KaloBios is back from the dead after Shkreli swoops in to 'save' its lead drug

Turing Pharmaceuticals CEO Martin Shkreli

KaloBios ($KBIO), circling the drain after a slew of clinical failures, said last week it was finally packing it in, recruiting a liquidation consultant to help it gradually wind down operations. But the company saw its share price rocket up more than 700% on Wednesday evening after controversial entrepreneur Martin Shkreli acquired a controlling stake with plans to rescue KaloBios' lead asset.

Shkreli bought about 1.2 million shares of KaloBios for roughly $1.6 million in total, according to a filing with the SEC, giving him and some undisclosed associates more than 50% of the company's outstanding shares. The trades sent KaloBios' stock price as high as $23.76 overnight as some investors read Shkreli's move as a means to take his company, the privately held Turing Pharmaceuticals, onto Wall Street without needing an IPO.

But that's not the plan, Shkreli said, adding that Turing could go public "whenever I feel like it." Instead, Shkreli said he sees promise in lenzilumab, a KaloBios-owned antibody that failed a Phase II trial in severe asthma last year.

Before starting down the path of liquidation, KaloBios had shifted its attention to a Phase I study of lenzilumab in the rare chronic myelomonocytic leukemia, or CMML, a deadly disease with no FDA-approved treatments. Now that Shkreli controls KaloBios, that study will move forward as planned, he said, expecting to begin enrollment this year.

"I'm happy to save this company from the brink," Shkreli said. "They announced they were going to shut down, and I came in and said, 'No, you're not.'"

The allure of lenzilumab, according to Shkreli, is that despite missing the mark in that Phase II asthma trial, the antibody demonstrated a clinically relevant effect on its target, a cytokine called GM-CSF. And hypersensitivity to GM-CSF plays a role in the growth and survival of CMML cells, making the disease "a home-run indication" for lenzilumab, he said.

And Shkreli's not alone in seeing the promise of GM-CSF antagonism. The CEO cites GlaxoSmithKline ($GSK) and its 2013 move to license a similar antibody from MorphoSys for €22.5 million up front and up to €423 million more, planning to develop the therapy for rheumatoid arthritis. If that effort succeeds, lenzilumab could be all the more valuable, Shkreli said.

Turing and Shkreli made headlines around the world earlier this year after acquiring a little-used drug from Impax Pharmaceuticals and raising its list price by about 5,000%, sparking concentric circles of outrage that eventually made the CEO a mascot for Big Pharma in the debate over drug pricing in the U.S. The ensuing fervor shifted the spotlight to companies much larger than Turing and has contributed to an industrywide dip in stock valuations.

- read the filing