PhaseBio Pharmaceuticals, a clinical-stage biopharmaceutical company, could file for chapter 11 imminently amid a liquidity crisis and ongoing litigation with SFJ Pharmaceuticals, its co-development partner for key drug bentracimab, sources said. The Malvern, Pa., and San Diego-based company, which focuses on the development and commercialization of novel therapies for cardiovascular diseases, has been working with Cooley as counsel and Miller Buckfire as financial advisor, they added. SFJ Pharmaceuticals is advised by Orrick.
The publicly listed company reported
cash and cash equivalents of $7.8 million as of June 30, compared with $41.8 million as of Dec. 31, 2021, reflecting cash used in operations. Net loss for the quarter was $16.7 million, compared with a net loss of $28.7 million for the prior-year period.
PhaseBio entered into a co-development agreement, or CDA, with SFJ on Jan. 9, 2020, in which SFJ provides the company funding to support the global development of bentracimab. Bentracimab is a monoclonal antibody that functions as a reversal agent to the antiplatelet and potentially dangerous adverse effects of ticagrelor. Ticagrelor is prescribed primarily by cardiologists to reduce the risk of cardiovascular death, heart attack and stroke in patients.
Under the agreement, SFJ agreed to pay the company up to $120 million to support the clinical development of bentracimab. In addition to $90 million of initial funding, PhaseBio elected to receive an additional $30 million of funding, having met specific, pre-defined clinical development milestones for bentracimab. From the inception of the SFJ agreement through June 30, SFJ has provided funding and paid for amounts on the company’s behalf in the aggregate amount of $99 million. PhaseBio expects that SFJ will fund or reimburse an additional $21 million of clinical trial costs and other expenses.
However, on March 24, PhaseBio issued a going-concern notice due to the company’s rapidly dwindling cash reserves. Following PhaseBio’s failure to remedy the going concern within 180 days, SFJ submitted its demand for program transfer on Sept. 21, according to a complaint
filed on Oct. 7 in the Eastern District of Pennsylvania. Under the CDA, if PhaseBio issues a going-concern notice and cannot remedy that going concern within 180 days, SFJ may invoke a mandatory transfer of the bentracimab development program to SFJ.
“Yet, instead of following through with what the Parties negotiated, agreed to, and memorialized in the CDA, PhaseBio has refused to transfer the bentracimab program in direct breach of the CDA,” SFJ said in the court filing. “PhaseBio’s breach jeopardizes the continuity of the ongoing bentracimab clinical trials, threatening to erase years of investment and progress and derail regulatory approval.”
SFJ “now seeks declaratory relief of its right to the bentracimab development program under the CDA, as well as specific performance to transfer the development program and injunctive relief. Without that relief, the ongoing clinical trials may be disrupted. And because there are specific milestones that the drug must hit to obtain regulatory approval, disruption will endanger the possibility of bringing bentracimab to market,” according to the motion.
Just before the complaint was filed, on Oct. 3, Silicon Valley Bank entered
into an assignment agreement with JMB Capital Partners Lending, where SVB resigned as agent under a loan facility of up to $15 million and JMB became the successor agent and lender, according to an 8-K. Concurrently, PhaseBio entered into a loan amendment with JMB, which agreed to make additional advances to the company up to $6.25 million of tranche A growth capital advances with an 80 OID.
On Oct. 4, PhaseBio borrowed the full amount available at an 80 OID. The amendment also excluded from the definition of a material adverse change the occurrence of or failure to cure the going-concern condition, the delivery by SFJ of a program transfer notice or the taking of any related action. PhaseBio also granted JMB a security interest in all of the company’s intellectual property that has not already been recorded against by SVB.
PhaseBio declined to comment.
--Adelene Lee, Harvard Zhang