NanoString Technologies, joined by three of its subsidiaries, have filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code, blaming the $31 million jury award assessed against it last November in a patent infringement case filed by rival 10x Genomics.
The jury held that NanoString’s GeoMx® Digital Spatial Profiler (DSP) infringed seven patents that 10x held after exclusively licensing them from Prognosys Biosciences. 10x was awarded the $31 million in damages ($25 million in lost profits, $6 million royalty) in a lawsuit it filed against NanoString Technologies in the U.S. District Court for the District of Delaware.
“The unexpected outcome of the November GeoMx patent litigation trial in Delaware and the unusually large magnitude of the damages awarded by the jury have forced us to take proactive steps to protect our stakeholders, customers, and employees,” NanoString president and CEO Brad Gray said Sunday in a statement.
NanoString’s shares plunged 50% from $1.28 to $0.64 on November 20, the first trading day after the award became public after the close of the markets November 17. NanoString responded to the jury award by withdrawing its full-year 2023 guidance to investors of $175 million to $185 million, most of which consisted of spatial biology revenue projected to range from $100 million to $105 million.
NanoString, which is appealing the decision, has since disclosed that it is eliminating 9% of its workforce—about 50 employees—during this quarter, and faces delisting from Nasdaq after its stock closed below the $1/share minimum price for 30 consecutive business days.
“NanoString has powerful product platforms, strong relationships with our customers throughout the scientific community, an enviable workforce, and conviction in the integrity of our innovation process. We believe Chapter 11 protection will provide us with the necessary breathing room to continue to serve our customers while we address our litigation and the related financial challenges,” Gray added.
NanoString and the subsidiaries reported $325.3 million in total debts and only $274.7 million in total assets as of September 30, 2023. Joining NanoString in the filing were subsidiary NanoString Technologies International, and subsidiaries based in Germany and the Netherlands.
In the statement, NanoString expressed confidence in its innovation and product development process, adding that it “believes it has strong legal defenses and counterclaims.” The company maintained that its GeoMx Digital Spatial Profiler (DSP)—a spatial multiomic platform for analysis of formalin-fixed paraffin-embedded (FFPE) and fresh frozen tissue sections—and CosMx Spatial Molecular Imager (SMI), a high-plex in situ analysis platform designed to provide spatial multiomics with FFPE and fresh frozen (FF) tissue samples at cellular and subcellular resolution, “offer unique propositions to the scientific community.”
“Nonetheless, the company has faced unfavorable initial rulings that have impacted its business trajectory and financial position,” the company acknowledged. “While the company believes that it has strong grounds for appeals, these initial litigation outcomes, including the cost burdens associated with continued engagement in extensive litigation with a large well-funded competitor, have siphoned resources from innovation and customer support activities and placed a significant strain on the company’s business and financial resources.”
As a result, NanoString said, it will begin a restructuring process, during which it will explore strategic alternatives that include a possible sale of all or part of its business to new owners “who will continue the company’s mission.”
“The company has received and is currently evaluating multiple preliminary indications of interest as part of this process,” NanoString stated.
$40M debtor financing
Also as part of its restructuring, NanoString said, it has reached agreement in principle with lenders that have agreed to provide the company with at least $40 million in new debtor-in-possession (DIP) financing.
“Upon approval of the bankruptcy court, this financing facility is expected to provide sufficient liquidity to operate the company’s business during the pendency of the cases,” NanoString asserted.
Pending a selloff of all or part of its business, or other outcome of the strategic review, NanoString said, it will continue to operate its business, support its workforce, and serve its customers—including those that either own or are considering the purchase of an nCounter®, GeoMx DSP, or CosMx SMI system.
NanoString added that the Chapter 11 filing would stay all ongoing patent litigation against the company worldwide.
10x has filed multiple patent infringement lawsuits against NanoString in the United States and the European Union, focused on NanoString’s GeoMx DSP and CosMx SMI.
“10x is engaging in its litigation campaign with the apparent goal of shrinking the competitive landscape for different spatial biology platforms to the detriment of the public good,” NanoString contended.
Speaking on GEN’s “Close to the Edge”, 10x co-founder and CEO Serge Saxonov, PhD, defended 10x’s series of patent lawsuits against competitors.
“We see ourselves as an R&D engine, ultimately. And when we invest in innovation, into new product development, we’re very diligent to make sure we can also protect it and protect our customers… Once you bring awesome products to market, you have to protect them. And that’s what we’re doing. That’s what allows us to then keep investing into more innovation to bring more technology to market.”
NanoString said it will continue to serve researchers across its installed base of over 1,500 nCounter, GeoMx DSP, and CosMx SMI platforms.
“NanoString’s current management team, Board of Directors, and employees will continue to operate the business and serve customers following the filing,” the company stated. “NanoString expects and intends to pay vendors under customary terms for goods and services received on or after the filing date, and to pay its employees in the usual manner and to continue their primary benefits without disruption.”