KaloBios Pharmaceuticals files for bankruptcy in wake of Shkreli arrest

By Tom Hals and Rishika S

(Reuters) - KaloBios Pharmaceuticals Inc, a biotechnology company that fired Chief Executive Martin Shkreli earlier this month after his arrest on charges of securities fraud, filed for Chapter 11 bankruptcy on Tuesday.

The filing comes weeks after KaloBios received financing from Shkreli to avert closing down, only to have those plans upended by his arrest.

Shkreli was arrested on Dec 17 for engaging in what U.S. prosecutors said was a Ponzi-like scheme at his former hedge fund and a pharmaceutical company he previously headed.

Shkreli gained notoriety when, as the chief executive of Turing Pharmaceuticals, he raised the price of a drug used to treat a dangerous parasitic infection to $750 a tablet from $13.50. He resigned as Turing CEO on Dec 18.

KaloBios plans to use bankruptcy to "evaluate its strategic alternatives" and to develop a restructuring plan, according to documents filed with the U.S. bankruptcy court in Wilmington, Delaware.

A chief restructuring officer, Eugene Davis, was appointed on Dec. 23, according to court documents.

KaloBios named Shkreli as its CEO on Nov. 20, after Shkreli and a consortium of investors bought about 70 percent of its shares for an average price of $1.51, and agreed to provide additional financing.

The stock rocketed as high as $45.82 per share after Shkreli's investment was disclosed.

Shkreli had said that KaloBios' lenzilumab was a promising candidate for treating rare diseases.

The stock has been suspended from trading by Nasdaq since Thursday, when it last traded at $23.59 per share.

The company listed assets of $8.4 million and liabilities of $1.9 million.

KaloBios said on Monday said two of its directors, Tom Fernandez and Marek Biestek, had resigned.

KaloBios did not immediately respond to requests for comment.