Hard-Nosed Hedge Fund Chief Has Soft Spot for Rare-Disease Startup

Hard-Nosed Hedge Fund Chief Has Soft Spot for Rare-Disease Startup

On March 19, Martin Shkreli posted an article on the investing blog Seeking Alpha urging readers to “short” shares of San Diego-based Cytori (NASDAQ: CYTX)—essentially telling them they should bet that the company would falter and its share price would drop. Cytori is developing so-called regenerative treatments, using stem cells from fat, for example, to try to rebuild damaged heart tissue. Shkreli, who manages the MSMB hedge fund in New York, declared, “regenerative medicine is a meaningless and embarrassing buzzword that means nothing.”

Shkreli didn’t stop there. He criticized the company for its “meager sales” and losses, writing, “I believe management had a plan of benefitting from being associated with this growing field, and it backfired.”

Shkreli disclosed up front that his fund has a short interest in Cytori.

Cytori’s stock, which closed at $3.13 just before Shkreli’s post, has since fallen to $2.40, a 23 percent drop. Hedge funds don’t have to disclose details of their short positions, so it’s impossible to estimate how much MSMB has gained by shorting Cytori. Suffice it to say, Shkreli’s fund, which he founded in 2006, probably did all right on that bet.

It’s just such antics that have made 29-year-old Shkreli the target of angry life sciences executives, not to mention Washington watchdogs that are urging the SEC to investigate what they fear might be deliberate stock-price manipulation by an overzealous hedge-fund manager. But Shkreli embodies about as big a dichotomy as you’re likely to find in life sciences. That’s because in the midst of the storm of criticism that seems to follow him everywhere he goes, some physicians and notable Big Pharma veterans are hailing him as a hero for starting his own biotech company, Retrophin, which is pursuing treatments for rare diseases. The company launched earlier this year with $3 million in funding from MSMB and notable private investors, including Fred Hassan, former CEO of Schering-Plough.

In a meeting with Xconomy at his mid-town Manhattan office recently, Shkreli was as eager to talk up Retrophin as he was to sound off on life sciences companies that he thinks are on the wrong track. Shkreli, who raced through college and got his first job in finance at age 17, has been working in hedge funds his entire career. But he believes Retrophin is a better outlet for his skills. “The last 10 years of finance and swashbuckling stuff has been fun,” he says, “but I’m ready for a more interesting way of helping people and making money. Solving the world’s diseases one at a time is my new mission.”

Before we get to Retrophin, though, it’s worth taking a closer look at that swashbuckling. Shkreli, who considers himself to be an amateur biologist, is not shy about criticizing other companies’ scientific pursuits. Witness Cytori. In his 10-paragraph Seeking Alpha post, Shkreli reviews Cytori’s … Next Page »

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