Achaogen is looking to sell its assets and close out its affairs through the bankruptcy process. News of the Chapter 11 filing comes 10 months after Achaogen won FDA approval for its antibiotic Zemdri.
The run-up to the FDA approval of Zemdri proved to be the high watermark for Achaogen. While the FDA cleared Zemdri for use in complicated urinary tract infections, it rejected the drug in the treatment of bloodstream infections. That sent Achaogen into a downward spiral that led the company to lay off staff and seek a buyer for the business.
Now, five months after starting to search for a buyer, Achaogen has identified Chapter 11 bankruptcy as its best hope of getting some money for its assets.
“The Achaogen board of directors and management team have thoroughly assessed our strategic options and financial situation and unanimously agree that this structured sale process represents the best possible solution for the company,” Achaogen CEO Blake Wise said in a statement.
Notably, the process will allow buyers to acquire assets from Achaogen without taking on its debt and liabilities. Achaogen turned to debt to keep the business going when its plummeting stock price made raising money through share offerings less attractive.
Management at Achaogen thinks the $25 million in credit provided by Silicon Valley Bank will fund it through the Chapter 11 process. The first big milestone in the process comes when the window for submitting bids closes toward the end of May. A structured auction is due to start days later with a view to conclude the sale by mid-June.
The level of interest in Achaogen’s assets will depend on whether people think Zemdri can live up to the upbeat outlook that saw the biotech’s stock trade above $20 in 2017. Achaogen failed to deliver on expectations for the drug, but other products previously rescued from bankruptcy, such as Dendreon’s Provenge, have gone on to make significant sales.