Biotech companies like KaloBios rarely like to publicly discuss their drug pricing strategies. It’s not a popular topic and they typically don’t have any products on the market that need to be priced anyway. But then, most biotech companies don’t have to distance themselves from one-time CEOs like Martin Shkreli.
The story spun by KaloBios last year was that Shkreli snatched the company up last year just when it was on the brink of liquidating after a string of trial failures put the company under a black cloud. Then Shkreli did something he had become infamous for: He started work on a deal to bag an old drug for a rare disease--one that was never approved in the U.S.--with plans to point it toward an FDA OK that could open a new market with hundreds of thousands of patients.
A regulatory win would possibly warrant a priority review voucher worth hundreds of millions of dollars. And Shkreli set out to stay true to a notorious course that he mapped at Retrophin and Turing, with plans to demand a wildly inflated retail price for the old therapeutic--a strategy that made him permanently persona non grata in a biopharma industry struggling with plenty of image problems.
But a funny thing happened to the company on the way to another Shkreli-made PR bio-disaster. The feds descended on the widely pilloried exec, indicting him for alleged fraud during his hedge fund days as well as looting Retrophin (the controversial pricing strategy was 100% legal). He was cuffed and perp walked for photographers, forced to take the 5th in front of Congress on live TV, and KaloBios and Turing instantly got new CEOs as the disgraced young biotech wheeler dealer stuck to live streaming his thoughts on the internet.
In KaloBios’ case, the new CEO is Cameron Durrant. And now that Durrant’s lined up new financing and is well along in the process of cramming Shkreli’s stake in the company to less than 20%, he wants to clean up the messy legacy and start afresh. And a clean slate includes letting everyone know that the company will never, ever, ever do anything that remotely looks like price gouging.
Everything at KaloBios, says Durrant, will be “180 degrees different from what has gone before.” Shkreli’s hep C style pricing plan for the Chagas treatment? Gone for good.It’s up to the company, he says, “to lead by example. Pricing is a critical issue right now.”
Durrant’s making a public promise, detailed in a statement out this morning, to be completely transparent about everything related to the cost of any drug the little biotech markets, including the cost of marketing. And the CEO--who has a lengthy biopharma pedigree that spans several Big Pharmas and multiple biotechs--says that KaloBios can set the pace for a completely new breed of company when it comes to cost transparency, which he notes has been a black box for consumers.
If the Chagas drug eventually makes it to the market, he’s promising to do some public accounting on cost, leave out any “R&D premium” and clearly outline their profit margins, which he says should look perfectly reasonable based on any fair assessment. (Exact details, like a projected percentage on profit margins, aren’t included in the pledge.) The same basic transparency oath goes for the antibody work the company has in the pipeline.
To be sure, KaloBios is still a long way away from any market, and Durrant says there’s no telling how much a priority review voucher could be worth if they land it. But he’s confident that he can get the company out of bankruptcy on or before June 30, and back in the business of drug development full time.
“That financing as envisaged would be adequate to support the company through to the other side of bankruptcy,” Durrant tells me. It’s enough money to pursue development of the Chagas drug, benznidazol, as well as put its top antibody program back on track. The debtor-in-possession financing is subject to a bidding process, he adds, where other investors would have an opportunity to provide cash on better terms.
KaloBios, of course, had plenty going wrong for it before Shkreli showed up at the door.
Founding CEO David Pritchard won over investors to the IPO by making his own pledge. Antibody development, he maintained, had become de-risked and just a lot more routine. The company then proceeded to design and mount several failed clinical efforts, demonstrating the exact opposite of what Pritchard had insisted was a new reality.
That’s another legacy issue you won’t be hearing about at KaloBios (a one-time Fierce 15 company).
“I don’t think any development is easy,” says Durant, spelling out all the stages of high-risk work that goes into any new therapy ahead of an FDA approval. It’s a gamble no matter how you look at it, and Durrant isn’t trying to make it sound like a sure thing.
Whatever else happens between now and KaloBios’ next big catalyst, that’s one argument that won’t inspire a lot of kickback from the industry.