2nd part:
Investment bankers who examined the company’s books had less rosy assessments than Mr. Shkreli’s $500 million valuation. Mr. Shkreli blocked at least two offers to acquire the company, one for around $100 million.
After one person involved in the nixed sale expressed misgivings to others, he received a text message from an unlisted number that couldn't be traced. “You like talking to people about Turing? Bad. Bad. Bad. Bad. Bad. Bad. Bad. Bad. Bad. Bad. Bad. Bad. Bad. Bad. Bad. Bad. Bad,” the message read. “We are watching and listening.”
Mr. Shkreli repeatedly predicted he would avoid incarceration altogether. Before the trial, he wrote out a spreadsheet of comparable white-collar offenses that drew limited sentences. A judge remanded him immediately in September 2017 after Mr. Shkreli, then out on bail after his conviction, offered $5,000 to any stranger who would grab a strand of Hillary Clinton’s hair to disrupt her book tour. The judge called it a “solicitation to assault in exchange for money.” The same judge in March 2018 sentenced him to seven years in prison on the conspiracy and securities-fraud conviction.
That left Mr. Mulleady in charge of day-to-day operations, right as the company’s business degenerated. He sometimes exchanged messages with Mr. Shkreli through his criminal-defense attorney Benjamin Brafman, who was permitted to visit his client in jail. Mr. Brafman said “our only communications with Mulleady after Martin’s conviction were our efforts to satisfy Martin’s court ordered restitution and forfeiture issues.”
Mr. Shkreli’s company meanwhile hired well-known lawyer Marc Kasowitz—a longtime counsel to Donald Trump—to advise it. The company laid off dozens of staff in late 2017 and early 2018. Last summer, Vyera changed its name yet again to Phoenixus, an amalgamation of the Latin words for phoenix, the bird that rises from the ashes, and nixus, to struggle or progress.
From prison, Mr. Shkreli phoned in advice to company officials when he could. He hasn’t always been plugged in. He spent a few weeks in solitary confinement for unspecified violations and suffered a painful infection after needing dental fillings. Perennially slight of build, he has gained weight and plans to begin a weightlifting program, says Christie Smythe, an author writing a book about Mr. Shkreli who has visited him several times in prison. He can now do 15 push-ups in a row.
He has seen a prison therapist and taken on the job of caring for prison cats. He occasionally argues with his cellmates about proper grammar.
“The guards still mispronounce his name repeatedly, which he thinks is on purpose,” Ms. Smythe says. Based on testimony at Mr. Shkreli’s congressional hearing in 2016, the “h” is nearly silent.
Banned by Twitter for lewd missives, Mr. Shkreli frequently tweeted in prison from his new account at would-be foes such as Rep. Alexandria Ocasio-Cortez, a Democrat, and Twitter Chief Executive Jack Dorsey. The account, which was deleted Tuesday, included the profile description “scaffold hopper,” an apparent reference to a process for discovering new drugs in medicinal chemistry.
“Here we go with the virtue signaling and white male shaming.
@Jack walks right into it, apologizing for making billions of dollars,” he wrote on Feb. 12, in response to a chain involving Mr. Dorsey.
Despite being behind bars, he has worked to consolidate control of the company. He advised on two offers in 2018 to buy shares from existing shareholders at a steep discount. Some investors took the deal, while others held out in the belief that they could make more in a sale to a third party.
As of the end of September, Phoenixus had $37.7 million of cash, according to the company’s private third-quarter financial statement. It reported $48.3 million of sales for the year to date, with a $10.3 million net loss after operating expenses including $9.4 million spent on unspecified “research and development,” the statement says.
Mr. Shkreli recently oversaw a series of Phoenixus deals it hopes will lead to new cash cows like Daraprim, people familiar with the matter say. In September, it signed a commitment to provide $20 million to Orphan Star Therapeutics LLC to work on drug candidates for several rare diseases, according to people familiar with the deal. Orphan Star’s public announcement didn’t name Phoenixus and the company didn’t respond to a request for comment.
In January, Phoenixus told shareholders it licensed one of its drugs to Seelos Therapeutics , receiving $1.5 million and 250,000 shares in Seelos.
Investors were given little information about the deals, they say. Seelos didn’t comment.
“We suspect a lot of self-dealing,” Mr. des Pallieres says, citing Mr. Shkreli’s checkered history. He is banding together with other investors to push for more insight into the company’s operations, and to force a sale.
Mr. Shkreli isn’t getting out of prison anytime soon, but he may be running out of time to control Phoenixus. He needs to repay at least $7.6 million to the federal government as part of his sentence, pending appeal. Court filings show he has only $5 million in cash, meaning he may need to sell shares in Phoenixus to pay the bill, paring his voting power. He was earlier ordered to forfeit his one-of-a-kind Wu-Tang Clan album and a Picasso painting.
Retrophin is pursuing a civil lawsuit against Mr. Shkreli, seeking to recover cash and shares he used to repay his original hedge-fund investors without authorization, court records show.
At Fort Dix, Mr. Shkreli recently lost patience yet again with his executives. At year-end, Mr. Mulleady put in for a seven-figure pay increase. Mr. Shkreli, who has been generous with fellow prisoners and even paid their poker debts, was livid. He phoned the chief executive, who was on an African vacation with his new fiancée, to fire him, a person familiar with the matter said. Mr. Shkreli later agreed to make it a suspension.
Mr. Mithani, the Phoenixus board member, declined to say who was now acting as chief executive of the firm.
