Case Study - Egenix

The Challenge

Egenix, Inc. (the “Company”) was a privately held biotechnology company focused on the development of innovative and potentially disease transforming cancer therapeutics. In 2014, the Company was in financial stress and dependent on investor capital in order to continue operating. Egenix Management engaged Devonshire Holdings, Inc. for restructuring and financing services. Initial Due Diligence revealed serious governance, financial and reporting issues. The challenge was to restructure the heavily indebted Balance Sheet and to secure financing in order to continue the highly promising R&D efforts.

The Method

Devonshire conducted extensive Due Diligence and prepared a report which concluded that the Company was not financeable due to the above issues and considerable dilution to the equity shareholders from stock options and other awards to Management and investors. A major restructuring and Management change was necessary to save the enterprise. A group of leading shareholders and lenders decided the best way to preserve the R&D efforts and to save the work that had been accomplished was to put the Company into Chapter 11 for reorganization. Despite strong resistance from the outgoing Management, the Chapter 11 was approved by the Board and the Company was declared bankrupt. William T. Nolan was selected by the Board as the Chief Restructuring Officer, and he was approved and appointed by the Bankruptcy Court in Delaware.
During Chapter 11, we successfully funded the Company with two Debtor In Possession Financings and significantly increased the R&D efforts. We separated the “Good Assets” from the “Bad Company” and empowered the Chief Scientific Officer to continue and accelerate the R&D efforts. We created a separate R&D enterprise with its own management so that it could be valued as an ongoing entity. We were able to preserve and enhance the Intellectual Property (the “IP”) in order to create value for potential Buyers of the Good Assets.

The Results

We conducted a 363 Asset Sale in Chapter 11 through an Auction that attracted a number of interested parties from Big Pharma to private investors. The Auction resulted in a winning bid that will yield a return to Creditors that is larger than anticipated. The Buyer has received IP assets that are free and clear and fundable in order to achieve the desired outcome, which is a “drug-able” compound that may become an important cancer therapeutic agent.