HGEN Humanigen Inc (CE)

KaloBios Pharmaceuticals on Thursday said it had reached an agreement with ousted Chief Executive Martin Shkreli to limit his shareholder rights, a week after the rare disease drugmaker said it had emerged from bankruptcy.

Mr. Shkreli, who holds 50.3% of the South San Francisco-based biotech firm's shares according to FactSet data, was arrested in December on securities-fraud charges unrelated to KaloBios. Soon after, the company filed for bankruptcy protection, fearing the turmoil surrounding Mr. Shkreli created an "imminent threat" to its liquidity.

On Thursday, the company said it signed a governance agreement with Mr. Shkreli, including an option for the company to repurchase his shares as well as provisions significantly restricting his actions as a shareholder.

"This agreement is another step in the company's pursuit of revitalizing its reputation," said Chief Executive Cameron Durrant. "KaloBios is building a company committed to transformational ideas, like transparent and responsible pricing, to drive change. This agreement, combined with our recent emergence from bankruptcy, helps to hit the reset button and move forward."

Mr. Shkreli, also formerly the CEO of Turing Pharmaceuticals, was widely criticized for increasing the price of anti-parasite drug Daraprim by fiftyfold. Before the criminal charges, which he denies, he alarmed advocates for rare-disease treatments when he told investors he intended to price Chagas disease treatment benznidazole in line with hepatitis C treatments that can cost as much as $94,000 per course. In Latin America, where most cases of Chagas disease are found, benznidazole costs $60 to $100, according to the Drugs for Neglected Diseases Initiative.

In the agreement with KaloBios, for 180 days following June 30—the company's effective emergence from its chapter 11 bankruptcy proceedings—Mr. Shkreli may not sell his shares to any third party for less than $2.50 a share or a 10% discount to the prior two-week volume-weighted average price, whichever is greater. Additionally, KaloBios has right to buy any or all of Mr. Shkreli's shares at the market discount price for 180 days after Aug. 30.

For "a limited time," the company can also refuse to purchase shares that Mr. Shkreli proposes selling. The agreement bars him from transferring any shares to his affiliates or associates unless they agree to be subject to the same terms.

Mr. Shkreli can't nominate directors to the board and has agreed to vote his shares in proportion to the votes of the company's public stockholders.

The agreement also prohibits, for the next two years, Mr. Shkreli or his affiliates from purchasing any stock or assets of the company; participating in any proposal for any merger, tender offer or other business combination; seeking to control or influence the management, board or policies of the company; or submitting any proposal to be considered by stockholders.

Mr. Shkreli paid $3.2 million in November 2015 for a controlling stake in the struggling biotech firm, became its CEO and saw the value of that holding grow to more than $48 million before his arrest a month later. The criminal charges involve allegations he hid losses in hedge funds he managed with the help of money from a public company.

Mr. Shkreli couldn't immediately be reached for comment.

Write to Anne Steele at Anne.Steele@wsj.com

(END) Dow Jones Newswires

July 07, 2016 09:45 ET (13:45 GMT)

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