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KaloBios Pharmaceuticals, the drugmaker that was briefly taken over by former pharmaceuticals executive Martin Shkreli last year, said Monday it will charge cost plus a "reasonable and transparent profit margin" for any drugs it produces.

Cameron Durrant, the physician who replaced Mr. Shkreli as KaloBios's chief executive, said in an interview the new drug pricing policy is designed to "set the record straight" and end speculation that the company will follow the controversial price-setting path laid out by its former chief executive.

Mr. Shkreli gained notoriety last year by hiking the price of a vital drug, Daraprim, by 5,000%, then declining to answer U.S. lawmakers' questions about pricing. He was ousted from KaloBios in December, after his arrest on securities fraud charges unrelated to KaloBios, but remains a large shareholder. He denies allegations of securities-law violations.

"I've been thinking quite a bit about pricing and affordable pricing and transparency and what constitutes a reasonable return for parties that are able to bear the risk of getting drugs to market," Dr. Durrant said Monday.

He said the result is a no-gouging pricing policy under which KaloBios will spell out for all stakeholders, including patient advocates, the components of its cost, then set a reasonable profit margin. Investors backing KaloBios in its drive to exit bankruptcy and get an important drug to market support the commitment to openness, he said.

If the policy is implemented, KaloBios's responsible pricing policy will break ground in an industry that is vulnerable to profiteering, said Judit Rius Sanjuan, U.S. manager and legal policy adviser for Doctors Without Borders.

"These are beautiful words," she said. "The transparency commitment is quite unprecedented. Let's see what transforms into action."

KaloBios was on the ropes in November 2015, when Mr. Shkreli bought a controlling stake. When he was arrested for securities fraud unrelated to KaloBios a month later, the company filed for bankruptcy protection and began an effort to distance itself from Mr. Shkreli.

Finding itself in the spotlight when Mr. Shkreli's profiteering had cast a harsh light on pharmaceutical pricing practices, KaloBios came up with a chapter 11 plan that will have the effect of diluting the value of his shares while completing a deal he brought to the company, the acquisition of benznidazole.

Benznidazole has been in use in Latin America for decades and has proven to be a safe and effective remedy for Chagas disease, a parasitic infection that can lead to heart damage. In a call with investors in December, Mr. Shkreli said that once he obtained it, he would price it in line with hepatitis C treatments that cost tens of thousands of dollars.

That would be a huge increase for U.S. sufferers of the disease. A course of treatment in Latin America costs between $60 and $100. The latest hepatitis C drugs cost up to $94,000 for a course of treatment, according to the Drugs for Neglected Diseases Initiative.

Mr. Shkreli's statements set off alarms at groups critical of U.S. policies that they say reward greed rather than innovation. Benznidazole could qualify for a priority review voucher, as it is a treatment for a disease on the Food and Drug Administration's short list of tropical diseases that don't have easily available remedies in the U.S.

Before he could close the deal, Mr. Shkreli was arrested, and KaloBios was in bankruptcy.

KaloBios's new leaders revived the benznidazole deal talks and raised money to complete the acquisition as part of the company's bankruptcy emergence, which is set to take place in June.

Monday, KaloBios said that if it gets benznidazole, it will only charge a reasonable profit margin for its efforts, and it won't include in the cost calculation spending on research and development that it didn't do. There will be no hepatitis C-level pricing for benznidazole, Dr. Durrant said.

Critics of the drug pricing system say rewards for innovation are instead being steered into the pockets of people like Mr. Shkreli, who buy established treatments and run up the prices. Benznidazole has been in use for decades, and KaloBios likely won't have to do extensive clinical work to get FDA approval and a priority review voucher.

Ms. Sanjuan, of Doctors Without Borders, said assurances that KaloBios won't charge for research it doesn't do fails to address the problem in the priority review system.

Write to Peg Brickley at peg.brickley@wsj.com

(END) Dow Jones Newswires

April 11, 2016 17:35 ET (21:35 GMT)

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