Power Sheet – December 18, 2015

As the world devours the irresistible details of Turing Pharmaceutical CEO Martin Shkreli’s loathsome behavior, which became front-page news after his arrest by federal authorities yesterday, many people are surely wondering how someone like him could have risen so far, so fast. The answer is that he didn’t rise very far at all. He’s a small-timer who would have been rightly ignored if not for one decision in September that touched a very hot topic. His story shows how easy it is to become famous or infamous, to attain elevated status, if only briefly, in today’s environment.

Shkreli is of course the CEO who in August bought the rights to a life-saving anti-parasite drug and in September raised its price from $13.50 to $750 a pill, instantly becoming the world’s most hated business leader. His arrest yesterday was for entirely different alleged behavior, securities and wire fraud in connection with his previous roles as CEO of another pharma firm, Retrophin, and as the manager of two hedge funds. CEO of two pharmaceutical firms, a hedge fund manager – it’s an impressive résumé for a 32-year-old.

Except that everything about Shkreli is smaller than it appears. Pharma CEO? Definitely glamorous, but when he was running Retrophin it was a “development stage company” with little or no revenue from year to year. It just lost a lot of money. Hedge fund manager? Sounds very grand, but his funds were minuscule and never held more than a few million dollars; prosecutors say Shkreli lost most or all of it in short order. Indeed, prosecutors allege that each new fund – Shkreli has started at least three – raised money in part to pay off the losses incurred by the previous fund, and he then allegedly plundered Retrophin in part to pay off investors in his most recent fund, until the board fired him in September 2014. Shkreli has pleaded not guilty to all charges.

What’s beyond dispute is that, by the standards of Wall Street and the pharma industry, he was piddling. He managed to accumulate a few million dollars of his own, but America is filled with anonymous young entrepreneurs, stockbrokers, real estate agents, and others who make that much and more. Even his arrest would have gone unnoticed – the numbers just aren’t that big – except that he had already become famous for his re-pricing of the anti-parasite drug, Daraprim, and for his obnoxiously defiant, smirking response to the widespread outrage over the move.

It couldn’t have happened in a world without the Internet and social media. The Shkreli story was made for this world. First he makes an outrageous but entirely legal decision that plays into deep concerns about health care costs. The blogosphere goes nuts. Then presidential candidates – Hillary Clinton, Bernie Sanders, Donald Trump, others – tweet their fury. As the story mushrooms, it’s discovered that Shkreli is a prolific and offensive tweeter, providing new fodder to keep the story going almost daily. Now, with his arrest, he’s an accused felon.

Shkreli must be presumed innocent until proven guilty, but I suspect that as a business leader, his story is over. He was never much, and now he’s nothing. Let’s say goodbye and move on.

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