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Shkreli’s Chagas Maneuver

In case you’ve been wondering what Martin Shkreli has been up to, here’s a look at his recent appearance at a meeting put on by the folks at Forbes. “Unrepentant” would be an appropriate adjective, although I can think of some others, along with some richly descriptive nouns. He has been backing out of his statements about lowering the price of Daraprim, the compound that made him famous, and says that he mainly regrets not setting it even higher at first. So there you have it.

Meanwhile, he’s bought a just-about-defunct company, KaloBios, and that’s been a rather jumpy affair:

The new direction follows a meteoric rise in KaloBios’ stock price since a group led by Shkreli last month bought about 70 percent of the South San Francisco company. Until that point, KaloBios was a poster child for the risks of biotech investing, thanks to failed clinical trials and failed attempts to raise additional funds. The company, which raised $70 million in an initial public offering in January 2013, said early last month that it would close its doors, and its stock fell to as low as 44 cents. Then Shkreli came along. . .In picking up KaloBios, he played up the promise of the company’s experimental leukemia-fighting drug lenzilumab, and Thursday he said KaloBios had signed a deal to buy an experimental treatment for Chagas disease from a company called Savant Neglected Diseases LLC.

The resulting squeeze really hammered the people who were unfortunate enough to be short the stock, which until then had looked like it was heading into the trash bin. An outside observer might see this as a chance to pick up a stock market listing on the cheap, without the scrutiny that would (or should) accompany an IPO. And moving into Chagas disease might similarly be seen as a chance to pick up a Priority Review Voucher from the FDA, an asset that can be resold if desired. The compound in question is benznidazole, a nitroimidazole that has been around as a Chagas therapy for many years now. I would not be able refer to it as an “experimental” Chagas therapy with a straight face.

In fact, this appears to be yet another loophole-seeking exercise, where Shkreli’s company can take a compound that is already known to work and is already a recognized therapy, run it through the US regulatory process, where it’s never been approved, and then clean up by collecting a priority review voucher for what is basically a riskless trial. Shkreli has what can fairly be described as an unusual personality, which is well on display in the videos that he’s uploaded, and he’s also unusually attuned to this sort of maneuvering.

Update: if you’d actually like to see Shkreli in action at the Forbes conference, it’s here.

33 comments on “Shkreli’s Chagas Maneuver”

  1. biotechtoreador says:

    You see loopholes, I see a guy picking up $20 bills on the ground….

  2. crh says:

    “Shkreli’s company can take a compound that is already known to work and is already a recognized therapy, run it through the US regulatory process, where it’s never been approved […]”

    Forgive my ignorance, but why is this a bad thing to happen? Shkreli is such a known weasel that I’m primed to believe that anything he does is shady in one way or another, but I don’t understand the problem here.

    1. hypnos says:

      The compound probably never went through FDA approval because Chagas is not really a problem in the US (?). Now, someone is using existing data for an existing compound to make a lot of money using a mechanism that was intended to stimulate the work on new compounds or the better characterization of existing compounds. This may be legal, but it does not really help anyone except a few investors. And it poses the risk of shutting down a well-intended mechanism.

      1. schinderhannes says:

        Chagas is a growing problem in the US. Many immigrants suffer from it and the suffering increases with age.
        There are only two treatments available, both have no FDA approval, but both can be received via the CDC in the US. (Lampit = Nifurtimox from Bayer is the other one). I bet the FDA would love to get them approved, but I´m not sure if the 50+ year old original research and development documentation on them will be sufficient.)
        There has been a recent FDA Panel discussion on Chagas:

        Probably that inspired Mr Shkreli. I hope he underestimates the problems with approval. Maybe the US would be better off optimize the CDC route of distribution rather than having someone get FDA approval and then hike the price by many orders of magnitude!

        I hope your Government manages to close these crazy loopholes in its legislation soon! The collateral damage some non-vertebrates do to the whole drug discovery industry by milking the system is ridiculous!

    2. UP says:

      I’m inclined to agree with you, Crh. If the drug is currently used, and even if data currently exists, running it through the FDA regulatory process will only provide more transparency on its safety and effectiveness… therefore potentially leading to better use of the drug. I don’t see how that’s a bad thing.

      1. Alex Kravetz, PharmD says:

        UP , there is little, if anything to be gained or revealed by running this drug through clinical trials since it has already been in use for so long. The negative side is that after doing so, Martin’s company will obtain 3 years of exclusive marketing rights where they can set the price as astronomically high as they’d like. This reduces access to care for patients in need and also puts a huge financial burden on all players in healthcare: hospitals, insurers, and the taxpayers who fund medicare.

  3. d says:

    Maybe he’s right? Maybe the capitalism employed here is flawed to allow this? Maybe he’s just a jerk with a good idea?

    There are plenty of tech companies (I’ve worked for a couple) with nearly no chance of success employing CEOs that make millions from investors. At least this guy tells it how it is, and appears to be lying to no one. I doubt many overly paid money-losing bio CEO’s could boast the same without some qualification.

  4. Derek – based on the articles I’ve read, Martin doesn’t even plan on running a trial for benznidazole. He’ll just use existing data. Basically the same path to approval as Makena.


  5. JJar says:

    Selling of Priority Review Vouchers has been done before (See United Therapeutics $350M sale to Abbvies). I’m sure Shrekrelli got the memo that the FDA added Chagas disease to that list. The Priority Review Vouchers should be specific to the disease, as to make companies use it for the specific compound they applied for, or sell it to a company targeting the same disease (because their compound isn’t faring that well). Either way, as much as Shrekrelli is a scumbag this trick has been done before, so we should scrutinize the others just as heavily.

  6. milkshake says:

    Vice Magazine just equalled Shkreli with the depredations of Cartman, in this delightful cartoon” Your tears of unfathomable sadness are so delicious”

    1. ScientistSailor says:

      This really is a nightmare. People have been talking about a post-antibiotic era for some time now. The emergence of a plasmid-mediated colistin resistance gene is a huge step in that direction. Travelers can be colonized with this bug and spread it across continents, with no symptoms until they get sick or injured.
      Colistin is the last-line of defence against CRE, and when that’s gone, mortality rates from ‘simple’ infections will skyrocket. Routine procedures that we now take for granted such a pace-makers, arterial stents, joint replacements, chemotherapy, bone-marrow transplant will become life-threatening.

      Take action:
      Make a pledge not to buy meat raised on antibiotics.
      Don’t take antibiotics for your viral infection.
      Be prepared to pay A LOT more for new new generation of antibiotics that are coming out. They add many more years to your life than the cancer drugs that cost $$$.

  7. gippgig says:

    White House Chronicle (Dec. 6 9AM Channel 26 (PBS) in Washington, D.C.) is scheduled to discuss “the launch of a groundbreaking global alliance formed to find treatments and cures for the deadliest brain tumor”.

  8. Anonymous Researcher snaw says:

    I couldn’t adequately describe the maneuvers to which I would like to subject the guy in words that I would use in a public forum.

  9. Anon says:

    I wish people would understand, there are two sides of capitalism, i.e., two very different ways to make money:

    1. Create value with innovation and share it with all stakeholders involved (patients, physicians, payers and providers, employees, shareholders, tax payers, … and solciety as a whole)

    2. Take value from others by screwing them without creating any value, for example:
    a) Screwing patients, payers & providers by raising prices without any added benefit
    b) Screwing tax payers by avoiding tax with tax inversions, etc.
    c) Screwing employees by laying them off as soon as they have helped to create any value
    d) Screwing competitors by copying their drugs with me-too’s that add no value

    Seems like Pharma (not just Shkreli) has moved to the dark side of capitalism. This is not sustainable, because once you take everything, there’s nothing left to take, and society breaks down. Just you watch.

    1. schinderhannes says:

      Dear Anon,

      I can support views 2a till 2c but I have to oppose 2d!

      This is one of the often cited but – at least in my opinion not very carefully thought thru pseudo arguments.

      1. Very often those “me toos” appear less then 10 years after the first one, which indicates research on them was already ongoing before the first one was launched and became a success.
      2. You never know beforehand if the me too is only a slight improvement or a big one. One example of many: With antibiotics there were a couple of week quinolones before the good ones like Cipro came to marked, good thing research wasn´t stopped after the first one. OTOH, quinolones entering the market nowadays have to prove to be wastly superior to the dirt cheap Cipro to gather significant sales.
      3. Me toos mean true competitions so price hikes like with niche products will be problematic. As long as the prototype drug is still patent protected all drugs will have a similar high price. Once the first goes of patent, and its price crumbles, doctors and patients will have to make an educated decision to go for the generic or to stay on a premium priced maybe slightly improved second generation drug. That decision is not always easy, and pharma marketing will try to convince you not to switch, but at least you have a choice.
      4.I do not think it is fair to blame the pharma industry for the high costs with many people “needing” the newest e.g. statin. If society was smart enough to really understand the system, we would all take great generic statins, sartans and the like and the newer me toos would have a hard time. But many people decide differently. I think its called free market and capitalism 🙂
      If we were smarter, a lot of budget for truly new and innovative products would be freed. If a company comes 8 years late with a me too it should expect that the last 8 years of its patent protection arn´t worth much any more as generics will erode the market. But hey its their business decision ain´t it?

      1. Anon says:


        Actually, it doesn’t matter who develops and/or launches the “me-too” drug first…

        Simply by chasing the same limited set of hot targets, Pharma destroys significant value by duplication with minimum incremental benefit. On average, 5 me-too drugs are developed and launched per novel drug, regardless of the order in which they are launched.

        And at least 85% of the sales each drug generates come from taking market share from other drugs in the same class.

        What a waste!

        1. schinderhannes says:

          again, isn´t that entirely big pharmas own problem? Let them decide!
          To me the benefit for the patient is clear! Tell me one example of a mayor drug class where first in class is also anywhere close to best in class (ok. omeprazol might be one example – and nexium amrketing a dark episode) but apart from that I do prefer having seconds and thirds to compare.

          It´s not like hot drug targets by the dozen are waiting either…

          1. Anon says:

            The issue is that there can only be one best in class, so the odds of being best in class are inversely proportional to the total number of drugs in each class. The others are wasted R&D money that could have been better spent finding more effective mechanisms. Novel drugs are more likely to fail earlier in R&D, but the ones that succeed are more likely to deliver bigger improvements on average.

      2. Isidore says:

        I think that a lot of what is labeled as R&D “waste” in the development of follow-up drugs is simply hindsight-related. I suppose there may be some exceptions, but in general pharma researchers do not aspire to coming up with a second or third best drug but with the best in class, however it is impossible to know at the start whether they will be successful. The same argument applied, say, to the automobile industry would have us driving cars that are getting 10 miles to the gallon. After all the basic operation of the internal combustion engine in a Ford Model T is the same as in today’s gasoline-powered automobiles.

        1. Anon says:

          The question is: Are the incremental improvements worth more than the cost of developing them? In many/most cases, and certainly on average these days, I think not.

  10. Ash (Wavefunction) says:

    Here’s a NYT piece from over the weekend glorifying that ‘bad boy’.

  11. Magrinho says:

    Is Anon just a fill in name for ‘Straw Man’?

    What do you mean by best in class? One drug wins and the others are inferior on all levels?

    A quick survey of allergy sufferers (probably 5 is enough) would cure you of that simple minded notion. Loratidine, cetirizine and fexofenidine are all the same class but efficacy/side effects are very different for different patients. Many drugs within an identical class show a similar phenomenon: anti-depressants, statins to name two more. But is that really new info here?

    1. Mark Thorson says:

      Good examples. Anti-epileptics are another. If you invented a new anti-epileptic drug, there is likely to be a class of patients out there who are refractory to all anti-epileptics except yours. We understand a lot about what causes epilepsy, but we don’t understand everything about epilepsy, and there are some patients who can’t be reached by existing drugs. (Oddly, some of these patients can be reached by the ketogenic diet, an anti-epileptic therapy developed in the 1920’s.)

    2. Anon says:


      “What do you mean by best in class? One drug wins and the others are inferior on all levels?”

      Nope, I’m just saying that there is significant overlap and thus more duplication as improvements tend to be much more marginal (incremental) when you target the same mechanism.

      Yes, you *can* get major improvements in rare cases of incremental innovation, but generally they are much more incremental on average. That’s why it’s called incremental innovation. And generally it can be rather wasteful because you always get diminishing returns until you shift to a new paradigm.

  12. Vader says:

    “2. Take value from others by screwing them without creating any value, for example:
    a) Screwing patients, payers & providers by raising prices without any added benefit”

    This is possible only because of a government-granted monopoly. That’s not really laissez-faire (which is which I assume you mean by “capitalism.”)

    b) Screwing tax payers by avoiding tax with tax inversions, etc.

    Moving your company to a lower-tax jurisdiction strikes me as perfectly fair play. If a different government can give you the benefits of rule of law and lack of corruption at a lower cost, swell.

    c) Screwing employees by laying them off as soon as they have helped to create any value

    This strikes me as suicidal, in the long term. Capitalism is about making rents off of investments — it requires long-term thinking to be done well.

    Sooner, or later, short-term thinkers (e.g. speculators) get hit by a bad turn of the roulette well. The trick is to ensure that government doesn’t then bail them out — which is hardly laissez-faire.

    d) Screwing competitors by copying their drugs with me-too’s that add no value

    Not sure what this scenario really entails.

    If you mean copying their formulation, that’s patent infringement.

    Unless the patent has run out, in which case it’s fair play — and the whole basis of the entirely socially beneficial generics industry.

    If you mean making a formulation just different enough to avoid patent difficulties, I’m not sure how that’s supposed to pay off. Unless — *sigh* — there is another non-laissez-faire government intervention involved.

    I like government. I like that it establishes rule of law. However, I like that it stays small and focused.

  13. Calvin says:

    Ahhh good old Chagas and Benznidazole. I rather suspect that bozo Shkreli might get a bit of a surprise with this one. The big big issue is that there are no agreed clinical endpoints. DNDi have been wrestling with this and while the newer PCR test does indicate that the parasite has been eliminated below the limit of quantification it’s pretty clear that even if there is a single live parasite living in deep tissue post treatment, the parasite comes back even when PCR suggested cure. So follow-up has to be >3 years probably (which is hard in this patient group) which is going to be expensive. And the current clinical data doesn’t really include that type of follow-up. The FDA could quite easily say no on this one.

    As an aside the regulatory info was first generated by Roche but is now held by the Brazilian government, who after quite a song and dance now manufacture it. There’s no way they’ll give it to Shkreli. So he’s entirely relying on the current clinical dataset in the public domain for this. But he’s not really got a clinical end point. Yeah, I can see the FDA saying no and him having to run a very long clinical trial (which he won’t do).

    If he was really clever he’d be looking at animal health. Chagas is a real problem in expensive race horses and dogs in the south of the US (where the non-biting parasite lives but gets passed on by ingestion). You could make money there……

  14. DrSnowboard says:

    This guy is a bottom feeder, but he is exploiting a poorly regulated system. Hiding behind his legal responsibility to his shareholders under Delaware law is further evidence of him seeing life as a game. I’d quite like to see him game his way out of a poorly served disease area of extremely personal relevance.

  15. Rule (of 5) Breaker says:

    While I generally believe this guy is a piece of trash, as long as the FDA creates a game, people are going to play it.

  16. Jeff says:

    Can I ask a question? If this voucher is so valuable (and I read the article telling me why), then why hadn’t Savant Neglected Diseases already pursued it? Did they not know what they were sitting on? Did they under value their asset (seems unlikely in a market that appears relatively transparent and active)? I’m not sure I understand how he could possibly be making a profit on the Chagas transaction.

  17. David says:

    Since it’s only available through the CDC atm, maybe the best route is for the CDC to still be able to source and distribute it at the same price, with only patients unsble to acess it before levied the astronomical profiteering? Might help supply some market levelling force without the full competition of the market.

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