Sometimes in biotech, you bet big and you win big. Other times, you bet big and watch your short position get absolutely demolished while the internet watches. Wednesday was very much the second scenario for Martin Shkreli.
Capricor Therapeutics (CAPR) stock went ballistic after the company dropped positive topline data from its Phase 3 HOPE-3 trial for deramiocel, a cell therapy candidate for Duchenne muscular dystrophy. The stock surged 356% to $29.02, which is particularly painful if you're the guy who just published a 46-page report explaining why the trial would fail and the stock would crater to $2.
That guy, of course, is Shkreli—the controversial former pharma executive turned prominent short-seller who had identified Capricor as his next big biotech short target.
The Setup: A Very Public Short
Just last week, Shkreli co-authored that lengthy report and took to social media to announce his bearish position. "My next biotech short is $CAPR," he posted Monday. "@anthonystaj and I wrote a 46-page report on the issues facing Capricor. In the next few days, the HOPE-3 (aka COPE-3) study will report its data. It will not work. This is the company's only asset."
Bold stuff. Specific predictions. Public declarations. All the ingredients for a spectacular face-plant if things went sideways.
On Tuesday night, before the data release, Shkreli even posted a warning directly to Capricor CEO Linda Marbán: "Do not lie about your data when you present it, @linda_marban. if you do, you will face law enforcement consequences. take it from me, it's just not worth it. lying is wrong. spinning is wrong. just give the real data: good, bad or ugly. prison is not the way."
The Squeeze
When the actual data hit Wednesday morning, the market's response was swift and brutal for anyone on the wrong side of the trade. The stock went parabolic, triggering what appears to be a classic short squeeze—where short sellers scramble to cover their positions, driving the price even higher.
For Shkreli and other shorts, this represents a massive paper loss and a major reversal of fortune. When you publicly predict a drug trial will fail and it succeeds instead, the math gets ugly fast.
Shkreli Fights Back
After the data release, Shkreli didn't exactly take the L gracefully. He immediately questioned the validity of the results, alleging that Capricor hadn't met a "prespecified primary endpoint" and that the reported results were based on "post-hoc analyses."
He went further, claiming the company had actually changed the primary endpoint after the fact. "Okay first glance is CAPR changed the pre-defined primary endpoint from mean change to % slowing. linda really wants to visit the bureau of prisons," he posted.
What The Company Says
CEO Linda Marbán struck a decidedly different tone. She stated that the HOPE-3 results delivered "strong and definitive evidence that Deramiocel can meaningfully improve the course of Duchenne muscular dystrophy." The company plans to use the data to address a previous Complete Response Letter from the FDA—a major regulatory hurdle.
If the data holds up to scrutiny and the FDA agrees with the company's interpretation, this could be a genuine game-changer for Capricor and patients with this devastating muscle-wasting disease.
The Bottom Line
Shkreli's short thesis remains a hot topic among retail traders, and questions about endpoint definitions and statistical analyses will likely continue to swirl. But the market's initial verdict was unambiguous: HOPE-3 succeeded, and those betting against it got crushed.
Whether Shkreli's technical critiques have merit or whether this is just the sound of a short position going up in flames—well, that's the debate now consuming biotech corners of the internet. Either way, it's a reminder that when you short a binary event like a clinical trial readout, you better be right. Because if you're wrong and you've been loud about it, everyone gets to watch.
