Regenerative medicine developer Athersys Inc. could end up selling most of its assets to its Japanese development partner, Healios K.K., to repay creditors in bankruptcy court.
The locally based clinical-stage company and its subsidiaries filed for Chapter 11 bankruptcy protection late Friday afternoon. Since 1995, Athersys has been developing a stem-cell therapy derived from adult stem cells, called MultiStem, to treat ischemic stroke, acute respiratory distress syndrome and spinal cord injuries.
The filing is intended to maximize the value of Athersys' assets, which would be sold through an auction in the U.S. Bankruptcy Court of Northern Ohio for the benefit of creditors, said Kasey Rosado, the company's interim chief financial officer, in a bankruptcy court filing.
Athersys executives tried to take their MultiStem offering to market before the company ran out of capital from corporate collaborations, license agreements and government grants, said Rosado, a senior managing director of Ankura Consulting Group LLC, the New York-based turnaround firm hired by Athersys in August 2022.
Beginning in mid-2022, Athersys made several moves to cut costs, restructure its debt and raise money from investors and companies that would license or buy Athersys' technologies.
In early October 2023, Athersys agreed to license its horse, dog and cat health assets to Ardent Animal Health. The company also granted Ardent rights of first refusal as the exclusive distributor for Athersys' cryogenic storage system, the Secure Integrated Freezer Unit, in the U.S. animal-health space.
Athersys also reached a deal with Healios to license the global rights to develop and commercialize MultiStem for the treatment of ARD Syndrome, receiving a $1.5 million upfront payment along with potential future development milestones and royalties.
Subsequently, Outcome Capital LLC — the investment banker Athersys had hired a year earlier to find potential buyers or development partners for the company's technologies — began trying to market the entire company for sale, Rosado said. Outcome Capital contacted about 60 potential acquirers; only Healios was interested.
By December, Athersys executives and their advisers had decided the company's "operations were no longer viable," Rosado said. Ultimately, Athersys was unable to bring MultiStem to market "in time to counteract the heavy burden of (the company's) obligations to creditors," she said.
Athersys by the end of December had terminated all of its employees, including CEO Daniel Camardo and Chief Operating Officer Maia Hansen. Camardo, Hansen and five other Athersys executives "have signed consulting agreements to continue to advise the company over the next few months to ensure a smooth sale process," Rosado said.
Meanwhile, the Nasdaq Stock Market suspended the trading of Athersys shares in October and formally delisted the company's stock on Dec. 27.
Athersys has between 200 and 999 creditors, the company said in its bankruptcy filing. As of Sept. 30, the company had liabilities of $38.6 million — more than 5 times its listed assets of $7.4 million — and the company posted zero revenue and an operating loss of $2.6 million in the third quarter.
Lonza Netherlands BV, the primary contract manufacturer with which Athersys restructured its debt in May 2023, holds a $15 million note and $11.8 million in trade debt, according to the filing. Seasons Business Center Four LLC in Brooklyn Heights holds a lease claim for $8.3 million, which Athersys disputes, and Healios holds a $5.2 million claim for an advance to the Cleveland company.
Just before its bankruptcy filing, Athersys said it entered into a "stalking horse" purchase agreement with Healios to sell "substantially all" of its assets, including contracts, personal property, inventory, intellectual property, intangible property, accounts receivable, permits and approvals, studies, documents and claims to the Japanese regenerative medicine developer for a credit bid of $2 million.
The purchase agreement makes Healios the initial bidder in the bankruptcy court auction for Athersys assets. Other companies may bid on Athersys' assets in bankruptcy court, but the Healios credit bid sets a floor for the asset sales.
Healios also has proposed to act as Athersys' bankruptcy court lender, committing up to $2.25 million to pay the Cleveland company's costs. These and other moves await bankruptcy court judge approval.
