KaloBios Pharmaceuticals filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code yesterday, as the troubled biotech scrambles to recover from losses as well as the brief CEO tenure of Martin Shkreli, whom the company fired last week days after his arrest on federal securities fraud charges.
In papers filed at U.S. Bankruptcy Court for the District of Delaware, KaloBios listed total assets of nearly $8.4 million and total debts of $1.9 million. KaloBios’ largest unsecured creditor listed in the filing is the University of Miami, to which the company said it owed $291,126.30.
The company also listed nearly 4.5 million shares of common stock, trading on which has been halted since Shkreli was arrested on December 17. Two days later, Shkreli issued a statement on Twitter calling the allegations against him “baseless and without merit,” adding, “I am confident I will prevail.”
KaloBios is appealing a decision by NASDAQ to delist the company’s shares, with the exchange citing in part the arrest and indictment of Shkreli and Evan Greebel, the company's former outside counsel, on similar allegations, plus a civil complaint from the U.S. Securities and Exchange Commission against both men.
NASDAQ also cited the company for non-compliance because it had not filed a Form 10-Q quarterly report for the third quarter. A hearing on the matter is set for February 25.
The Chapter 11 filing caps a turbulent seven weeks for KaloBios that began with the company’s announcing it would lay off 61% of its workforce—17 employees—and had begun “evaluating strategic alternatives,” including a possible sale of the company.
The layoffs and search for alternatives, announced on November 5, followed a series of clinical setbacks, each resulting in significant drops in KaloBio’s share price.
On November 16, KaloBios said it planned to shut down operations and had hired a firm to lead wind-down efforts. But just three days later, the company disclosed it was in talks with an investor group consisting of Shkreli and associates. Those talks culminated in Shkreli’s group snapping up more than half the company’s shares, with Shkreli taking over as CEO—a position from which he was terminated the day of his arrest. Shkreli and Tony Chase resigned from the company’s board of directors the same day.