Page 5 - Martin Shkreli Case Study

During Shkreli's tenure as CEO, the company's employees used alias
Twitter accounts to make gangster rap jokes against critics of Shkreli
and encourage short selling of other biotech stocks.

In 2011, Shkreli filed requests with the FDA to reject a new cancer
diagnostic device from Navidea Biopharmaceuticals and an inhalable
insulin therapy from MannKind Corporation while publicly short-selling
both companies' stocks, the values of which dropped after Shkreli's
interventions. The companies had difficulty launching the products as a
result, although the FDA ultimately approved both.

Moreover, Shkreli often advertised his short positions on an investing
website called Seeking Alpha, where he encouraged others to follow his
lead. In March 2012 he took on San Diego-based Cytori Therapeutics,
criticizing “regenerative” treatments it was developing to use stem cells
to rebuild damaged tissue. “Regenerative medicine is a meaningless
and embarrassing buzzword that means nothing,” Shkreli declared. By

early April the company’s stock had plummeted 30 percent, to about $2.

Shkreli took Retrophin public in late 2012 by means of a “reverse
merger” with an existing shell company called Desert Gateway.

However, critics argued that Shkreli was intelligent but too immature and
unfocused for the job of CEO.

Shkreli, however, was in a hurry. Through Retrophin he made a $63
million purchase in February of Manchester Pharmaceuticals which
helps illustrate Shkreli’s strategy of buying the rights to obsolete drugs
and repurposing them as treatments for rare illnesses.

Manchester’s main asset is Chenodal, an FDA-approved drug to treat
gallstones that hadn’t caught on commercially. Chenodal, or
chenodeoxycholic acid, can also be used to treat a rare disease called
CTX, or cerebrotendinous xanthomatosis, which, if unaddressed, can
cause brain damage and early death. The FDA has granted Chenodal

orphan drug status for CTX patients, meaning that for a period of years,
its owner receives valuable financial incentives to proceed.