A bad bet shorting Orexigen Therapeutics’ stock back in 2011 torpedoed Martin Shkreli’s hedge fund, according to a former staffer testifying in the Shkreli fraud trial in New York this week. But it also led Shkreli to launch Retrophin, which prosecutors say the outspoken exec went on to use as his own personal piggy bank to pay back investors in the fund.
CNBC’s coverage of the trial spotlighted the bad bet, which left Shkreli’s fund owing $10 million to Bank of America/Merrill Lynch, far more than the fund had. But instead of telling his investors that he had lost all their money, he insisted that the fund was fat with cash. Then he proceeded to stall any payouts for years as the investors grew increasingly angry and impatient, according to testimony.
Texas investor Darren Blanton took the stand at Shkreli’s trial to say that the trash talking “pharma bro” — who has once again been kicked out of Twitter — took three years to pay him back, allegedly using a phony consulting agreement to explain a $200,000 payment plus the Retrophin stock Shkreli used to cover his losses.
That stock, though, wound up being worth millions of dollars. And that once again could undermine the federal case against Shkreli. Shkreli may have lied to his investors, as prosecutors allege, but the ones they are putting on the stand also ended up doing very well ultimately. That will leave the case centered on his deceptions and whether his use of company resources could be excused.
Shkreli’s most famous for hiking the price of Daraprim more than 5000% soon after bagging it, spotlighting a strategy of buying old drugs without generic rivals and then ratcheting up the cost to payers. But even though none of that is on trial — and is in no way illegal in the US — Shkreli has had a big impact on the industry.
That impact was visible after Maryland passed a bill that allows the state attorney general to go after any manufacturer who does what Shkreli did at Turing, the company he founded after he was kicked out of Retrophin. A trade group representing generic companies filed suit against that law on Thursday, looking to block it with a claim that the law would limit access to badly needed drugs. The law, they say, gives Maryland broad powers to regulate the market, something they say isn’t allowed in the constitution.
They’ll be arguing that one long after the jury decides Shkreli’s fate in federal court.
Image via Getty/Bloomberg
The best place to read Endpoints News? In your inbox.
Comprehensive daily news report for those who discover, develop, and market drugs. Join 35,300+ biopharma pros who read Endpoints News by email every day.Free Subscription