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Business and Markets

Biopharma Will Not Be Dull As Long As Martin Shkreli’s Around

Things really boiled over here last fall when I wrote about Retrophin, their business strategy, and their CEO, Martin Shkreli. That one ended up with a bizarre encounter with Shkreli in real time on Reddit, and to me getting briefly thrown off of that site entirely. Not long afterwards, Shkreli himself was ousted by his own board at Retrophin, and went on to form a new company, Turing Pharmaceuticals.

But the noise has not died down at Retrophin. Two days ago, the company filed suit against Shkreli, alleging financial improprieties. It’s quite a story, and if any of it is true, then Shkreli himself is in for a hard time of it. The suit claims that he and his investment fund made a “disastrous” investment in Orexigen in 2011 (there have been opportunities since then to do that), and that he did not disclose this to investors, but instead engaged in a bunch of complex maneuvers to try to (1) pay off his investors in Retrophin stock and (2) use Retrophin in general as a personal piggy bank.

None of this has been proven in court, of course, and we’ll have to wait and see what becomes of this case. I for one am laying in a stock of popcorn and cold beverages against the time it actually goes to trial. Meanwhile, Turing (the new Shkreli company) just completed a financing round last week, under somewhat unusual conditions. The company seems to have the same (dishonorable) business model as Retrophin – identify obscure drugs from small suppliers, take them over and ram up the price – but Shkreli himself took to his Twitter account recently (where he’s had some adventures before) to promote Turing’s plan to pay its inventors direct royalties.

That’s a tricky topic in itself (see here for a discussion, with many interesting comments). In general, this is one of those ideas that sounds good (and could perhaps be good in practice), but has many unintended consequences. The biggest one is that idea-generation tends to shut down amount colleagues, because everyone is closely guarding their own inventorship status, and can become fearful of giving someone else a chance to get on the patent and dilute the revenue stream. That’s not a recipe for scientific progress, overall, and if you’re going to institute direct patent-based rewards, you’re going to have to look out for this effect.

But we don’t even know what Turing is up to yet. And whatever it is may be infuriating, or incomprehensible, or land everyone in court again (who knows), but at least it won’t be dull.

7 comments on “Biopharma Will Not Be Dull As Long As Martin Shkreli’s Around”

  1. Anon says:

    With all this going on I’m surprised any investors would touch him with a barge pole. And ramping up prices on established drugs won’t last very long as a business model. That will be the first place to face new legislation as the price bubble pops.

  2. Ghostface says:

    That dude’s Twitter is gold. So much laugably bad wannabe hip-hop gangstar. If the BOD at Retrophin couldn’t figure this dude for what he is then they got what they deserved.

  3. The most interesting part of the Retrophin suit against Martin is the admission that RTRX stock was essentially a rig from the get go. The free-trading shares were secretly controlled by nominees. Proving yet again that reverse-mergers are all scams in one way or another. If one never invests in any reverse mergers the chances of being conned go down considerably.

  4. z says:

    Just noticed, but I cannot see the categories/tags of stories in either the full stories or when I browse by categories on the right side.

    Though you can probably make a guess to what category it belongs to and check the right side, that’s a lot harder and missable. For example, if someone linked one of the things-i-wont-work-with pages, a new reader may very well miss that it’s part of a series of stories than if they saw the tag.

  5. a. nonymaus says:

    Shkreli should have no problem paying his inventors royalties, since his entire business model is based on avoiding inventive acts. He’s a pure rent-seeker, and I won’t shed a tear when he gets what’s coming to his ilk.
    The broader question of inventor compensation is more interesting. I’ve been a fan of the idea that inventions should be not be assignable, and that employees can only be compelled to provide an exclusive license whilst employed. That is to say, if you are an inventor, your employer should have to make it worth your while to not quit and take your patents with you. Of course, there is the possible problem of hindered collaboration, but I don’t think this is a serious impediment. Hits are such blockbusters that the rewards are far into the land of diminishing returns, so even liberal sharing of inventorship pays off better than being avoided by others as a hoarder of credit. One sees a similar thing in academic publishing with co-authorships.
    This could lead to the possibility of investors being held hostage by inventors, but that is more solution than problem. After all, if the investors really deserved their wealth, they themselves would have gone into the lab and made the invention. And, if the invention is not worth what the inventors ask, nothing stops the investors from calling the bluff.

  6. A Nonny Mouse says:

    Seems that there are bigger fish involved in this kind of dealings as well.

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