Controversial pharma CEO Martin Shkreli bails on Valeant bet

Mon Oct 26, 2015 6:31pm EDT
 
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By Angela Moon

NEW YORK Oct 26 (Reuters) - The one-time hedge fund executive now running a biotech firm at the center of a drug-pricing controversy on Monday said he has bailed from a losing bet he made on another contentious drug maker: Valeant Pharmaceuticals International Inc .

On the day last week that Valeant shares plunged in response to a shortseller's accusation of accounting irregularities, Martin Shkreli, head of Turing Pharmaceuticals, took to Twitter to say he had bought shares of Valeant while at the same time selling short the shares of rival Allergan Plc, a transaction known as a pairs trade.

"I have taken a long position in $VRX and shorted $AGN as a hedge. Both companies have similar prospects and one is at half the price," he tweeted on Oct 21.

On Monday, he said he'd quit the trade with a loss.

"Exited the $AGN $VRX trade. 3% loss or so. Bad idea. Onward and upward," Shkreli tweeted, just hours after Valeant laid out a detailed defense against the accusations of accounting fraud.

Shkreli has been vilified on social media and became the symbol for price gouging after Turing raised the price of a recently purchased AIDS and cancer drug, Daraprim, from $13.50 to $750 a tablet. He later said he would lower the price an unspecified amount.

Shkreli did not say at what price levels he'd entered the Valeant-Allergan trade, and Valeant shares swung violently that day, trading in a $60 range from the day's high to low before closing down by $28.13, or more than 19 percent. Allergan, too, had a volatile day, swinging in a $32.49 range before closing lower by $9.89, or 3.2 percent.

In all, shares of Valeant are down about 25 percent since short-selling firm Citron Research published a report on Oct 21 alleging that the company has used its ties with a specialty pharmacy to inflate revenue.. Allergan shares are up about 3 percent in the same period.

On a 75-minute conference call with investors and analysts on Monday, Valeant executives said they had asked U.S. securities regulators to investigate "completely untrue" allegations from research firm Citron that the company used its ties with a specialty pharmacy to inflate revenue.

But the defense did little to calm investors. Valeant shares closed down by another 5.3 percent at $110.06 on Monday. Allergan shares ended up 1.1 percent at $271.57. (Reporting by Angela Moon; Editing by Dan Burns and Christian Plumb)