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KaloBios Soars on Investment by Martin Shkreli-Led Group

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Shares of KaloBios Pharmaceuticals, Inc. skyrocketed 402.4% after the company announced that an investor group led by Martin Shkreli had acquired 70% of its outstanding shares.

Subsequently, Shkreli has been appointed as the Chief Executive Officer (CEO) and Chairman of the company’s board of directors.

Shkreli and the other investors have committed to an equity investment of at least $3 million, apart from a $10 million equity financing facility, subject to shareholder approval.

Why the Massive Jump?

Investors reacted positively to the investment from Shkreli and others as it gave a new lease of life to the company. Last week, the company had announced that it would undertake a wind-down of the business.

KaloBios’ pipeline comprises KB004 (phase II – certain hematologic malignancies) and lenzilumab (to initiate enrollment of phase I/II study later this year – chronic myelomonocytic leukemia).

We note that Shkreli is the founder and CEO of a privately held biopharmaceutical company, Turing Pharmaceuticals, which came into the limelight earlier this year with presidential candidate Hillary Clinton’s tweet on price gouging. In Aug 2015, Turing Pharmaceuticals, acquired U.S. rights to Daraprim (approved for various indications including toxoplasmosis, acute malaria and chemoprophylaxis of malaria due to susceptible strains of plasmodia) from Impax Laboratories and increased its price from $13.50 to $750 per pill in a single shot.

The two companies – Turing Pharmaceuticals and KaloBios – will operate independently. Given the ongoing political pressure and negative sentiments regarding drug price increases, investor focus is expected to remain on Shkreli’s next move.

A couple of favorably ranked stocks in the health care sector are GW Pharmaceuticals plc (GWPH - Free Report) and Conatus Pharmaceuticals Inc. (CNAT - Free Report) . While GW Pharma sports a Zacks Rank #1 (Strong Buy), Conatus holds a Zacks Rank #2 (Buy).

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