Post by mindovermatter on Dec 23, 2015 14:24:27 GMT -5
www.wsj.com/articles/the-good-the-bad-and-the-shkreli-1450829001
“He stayed there two weeks, dismayed at its ferocious indifference to the drums of his destiny, to destiny itself, and despising the janitor’s work with which he was to pay his way through.” —F. Scott Fitzgerald, on the brief college career of his title character in “The Great Gatsby.”
“My parents were immigrants and janitors. [Trump] inherited wealth! [Expletive] him. And I thought we could be friends.” — Martin Shkreli, disgraced pharmaceutical CEO, quoted in Vanity Fair.
Martin Shkreli, the wunderkind and bad boy of pharmaceuticals who was arrested last week, takes exception to the term Ponzi scheme, and no wonder. If the government charges are correct, his story goes like this: In his 20s, he raised a few million dollars from acquaintances and tried to become a hedge-fund impresario but almost instantly lost their money and then lied to his investors about it.
Thereupon he created what appears to have been a successful pharmaceutical company from which he allegedly illegally transferred cash and shares to placate his previous investors. When the company understandably fired him and sued over these actions, he created a second apparently successful drug company.
The first company, Retrophin, even after the controversy and bad headlines of the past week, is still worth $730 million in the market, a large multiple of his alleged hedge-fund losses.
The second company, Turing Pharmaceuticals, is not publicly traded but owns lucrative drug rights and apparently continues to realize profitable sales.
Awkward questions naturally come up. Going by Retrophin’s private lawsuit against Mr. Shkreli, its former CEO, which gives names and dates, he wasn’t exactly operating behind a veil. Some of his investors are fairly prominent names whose make-good for their hedge-fund losses allegedly came in the form of “sham consulting agreements” that Mr. Shkreli provided through his company Retrophin. Will these investors soon be hearing a federal knock on the door?
Even as Retrophin was firing him for alleged fraud, it struck a deal to let him take some of its drugs under development. Hmm. And despite the swirling complaints that followed him from his hedge funds and Retrophin, Mr. Shkreli claimed he raised $90 million for his new company, Turing. At least $55 million of this money apparently was real: He bought the U.S. rights to Daraprim, the aging, off-patent drug that made him a near-household name (not in a good way) months before any federal indictment surfaced.
Unknowable at this point is whether any of Mr. Shkreli’s apparently creditable designs on new-drug development will ever pay off. Multiple industry executives, investors and drug scientists have spoken of what one called the untrained 32-year-old’s “humbling” insights into biopharmacology.
We’ll have to see. Meanwhile, undoubtedly due to his urgent need for money to silence his irate hedge-fund investors, his immediate strategy at both Retrophin and Turing was to acquire the rights to old drugs and jack up the prices. Voilà, in an election year, a passport to infamy. Off-patent drugs that treat rare conditions are evidently extortionate price hikes waiting to happen. Any generic copycat would have to pass through the FDA’s complicated, expensive approval rigmarole, which isn’t worthwhile for a drug that treats a small population.
Let’s not deceive anyone. Established companies like Valeant, Questcor, Rodelis, Merck, Pfizer and others also hike prices. Indeed, every seller of a medical good or service charges what the market will bear in a system where market discipline is attenuated and distorted by third-party payership.
Mr. Shkreli’s story, furthermore, wouldn’t be possible without a drug-approval system that vastly inflates the cost and undermines the incentive to create new drugs. At the same time, it also wouldn’t be possible without the not-unattractive fact that, in what remains a fairly free society, anybody can hang out a shingle as an investment manager for “accredited investors,” i.e., people with enough money that they’re assumed to know what they’re doing.
Finally, his story wouldn’t be possible without the enormous excitement and promise of genetic medicine, about which Mr. Shkreli seems to have acquired genuine expertise even while allegedly committing the remarkable litany of frauds detailed in the government’s complaint.
For instance, Mr. Shkreli may well have been onto something with respect to new treatments for certain genetically based neurodegenerative diseases.
It all brings to mind the Chinese Communist Party’s labored verdict in the 1980s that Mao was 70% good and 30% bad. Maybe the CCP can lend us expertise to differentiate the good Mr. Shkreli from the bad.
“He stayed there two weeks, dismayed at its ferocious indifference to the drums of his destiny, to destiny itself, and despising the janitor’s work with which he was to pay his way through.” —F. Scott Fitzgerald, on the brief college career of his title character in “The Great Gatsby.”
“My parents were immigrants and janitors. [Trump] inherited wealth! [Expletive] him. And I thought we could be friends.” — Martin Shkreli, disgraced pharmaceutical CEO, quoted in Vanity Fair.
Martin Shkreli, the wunderkind and bad boy of pharmaceuticals who was arrested last week, takes exception to the term Ponzi scheme, and no wonder. If the government charges are correct, his story goes like this: In his 20s, he raised a few million dollars from acquaintances and tried to become a hedge-fund impresario but almost instantly lost their money and then lied to his investors about it.
Thereupon he created what appears to have been a successful pharmaceutical company from which he allegedly illegally transferred cash and shares to placate his previous investors. When the company understandably fired him and sued over these actions, he created a second apparently successful drug company.
The first company, Retrophin, even after the controversy and bad headlines of the past week, is still worth $730 million in the market, a large multiple of his alleged hedge-fund losses.
The second company, Turing Pharmaceuticals, is not publicly traded but owns lucrative drug rights and apparently continues to realize profitable sales.
Awkward questions naturally come up. Going by Retrophin’s private lawsuit against Mr. Shkreli, its former CEO, which gives names and dates, he wasn’t exactly operating behind a veil. Some of his investors are fairly prominent names whose make-good for their hedge-fund losses allegedly came in the form of “sham consulting agreements” that Mr. Shkreli provided through his company Retrophin. Will these investors soon be hearing a federal knock on the door?
Even as Retrophin was firing him for alleged fraud, it struck a deal to let him take some of its drugs under development. Hmm. And despite the swirling complaints that followed him from his hedge funds and Retrophin, Mr. Shkreli claimed he raised $90 million for his new company, Turing. At least $55 million of this money apparently was real: He bought the U.S. rights to Daraprim, the aging, off-patent drug that made him a near-household name (not in a good way) months before any federal indictment surfaced.
Unknowable at this point is whether any of Mr. Shkreli’s apparently creditable designs on new-drug development will ever pay off. Multiple industry executives, investors and drug scientists have spoken of what one called the untrained 32-year-old’s “humbling” insights into biopharmacology.
We’ll have to see. Meanwhile, undoubtedly due to his urgent need for money to silence his irate hedge-fund investors, his immediate strategy at both Retrophin and Turing was to acquire the rights to old drugs and jack up the prices. Voilà, in an election year, a passport to infamy. Off-patent drugs that treat rare conditions are evidently extortionate price hikes waiting to happen. Any generic copycat would have to pass through the FDA’s complicated, expensive approval rigmarole, which isn’t worthwhile for a drug that treats a small population.
Let’s not deceive anyone. Established companies like Valeant, Questcor, Rodelis, Merck, Pfizer and others also hike prices. Indeed, every seller of a medical good or service charges what the market will bear in a system where market discipline is attenuated and distorted by third-party payership.
Mr. Shkreli’s story, furthermore, wouldn’t be possible without a drug-approval system that vastly inflates the cost and undermines the incentive to create new drugs. At the same time, it also wouldn’t be possible without the not-unattractive fact that, in what remains a fairly free society, anybody can hang out a shingle as an investment manager for “accredited investors,” i.e., people with enough money that they’re assumed to know what they’re doing.
Finally, his story wouldn’t be possible without the enormous excitement and promise of genetic medicine, about which Mr. Shkreli seems to have acquired genuine expertise even while allegedly committing the remarkable litany of frauds detailed in the government’s complaint.
For instance, Mr. Shkreli may well have been onto something with respect to new treatments for certain genetically based neurodegenerative diseases.
It all brings to mind the Chinese Communist Party’s labored verdict in the 1980s that Mao was 70% good and 30% bad. Maybe the CCP can lend us expertise to differentiate the good Mr. Shkreli from the bad.
