KaloBios Pharmaceuticals is seeking bankruptcy court permission to buy rights to a drug that could be in line for a lucrative priority review voucher, a ticket for a fast trip through the regulatory process.

The company filed for bankruptcy protection not long after its ousted chief executive, Martin Shkreli, was arrested on securities fraud charges unrelated to KaloBios. At the time of his arrest, Mr. Shkreli was trying to land the rights to the drug, benznidazole.

Benznidazole, the drug at issue, is an established treatment for Chagas disease, which is an parasitic infection designated as neglected and in need of attention as a public health matter by U.S. regulators. The designation means benznidazole might qualify for an FDA voucher of the type that in the past has sold for as much as $350 million.

And that could mean profits for Mr. Shkreli, who was ousted from his post as chief executive of KaloBios after his arrest on securities fraud charges in December, but who remains a major shareholder. In a bankruptcy court filing Tuesday, KaloBios said it is "very likely solvent" and is running its affairs to benefit shareholders.

Peter Ivanick, KaloBios's lead bankruptcy counsel, also said in an email Wednesday that the company's board "is considering all of its options in connection with Mr. Shkreli's stock position."

Mr. Shkreli has been widely criticized for increasing the price of another vital drug, Daraprim, by fifty-fold. Before the criminal charges, which he denies, he alarmed advocates for rare-disease treatments when he told investors he intended to price benznidazole in line with hepatitis C treatments that can cost as much as $94,000 per course of treatment. In Latin America, where most cases of Chagas disease are found, benznidazole treatment costs $60 to $100, according to the Drugs for Neglected Diseases Initiative.

KaloBios's board of directors has told a bankruptcy judge the ousted CEO has no decision-making power in its affairs. Yet Mr. Shkreli stands to profit if hopes of the benznidazole deal drive up the stock price. Mr. Shkreli paid $3.2 million in November 2015 for a controlling stake in KaloBios, and saw the value of that holding grow to more than $48 million before his arrest.

The criminal charges, which he denies, involve allegations he hid losses in hedge funds he managed with the help of money from a public company.

KaloBios's stock price took a beating after Mr. Shkreli's arrest and the company's bankruptcy filing. At a court hearing earlier this month in the criminal case against Mr. Shkreli, prosecutors said his KaloBios stock makes up much of the E*Trade account pledged to secure his bail, and its value has shrunk. KaloBios shares, which reached a high of $39.50 a share in November, were trading at $1.89 a share on Wednesday on the over-the-counter market.

The stock was delisted from the Nasdaq Stock Market after Mr. Shkreli's arrest and KaloBios's chapter 11 filing. However, court papers reveal KaloBios intends to leverage its planned deal for benznidazole to climb back into the Nasdaq Stock Market, pledging "diligent efforts to promptly regain and maintain a Nasdaq listing for its common stock."

Company lawyers who filed papers in the U.S. Bankruptcy Court in Wilmington, Del., where KaloBios sought refuge in December, have blacked out many details of the transaction, including the price KaloBios is paying for intellectual property associated with the drug.

KaloBios is seeking to sign a binding letter of intent with Savant Neglected Diseases LLC, a private Bay Area company that signed a nonbinding letter of intent with KaloBios when Shkreli was in charge.

KaloBios is offering to pay $3 million to acquire the regulatory assets, which includes data, documentation and other materials relevant to pursuing FDA approval for benznidazole. Additionally, the company is agreeing to pay an undisclosed amount for an exclusive license of intellectual property associated with the drug, in a deal that appears to involve continued participation by Savant.

Last year, Mr. Shkreli became a target of widespread criticism for increasing the price of the drug Daraprim from $13.50 a pill to $750 per pill. A potentially lifesaving treatment, it is in demand among people with AIDS.

After his arrest, Mr. Shkreli resigned as CEO of Turing Pharmaceuticals, which owns Daraprim. Earlier this month, Mr. Shkreli refused to answer questions from U.S. lawmakers about pharmaceutical pricing. Turing issued a statement at the time affirming its "commitment to ensure access to Daraprim for every single patient who needs the drug, regardless of ability to pay."

The wholesale price of Daraprim remains $750 per tablet, a Turing spokeswoman said Wednesday.

In court papers, KaloBios offered assurances that, should it acquire benznidazole, people won't be denied access because of an inability to pay.

Write to Peg Brickley at peg.brickley@wsj.com

 

(END) Dow Jones Newswires

February 24, 2016 15:45 ET (20:45 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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