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TheStreet Open House

Retrophin CEO Under Fire for Twitter Faux Pas

Stocks in this article: RTRXVRXQCORMNK

NEW YORK (TheStreet) -- The social media activity at Retrophin (RTRX) has been placed on lockdown following questionable tweets penned by CEO Martin Shkreli and the discovery that employees were using alias Twitter accounts -- two of which affected the persona of gangster rappers -- to promote Retrophin and pitch short-sale recommendations of other stocks to followers.

Retrophin's stock price has been cut in half since April, partly due a broader selloff in biotech stocks, but also because investors are losing confidence in Shkreli's ability to lead the young company as it tries to simultaneously develop new drugs for rare, genetic diseases and re-invigorate sales of older drugs obtained through licenses and acquisitions.

The company's Twitter problem may not rise to the level of an Enron-like corporate scandal, but it's a frustrating distraction for investors waiting for Shkreli to deliver on promises made.

"I hope Martin [Shkreli] understands the responsibility of running a public company," says health care investor and Retrophin shareholder Brad Loncar. "It's one thing for Martin to manage money for a couple of friends, it's another thing entirely to run a company, manage shareholder money and have employees rely on you. These things should mature you pretty quickly, but so far, it's been very disappointing." (Bloomberg BusinessWeek published a profile describing Shkreli's transition from hedge fund manager to drug company entrepreneur in April.)

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Retrophin reports second-quarter earning on Tuesday. Expectations are high because the company has already raised revenue guidance for this year and 2015 three times since April. On Friday, Retrophin shares closed at $12.31. Despite falling from a high of $23 in April, Retrophin is still up 54% for the year.

Shkreli did not respond to a request for comment.

In June, Retrophin's board of directors instructed Shkreli to clean up tweets sent from his personal Twitter account. Shkreli was also told to cut back on tweets about the company, according to people familiar with the situation.

The board took action following two Shkreli tweets on May 29, which seemed to offer a hint to his Twitter followers about a Retrophin acquisition of an approved drug from a private Texas-based company announced hours later.





Retrophin's board was also angered by a Shkreli tweet in June in which he invited "BIOBabes" to stop by the company's booth at a biotech industry convention.

More recently, three alias Twitter accounts were found to be under the control of unidentified Retrophin employees, according to people familiar with the situation. The link was found after the IP address of one of the alias Twitter accounts matched the IP address of Retrophin's headquarters.

The most prolific of these accounts, @Thug_BioAnalyst, tweeted in "ghetto slang" expressing support for Retrophin and calling out other drug stocks, including TherapeuticsMD  (TXMD), as shorts.

Two additional alias Twitter accounts -- @legitbiotech and @cletus_burritus -- parroted the "Thug" tweets.

The discovery of the three alias Twitter accounts run by Retrophin employees compelled one large shareholder to lodge a complaint with Shkreli, urging him to put an end to the social media mischief. Tweets from all three accounts stopped on July 8, and the @cletus_burritus account was deleted entirely last week.

Read MoreBiotech Stock Mailbag: Arrowhead, Catalyst Pharma

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