UPDATED 12.16.16 @ 11:44 PM CST: Pathophilia adds these fine remarks:
“…Without other information, it appears that Shkreli’s worth is currently largely dependent on Turing’s value. The company’s only real revenue-generating product is Daraprim (pyrimethamine).
However, because the company is private, it’s impossible to know the relevant financials. Medicaid reimbursement data aren’t available for 2016, but data from 2014 to 2015 suggest a significant 24% drop-off in prescription pill counts (from 3,404 to 2,585), possibly as a result of the ridiculous Shkreli-induced price increase in August 2015 and physicians’ subsequent decisions to prescribe less expensive alternatives for toxoplasmosis.
If that trend has continued in 2016 across the board (for both Medicaid- and privately insured folks), Turing’s revenues might not be what they were originally expected to be by Shkreli and company. For the record, Medicaid spent $15.7M for Daraprim in 2015, compared with $2.2M in 2014.
We do know that Turing had to lay off a several people after Shkreli’s arrest last year, and that it narrowed its R&D program this year to focus only on the development of “new and improved” forms of Daraprim. These moves suggest some necessary retrenchment…” [End, Updated Portion — and I agree whole-heartedly, here.]
Okay. Yesterday, in comments, we discussed what are the likely best remaining sources of liquidity for Mr. Shkreli, as he continues to pay over one million dollars per month to his various lawyers. He also now owes over $5 million to the IRS, and over $2.5 million to Dr. Koestler. His bond is $5 million; so he will face a liquidity shortage in early 2017, in all likelihood.
PathoPhilia mentioned his Turing shares, which — according to federal-court filed admissions by tweet (in the case depicted at above right and discussed below) — he supposedly controls over 50 per cent of all the voting securities in that company, at least as of November 2016.
However, based on what I’ve seen in the Manhattan federal District Courthouse, related to a case we’ve not discussed here before — against Turing, brought by Impax Laboratories (the company that acquired, then sold-off/licensed the rights to the HIV treatment to Turing), for failure to reimburse Impax for payments it was required to make to CMS, on the drug… I think that whole Turing company may be worth nearly nothing, by the end of 2017.
We shall see. While the able judge has recently tossed the unjust enrichment claim made by Impax, the overall remaining breach of contract claim looks pretty solid to me. [This is my deeply experienced view, but is not individualized legal advice to any person or party, to be clear. Trade on this analysis entirely at your own risk.]
So — if I were a banker, I’d lend to Mr. Shkreli only a fraction of the likely enterprise value (even at a conservative 3X annual revenues) that Turing reports on its GAAP financials. I say this, because that revenue stream (or large portions of it) may go to covering a judgment owed to Impax, in late 2017 — so whatever Mr. Shkreli controls in Turing, it is — in my view — a melting ice cream cone, at midday… on the beach at Tulum — which is just an hour or so south of Cancun (bringing us right back to the head of this post).
Namaste — and have a great weekend, one and all!