Dying biotech stock in orbit on Turing buy

That Martin Shkreli makes things pop.

The Turing Pharmaceuticals chief executive achieved notoriety earlier this year by jacking up the price of an antiparasite pill by more than 5,000 percent, to $750 a pop.

Now he is tied to a nearly 9,000 percent increase in the stock price of KaloBios Pharmaceuticals, a tiny biotech company that was near death.

Shkreli announced last Thursday that he and a group had acquired 70 percent of its outstanding shares on grounds that “KaloBios’ lenzilumab is a very promising candidate for the treatment of various rare and orphan diseases.”

But is it so promising that the stock would rise from 44 cents a share on Nov. 16 to close at $39.50 on Monday? Not to Timothy Sykes, a shortsales expert, who warned that KaloBios’ huge oneweek increase is from “a stock in the gutter just days ago.”

The only difference is that those shorting it before Shkreli arrived were caught offguard. “When biotechs are left for dead, they’re really dead,” Sykes said.

Shkreli’s equity buy moved shortsellers to quickly cover their bets. Adding to the buying panic are laws that give investors just three days to access “long” shares to balance their “shorts.”

Some 17 million KaloBios shares traded on Monday — compared with 1.2 million on an average day — as in vestors scrambled.

This pattern reminded Sykes of last year’s rollercoaster ride with Cynk Technology, which had no product and no revenue but nonetheless managed a 36,500 percent stock price jump in a month. Cynk returned to being a penny stock, which is what Sykes expects for KaloBios.

“I’m not saying it’s going to crash Tuesday by noon, but I do expect a drop up to 50 percent by early next week,” he said.