of Chagas Disease from Savant Neglected Diseases, LLC, for $2 million in upfront payments. The company intended to file for Orphan Drug Designation and Fast Track Designation for benznidazole in Chagas Disease. Currently, there are only two treatments for Chagas disease available—niffurtimox and benznidazole. KaloBios had also planned to seek a neglected tropical disease priority review voucher from the U.S. Food and Drug Administration. However, that deal was never finalized before Shkreli’s arrest, a Savant spokesperson said. Because the deal was never finalized, Savant remains free to enter into a new deal for the drug.
Shkreli was arrested by federal authorities on Dec. 17. The seven count indictment against Shkreli included multiple charges of securities fraud, securities fraud conspiracy and wire fraud conspiracy. U.S. Attorney Robert Capers accused Shkreli of running his former company Retrophin Pharmaceuticals and his former hedge fund MSMB Capital Management like a “Ponzi scheme.”
