Battle brewing over ‘Pharma Bro’ Martin Shkreli’s controlling stake in Phoenixus

by Editorial Team

(Washington Insider Magazine) – Martin Shkreli may be losing his grip on the drug company he controls from prison.

Three days after the “Pharma Bro” bested a group of shareholders who tried to seize control of his company Phoenixus by ousting his cronies from the board, more efforts were made to relieve him of his controlling 44-percent stake in the pharmaceutical company, which he used to win the proxy battle.

On Thursday, a man owed millions by Shkreli, asked a Manhattan federal judge to delay no further in appointing a receiver to liquidate Shkreli’s Phoenixus stake.

Dr. Thomas Koestler — who a judge ruled in February 2017 was owed $2.6 million in consulting services he provided to another of Shkreli’s pharmaceutical companies, Retrophin — even cited Shkreli’s win on Monday against a pair of activist investors seeking to oust Phoenixus’ current board of directors.

“We note that time is of the essence and there is no reason for more delay,” he said. “It remains self-evident that Mr. Shkreli remains active in this business.”

On Monday, former Shkreli confidante and Vyera executive Kevin Mulleady, together with Jason Aryeh, a longtime activist investor in the pharmaceutical industry, held a special meeting asking Phoenixus shareholders to replace the current board of directors, who they say are Shkreli cronies.

Mulleady and Aryeh proposed a slate of six new directors who they argued would help turn the company around and put an end to Shkreli’s influence. But their candidates each lost by more than 70 percent, with Shkreli voting his 44 percent stake from prison.

Although the “Pharma Bro” was technically forced to forfeit the shares by a Brooklyn federal judge as part of his punishment for scamming investors, he is still able to use the shares to vote on company matters until they are reassigned.

Manhattan federal Judge Alison Nathan on July 1 agreed that the stock be liquidated to pay off Shkreli’s debts. But she has yet to appoint a court-ordered receiver to take control of the shares, worth an estimated $7.5 million.

Once the sale is completed, the title of the stock will pass from Shkreli to the new owner, which means Shkreli stands to lose the next proxy battle.

Whatever happens, Mulleady and Aryeh say they aren’t going away anytime soon.
The duo say they are now trying to scrape enough money together to make a competitive bid for Shkreli’s stake.

They could also try to take control of the company by holding another special meeting to oust Shkreli’s board while his shares are in limbo – or removed from his control but not yet purchased by someone else, they said.

When it comes to buying the shares, however, they are worried that the company or its directors can offer more.

According to documents reviewed by The Post, anyone who can shell out the money is eligible to purchase them — even if they’re in tight with Shkreli.

Aryeh and Mulleady, who says he was unfairly pushed off the Phoenixus board by Shkreli, want to extricate Shkreli from the company, return the price of drug Daraprim to pre-Shkreli levels, and throw out Shkreli’s enablers.

The 38-year-old Shkreli rose to notoriety in 2015 as CEO of Turing when he hiked the price of life-saving AIDS treatment Daraprim from $13.50 to $750 — a 5,000 percent increase. He later went on trial for scamming hedge fund investors, was convicted and sentenced to seven years in prison.

Koestler made his plea in light of Shkreli’s lawyer Brianne Murphy having filed a motion asking for a 90-day extension that would delay the appointment of the receiver and liquidation.

She has asked the court instead to appoint Buckley LLP partner and former state and federal prosecutor Daniel Alonso – who is perhaps best known for his commentary about the Trump Organization on MSNBC – as receiver to sell Shkreli’s shares.

Alonso declined to comment saying he “can’t discuss something under consideration by the court.”


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