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Performing due diligence on Martin Shkreli

The pharma CEO Martin Shkreli has been attracting attention lately after taking a very large position in KaloBios Pharmaceuticals.  After Shkreli made his initial investment, the stock has risen roughly 40-fold.  One of the more interesting documents that I found was the Retrophin 8-K filed on August 17, 2015 (EDGAR,  Shkreli’s former employer seemed a little unhappy with its former CEO, accusing him of:

  • “repeatedly breaching his duty of loyalty to Retrophin”
  • being the “paradigm faithless servant”
  • using “his control over Retrophin to enrich himself, and to pay off claims of MSMB investors (who he had defrauded)”
  • diverting “47,610 Retrophin shares for the benefit of himself and his MSMB Funds, resulting in a benefit to him and to them of more than $4.5 million (at current market prices)”

Retrophin seeks $65 million in damages and disgorgement. (*Its claims have not been proven in court. Retrophin’s EDGAR filings do not present Shkreli’s side of the story.)

How Sentieo can be used to make the due diligence process more efficient

To dig up relevant gems of information, I used Sentieo to sift through EDGAR filings as well as conference call transcripts and investor presentations.  A search for Martin Shkreli found 121 EDGAR filings, 16 conference call transcripts, 2 press releases, and 1 presentation that mentioned his name.  By default, Sentieo filters out insider trading forms (forms 3, 4, and 5).

Some other relevant documents that can be found in Sentieo’s database

A Retrophin 8-K filed Feb. 20, 2015 (EDGAR, discloses an investigation of Martin Shkreli by the US Attorney for the Eastern District of New York.

EDNY Subpoena. In January 2015, the Company received a subpoena relating to a criminal investigation by the U.S. Attorney for the Eastern District of New York. The subpoena requests information regarding, among other things, the Company’s relationship with the MS MB Entities and Mr. Shkreli. The Company has been informed that it is not the target of the U.S. Attorney’s investigation, and intends to cooperate with the investigation.

Since January 2015, every 10-K and 10-Q has mentioned the criminal investigation.  Regardless of whether Shkreli is guilty or innocent, it seems like he has various legal problems to deal with while he acts as the CEO of Turing Pharmaceuticals and KaloBios.

Another lawsuit

Another notable EDGAR filing is the Retrophin 10-Q filed Nov. 6, 2015 (EDGAR,  Page 18 describes a dispute between a “purported shareholder of the Company” and Mr. Skhreli:

On September 19, 2014, a purported shareholder of the Company sued Martin Shkreli, the Company’s former Chief Executive Officer, in federal court in the Southern District of New York (Donoghue v. Retrophin, Inc., Case No. 14-cv-7640). The Company is a nominal defendant in this action. The plaintiff seeks, on behalf of the Company, disgorgement of short-swing profits from Mr. Shkreli under section 16(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78(p)(b)). The parties have reached an agreement to settle the lawsuit. On October 19, 2015, Plaintiffs filed a motion seeking the Court’s approval of the settlement. If the Court approves the settlement, Mr. Shkreli will pay $2,025,000 to the Company and will pay an additional $625,000 to Plaintiffs to compensate them for their legal fees.

Given that the $2.675M settlement is pending, it seems that Shkreli will have one less lawsuit to worry about.

Shkreli’s SC 13/D

A SC 13/D filing (EDGAR, by Shkreli and his associates (David Moradi and Marek Biestek) provide some detail on the trio’s trading history.

It is interesting that Shkreli paid a weighted average price of $38.15 on Nov 24 versus a price of $0.94 two weeks earlier- roughly 40.6X what he was paying earlier!

The bottom line

I believe that EDGAR filings contain many interesting pieces of intelligence on KaloBios’ new CEO.  In this case, somewhat obscure 8-K and SC 13/D filings contained interesting morsels of information.  Traditionally, the problem with looking for information in 8-Ks and SC 13/D filings is that the process can be tedious and time-consuming.  Sentieo’s search tools can greatly speed up the research process by filtering out the SEC filings that don’t mention key words like the name of the CEO.  For example, only 5 of 118 KBIO documents in Sentieo’s database mention Martin Shkreli’s name (excluding insider trading forms).

To see how Sentieo can make your research process more efficient, please visit and sign up for a free trial.

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