KaloBios Files for Chapter 11 Bankruptcy

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KaloBios Pharmaceuticals, the struggling California biotech company that ousted Martin Shkreli this month, filed for Chapter 11 bankruptcy on Tuesday.

The drugmaker has listed approximately $8.4 million in assets and nearly $2 million in debt in filings with United States bankruptcy court in Delaware.

The drugmaker had planned to go out of business before Mr. Shkreli took it over. Several of its experimental drugs had failed, and the company did not have enough money to continue operating.

But in late November, Mr. Shkreli led a group of investors who bought 70% of KaloBios shares on the open market at prices typically below $2 per share. The stock briefly jumped to over $40 per share once news of interest surfaced.

Mr Shkreli quickly caught the eye after a plan surfaced to sharply raise the price of a decades-old drug that treats Chagas diseasea parasitic infection that can cause life-threatening heart problems.

Mr Shkreli had already become infamous, as head of Turing Pharmaceuticals, for raising the price of a life-saving drug to treat toxoplasmosis, a rare parasitic infection, to $750 from $13.50 a pill.

His ambitions for KaloBios proved to be short-lived. Mr Shkreli was arrested on December 17 on securities fraud and wire fraud charges. Federal prosecutors have charged Mr. Shkreli with something akin to a Ponzi scheme linked to his first pharmaceutical company, Retrophin. They say he used the pharmaceutical company’s funds to reimburse investors who lost money in his hedge fund, MSMB Capital Management.

KaloBios fired Mr. Shkreli after his arrest. Two days later, Nasdaq notified KaloBios that it would be delisted from the exchange. KaloBios appealed Nasdaq’s decision. A hearing is scheduled for February 25, the company said Tuesday.

The KaloBios business has been interrupted since Mr. Shkreli’s arrest. The last quoted price was $23.59 per share. On Monday, the company announced the resignation of two of its directors, Tom Fernandez and Marek Biestek.

In its bankruptcy filings, the University of Miami and the accounting firm Ernst & Young are among the main unsecured creditors of KaloBios.

Representatives of KaloBios could not immediately be reached for comment.

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