Battered by years of rough financial sledding and tough competition from rival next-generation sequencing companies, Helicos Biosciences filed Thursday for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code.
In its filing (Case 12-19091) in U.S. Bankruptcy Court for the District of Massachusetts, Helicos listed $15.478 million in liabilities and only $3.503 million in assets. On the day of its bankruptcy filing, Helicos sent notice to the U.S. Securities and Exchange Commission (SEC) that it would be late in filing third-quarter results.
“The Board of Directors of the Company has determined that continued operation of the Company outside of bankruptcy protection is not possible due to its lack of cash resources and no available funding options,” Helicos stated in the notice.
The Chapter 11 filing came about three months after Helicos last released quarterly results, which showed the company recording a Q2 loss of $459,000, an improvement over its $1.771 million loss for the second three months of 2011. Another brighter note was its cash and cash equivalents, which rose as of Aug. 9 to $2.1 million from $446,000 at the end of Q2.
But Helicos’ second-quarter revenues plunged 29% from a year earlier, to $577,000 from $809,000 in Q2 2011: “The Company does not generate sufficient funds to operate its business. The Company continues to require significant additional capital on a month-to-month basis,” Helicos stated in its 10-Q filing with the SEC.
Helicos sought to stem its financial bleeding with rounds of layoffs in 2010 and 2011 that eliminated a combined 66 positions, leaving it with 10 full- and part-time employees at the start of his year, and just eight at the start.
While the company has long struggled financially, its troubles mounted in recent months. President and CEO Ivan Trifunovich resigned from those positions Sept. 14, two weeks after he resigned as executive chairman of Helicos' board of directors. Trifunovich served at the helm of Helicos less than two years, taking office in October 2010.
Trifunovich resigned days after the U.S. District Court for the District of Delaware on Aug. 28 granted summary judgment in favor of arch-rival sequencing equipment maker Illumina in a patent-infringement case brought by Helicos. District Judge Sue Robinson declared U.S. Patent No 7,593,109 (“Apparatus and methods for analyzing samples”) held by Helicos invalid for "lack of written description." Helicos began the litigation by suing Illumina and two other rivals, Life Technologies and Pacific Biosciences, only to settle with Pac Bio and drop its suit vs. Life Tech.
Helicos’ tSMS sequencing method analyzes individual molecules of DNA directly instead of analyzing a large number of copies of the molecule that require producing through complex sample preparation techniques. The company’s Helicos® Genetic Analysis Platform is designed to repetitively performing biochemical reactions on individual DNA or RNA molecules, imaging the results after each cycle.
In a motion filed with the Chapter 11 case, Helicos called the summary judgment decision “the final blow to the Debtor’s potential for long-term viability.”
“Despite the advantages of the Debtor’s technology, delays in achieving reliability permitted the Debtor’s competitors to achieve an overwhelming advantage in the most important markets for large-scale genome sequencing. The Debtor was unable to raise capital for development of a smaller-scale system,” Helicos stated in the motion.
Among creditors holding the 20 largest unsecured claims, the largest three are all held by law firms: Brown Rudnick ($1.03 million), Goodwin Procter ($568,903.49), and Wilmer Hale ($238,997.52).
Established in 2004, Helicos went public three years later. The company’s four largest owners are all venture capital firms with a combined stake of more than half the company’s equity: Flagship Venture Funds (14.01% share of equity), Atlas Venture Funds and Highland Capital Funds (each with 13.62%), and Versant Venture Funds (12.64%).
Flagship’s Noubar Afeyan and Peter Barrett of Atlas Ventures resigned last month from Helicos' board.