Sometimes even monsters mean well: a meditation on the profitability of Takis-A

by Charles Stross

“They were careless people, Tom and Daisy—they smashed up things and . . . then retreated back into their money . . . and let other people clean up the mess they had made.”

— F. Scott Fitzgerald, The Great Gatsby

Healthcare is one of the pillars of our modern economy, contributing 15% of the United States’ gross domestic product. Without private healthcare the insurance industry would be a stunted shadow of itself, accountants and bankruptcy courts would be idle, R&D would grind to a halt, executive bonuses would stagnate, and demand for postgraduate education would collapse.

The biomedical sector is one of America’s most profitable export industries. The pharma industry has revenues of $1.42 Trillion worldwide, and the USA accounts for 49.1% of global pharmaceutical sales (both at home and via exports). But relatively little has been written about the impact of Xenovirus Takis-A on the development of the modern pharmaceutical sector.

I decided to start by requesting an interview with the former CEO of Tachyon Pharmaceuticals, disgraced former hedge fund manager Matthew Shkrelli. Much to my surprise, he accepted – and also arranged introductions to the current CEO, and others.

Born in 1982 to Serbian emigre parents of Albanian descent, Matthew and his identical twin brother Martin grew up in Sheepshead Bay, Brooklyn. Not much in the brothers’ early life distinguished them from the children of any other hard-working Catholic immgrant family until 1997, when both brothers were exposed to Xv-Takis-A. Martin tragically drew the Black Queen and today is reburied in Green-Wood Cemetery, thanks to a generous donation by his successful brother. Matthew was also exposed, but although initially thought to be infected, recovered. This tragic teenage accident had a lasting impact, however, as I discovered when I visited him in Federal Correctional Institution, Allenwood Low to interview him for this article.

We met in a lounge with scuffed flooring and worn armchairs, beneath the disinterested gaze of a corrections officer who seemed unconcerned that his charges were allowed to mingle freely with visitors. Whatever preconceptions you might have about federal prisons probably don’t fit this one – suffice to say it’s a low-security wing mostly known for holding White House staffers and temporarily embarrassed billionaires.

When we met, Shkrelli wore jeans and a hoodie – a freshly laundered company hoodie at that – with $500 trainers. I arrived to find him nose down in a well-loved of Atlas Shrugged, nodding to himself as he flicked through it. Either he’s a speed reader or it wasn’t his first rodeo. (I later learned that he had memorized John Galt’s speech verbatim.)

Shkrelli is something of an enigma. Wiry and intense, with a dark-eyed raptorial gaze and a boyish cowlick of hair, he doesn’t match the gruesome predatory reputation he acquired in the markets before the collapse of Martin Capital Management, the biotech hedge fund he named after his twin. To this day he insists that he is misunderstood: “profit is the engine of creation,” he explained. “Without a rate of return on investment, how am I – a small fish in a very big pond – going to underwrite the R&D overheads of new product development if I’m going to change the world for the better?”

(What kind of small fish has a net worth of more than three billion dollars even after his hedge got trimmed? I wonder, but the question slipped my mind before I could put it to him.)

Matthew explained – in a degree of dizzying detail that really called for a side-order of Powerpoint slides – that shepherding a new pharmaceutical along the discovery process from initial synthesis and patent filing through clinical trials and FDA approval normally took 14 years and cost at least a billion dollars. Assuming it was successful and reached the market at all, unlike 99.5% of contenders.

“That’s why new startups are increasingly locked out of the biomedical field,” Matthew continued. “I decided to do something about that.” Which is why he hatched the idea of buying up the patent rights to older licensed pharmaceuticals, re-licensing them for new conditions, and pricing them at modern market rates – increasing the price of Methotrexate, an immunosuppressant and cancer therapy also used for treating severe arthritis and first developed in 1947, by 3200%. He also targeted new, not-yet-approved drugs with requests to the FDA to reject their product license applications while aggressively short-selling their companies, then when the product launches failed he acquired the companies for pennies on the dollar, re-filed the applications, and brought them to market.

“Listen,” said Shkrelli, “those losers weren’t going to gain traction in the international market. By charging more for MTX in the United States – a price that insurance companies will happily pay – we were able to subsidize exports to the developing world, to sub-Saharan Africa, by keeping prices low. It’s just the charitable thing to do.” (Cheap Generic MTX manufactured by India’s Rambaxtra, is available for less than one two-hundredth the price of Shkrelli’s Trextra, outside of North America.) “And besides, it brought in the capital reserves we needed to underwrite development of Tachyon-B.”

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“Why not a vaccine?” I asked.

Matthew snickered. “You mean like Tisianne’s Trump-B daydream? Get out! It’s not commercially viable. Thing is, nobody in the business wants to fund a vaccine. Trump-B isn’t going anywhere because there’s no margin. It doesn’t matter that Doc Tachyon didn’t patent it – even suppose you could get it working reliably, manufacture a working vaccine against Xv-Takis-A: what then? The market is tiny. For the most part the spores lie dormant just about forever. The only people who will reliably want the vaccine are joker or ace parents, and there simply aren’t enough of them. Smart people who’ve been exposed should just get a vasectomy, tubal ligation, whatever. Look after themselves and spare their kids – spare themselves the heartache.” For a moment his gaze flickered towards some distant interior vista, before resuming his famous trademark smirk.

“You can’t run a business turning out a hundred thousand vaccine shots a year. For it to be commercially viable you really need a billion! A disease as contagious as the common cold that kills 1% every time you get it and comes back in a new mutant strain twice a year, maybe. Yeah, that’d do it.”

“Is that why you shut down Rabivax, then?”

“Yes.” He nodded vigorously. “Last year there were less than two hundred thousand cases of Lyssavirus worldwide — and only three in the United States. It’s mostly peasants in India who get bitten by rabid animals: it just wasn’t worth keeping the line open for two hundred paying Americans when we could re-purpose the factory to make shingles vaccines. That’s a market of millions, man. Tens of millions. This industry is absolutely cut-throat. You’ve got to seize opportunity by the throat, latch on, and drain it bloodless. Then, and only then, you might have the leverage to change the world. Rabies is a no-profit disease, and besides there’s the Milwaukee Protocol to compete with now.”

The Milwaukee Protocol is an experimental process for treating rabies patients who failed to obtain post-exposure prophylaxis in time to avoid developing the invariably fatal brain disease. First the rabies patient is placed in an induced coma: then they are injected with live Xenovirus Takis-A. As soon as that pathogen takes hold – and the virulent, rapidly-amplifying Wild Card virus is far faster than the creeping febrile brain damage of rabies – a course of Takis-B, Trump vaccine, is administered. Trump vaccine only confers a survival rate of 30-40%, but it wipes the floor with Lyssavirus, much as the fever induced by infection with Malaria was used in the 19th century to burn out Syphilis.

“But Tachyon-B –”

“Is not a vaccine. It’s going to be an antiviral drug. It interferes with DNA transcription, which suppresses replication and amplification – so the Xv-Tak-A stays dormant. If you’ve been exposed, or if you were born with it in your genome – we’re working on a DNA assay for that, a test that will not only confirm you’re a carrier but give a ballpark estimate of your risk of developing active Wild Card disease – you simply need to take Tachyon-B every day and you’ll never draw a card.”

Matthew didn’t mention that Tachyon-B has been stalled in development hell for more than a decade, has undesirable side-effects (including hair loss, impotence, digestive disturbances, kidney failure, and colorectal cancer), and has repeatedly been denied a product license by the FDA – which is unheard of for a new treatment for a usually-fatal pathogen. Nor did he discuss his pricing strategy, which subsequent research suggests starts at charging $250 a day for the tablet then works up to “whatever the market will bear”.

“Tell me more about this DNA test?”

“That’s Elzabeth’s pet project. She can tell you more: it’s a blood test using some kind of special lab technology she’s got the egg-heads from Stanford working on.”

Matthew was talking about his wife Elizabeth. 

Elizabeth Shkrelli (née Holmes – they married a few years before Matthew’s conviction for securities fraud and insider trading) is a charismatic ice blonde with a penchant for trademark grey turtleneck sweaters worn with power suits: she wears a black opera glove on her left hand and forearm at all times. The COO and President of Tachyon Pharma, Elizabeth Shkrelli is also interim CEO during Matthew’s vacation in Club Fed. Meeting her one realizes very quickly that she is driven to the point of obsession by her quest to develop a blood test that will reliably determine how likely someone is to develop active disease.

“Currently results are equivocal,” Mrs. Shkrelli admits when I try to pin her down on the status of the test apparatus. “As you know, the disease is almost always fatal: the 90% mortality rate from Takis-A is comparable to Ebola Zaire. So we don’t have as much of a problem with false positives – that is, with tests that falsely indicate someone is susceptible and needs prophylaxis – as with false negatives – tests that falsely indicate someone is safe, when in fact they’re at risk of dying.” She wrings her hands, as if anxious for her customers. “Right now there are too many false negatives in the test runs. People who won’t know in time that they or their loved ones need Tachyon-B.”

The Shkrellis, a pharma power couple, are intensely charismatic, intelligent, personally charming, and dangerously persuasive. While Matthew’s focus renders him almost eerily plausible – it was only after leaving the visitors suite at Allenwood that I began to pick holes in his narrative – Elizabeth is plausibly sincere. Reality itself seems to pay obeisance to her narrative. She’s absolutely hypnotic. 

“If Elizabeth’s test had been available in time we wouldn’t have lost our b – my brother,” Matthew had explained before I left. There was a faint catch in his voice. “You see, it’s personal for us. We have to bring this test, these products, to market. By any means necessary, at any price.”

“You can’t develop biotech on a shoestring budget, you just can’t,” Elizabeth said vehemently from her seat the other side of the aisle of the corporate Gulfstream. (I was hitching a ride with her to TEDx, where she was due to deliver a keynote before meeting with investors.) “VCs won’t put equity into a tech startup that doesn’t have a product roadmap and a viable marketing plan. And you don’t have a product roadmap if there’s no market niche for your product. Matthew’s particular genius is scenting the profit opportunity. I’m confident that once we get over this latest setback—” a peculiar way to refer to a four year stretch for naked short selling, insider trading, and securities fraud: pay no attention to the thousands of people dying in countries that lack a safe supply of modern rabies vaccine—“with the diagnostic test and Tachyon-B as a complete package we’ll bring this home and put an end to the scourge of Takis-A in a few years.”

“For the rich,” I echoed: then and after a moment she nodded. “But what about the poor?”

She shrugged. “They should have made better life choices. Chosen the right parents.” 

If it was meant to be a joke, it was in the worst possible taste. But some people use humor as armor in the face of unspeakable loss, and Elizabeth is one of them. Her baby son Michael Shkrelli drew the Black Queen aged nine days, and is buried in the family plot in Brooklyn, alongside his uncle.