Page 85 - CL Armchair Case
P. 85
On February 1, 2011, in a naked short sale on an account it
held with Merrill Lynch, MSMB Capital sold short 32 million
shares of Orexigen Therapeutics stock at about $2.50 per
share the day after its price plunged from $9.09, when the
Food and Drug Administration (FDA) declined to approve the
drug Contrave. The stock price rebounded; MSMB could not
cover the position, although it had told Merrill Lynch that it
could. Merrill Lynch lost $7 million on the trade and MSMB
Capital was virtually wiped out.
Shkreli founded Retrophin (investing $4 million) in 2011
under the MSMB umbrella and ran it as a portfolio company
with an emphasis on biotechnology, to create treatments for
rare diseases. His initial idea for Retrophin was to purchase
two drugs from Valeant, Cuprimine and Syprine, which are
used to treat Wilson disease, an inherited disorder that
causes severe liver and nerve damage. His plan, he said, was
to jack up the prices. But the deal fell apart. Syprine, which
had about $200,000 in sales per month in the fall of 2012,
now has sales of $10 million a month, an increase that is
due purely to price increases by Valeant. Cuprimine is a
similar story
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.
