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Kalobios, Briefly Run By Martin Shkreli, Files for Bankruptcy

Kalobios, a drugmaker taken over by Martin Shkreli last month, is seeking bankruptcy protection after his arrest on securities fraud charges.

NEW YORK -- Kalobios, a prescription drugmaker taken over by Martin Shkreli last month, is seeking bankruptcy protection less than two weeks after his arrest on securities fraud.

It is the second pharmaceutical firm with ties to the former hedge fund manager to fall into turmoil following his indictment on charges unrelated to his involvement with them, though the drugmakers are not lacking for problems of their own

The other, Turing Pharmaceuticals Inc., is cutting jobs and seeking a new CEO after Shkreli resigned the position because of his arrest.

Turing, under Shkreli, acquired the rights to a treatment for a rare parasitic infection that mainly strikes pregnant women and raised the price from $13.50 to $750 per pill. That shoved the New York company right into the crosshairs of lawmakers under pressure from constituents to do something about soaring drug prices.

Retail prices have surged 401 percent since 2009 for brand-name drugs for skin conditions, according to research published in JAMA Dermatology, a medical journal. That compares to an overall inflation rate of just 11 percent during the same period.

A report published in May by the pharmacy-benefits company Express Scripts found that 576,000 Americans spent at least $50,000 on prescription drugs in 2014, a sum roughly equivalent to the U.S. median household income.

An investigation by the Senate Special Committee on Aging is now focused on Turing and three other pharmaceutical companies.

Two weeks after he became its CEO, KaloBios agreed to buy the U.S. rights to benznidazole, which is used to treat a parasitic infection called Chagas disease. Benznidazole was never approved in the U.S. because Chagas disease isn't common here, although the number of cases is growing.

The South San Francisco, California, company said it planned to get quick marketing approval for benznidazole without running costly clinical studies and expected to price the drug similar to new hepatitis C drugs that cost around $1,000 per pill, or more than $80,000 for a course of treatment.

Doctors Without Borders said a course of treatment with benznidazole typically costs about $100 in Latin America. Patients in the U.S. get the drug through the Centers for Disease Control and Prevention.

If the Food and Drug Administration approved KaloBios' application for benznidazole, the company could have also obtained a Priority Review Voucher from the government entitling it to a faster review of another drug. Those vouchers can be sold to other companies, and KaloBios said they can fetch hundreds of millions of dollars in proceeds.

Analysis: Shkreli Isn't Responsible for High Drug Prices in U.S.

Trading in Kalobios' shares has been suspended and it was notified one week ago that it would be delisted from Nasdaq because of the arrest of Shkreli and the company's outside counsel.

In a Chapter 11 filing late Tuesday with the U.S. bankruptcy court for the District of Delaware, the company listed assets and liabilities in the range of $1 million to $10 million.

KaloBios plans to use bankruptcy to "evaluate its strategic alternatives" and to develop a restructuring plan, according to court documents. A chief restructuring officer, Eugene Davis, was appointed on Dec. 23, the filing said.

Kalobios' largest creditors include the University of Miami, Ernst & Young and Lonza Sales Ltd.

Reuters contributed to this report.