March 27, 2023 – Publicly traded Codiak BioSciences, Inc. and one affiliated debtor (Nasdaq: CDAK; “Codiak” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Delaware, lead case No. 23-10350 (Judge TBA). The Debtors, a Cambridge, Massachusetts-based "clinical-stage biopharmaceutical company focused on pioneering the development of exosome-based therapeutics," are represented by Ryan M. Bartley of Young Conaway Stargatt & Taylor, LLP. Further Board authorized appointments include: (i) Province, LLC as financial advisor and to provide a CRO and additional support personnel and (ii) Stretto as claims agent.

The Debtors’ lead petition notes between 100 and 200 creditors; estimated assets between $100.0mn and $500.0mn ($106.2mn as at February 28, 2023); and estimated liabilities between $50.0mn and $100.0mn ($85.4mn as at February 28, 2023). Documents filed with the Court list the Debtors’ three largest unsecured creditors as (i) Lonza Houston, Inc. ($978k trade debt claim), (ii) PPD Development, LP ($178k trade debt claim) and (iii) Apex Systems, LLC ($65k professional services claim).

In its November 3, 2022 10-Q, Codiak which netted $74.4mn in an October 2020 IPO and has otherwise "incurred significant operating losses and negative cash flows from operations since inception noted that there was "substantial doubt about its ability to continue as a going concern [and that] its cash and cash equivalents of $51.8 million as of September 30, 2022 will be insufficient to allow the Company to fund its current operating plan through at least the next 12 months…" 

In a press release announcing the filing, the Debtors note that they "will seek to pursue a sale process for its assets which is intended to maximize the value of the Company." The press release continues: "The Company began a marketing process ahead of the Chapter 11 filing to determine the level of market interest and is in ongoing discussions with several parties. The Company expects to consummate a sale of the entire business or its core assets as soon as reasonably practicable.

Douglas E. Williams, the Debtors' President and Chief Executive Officer, added: “The Board and management team have thoroughly assessed all of our strategic options and believe that this structured process represents the best possible solution for Codiak, taking into account our financial needs and the stage of our clinical and research programs."

The Debtors, who have not filed an 8-K over the last 120 days and did not otherwise provide an update as to their liquidity issues in the period between filing their last 10-Q and the above filing date press release, are similarly frugal in the guidance provided in their lead petition. Notwithstanding the announced intention to begin a sale process, March 26th board minutes filed with the lead petition do not note the engagement of an investment banker (there is no specific mention of a sale process at all) and do not provide any clues as to marketing in respect of assets or DIP financing.

Events Leading to the Chapter 11 Filings

The Debtors' declaration in support of first day filings provides: "Since inception, the Debtors have devoted substantially all of their resources to developing their engEx Platform, engEx product candidates and engEx exosomes, and building their intellectual property portfolio, process development and manufacturing functions….Despite substantial progress in their development efforts, the Debtors have been unable to establish a revenue-producing product line and have no near term prospects to do so (and they may never do so). As a result, the Debtors have been primarily reliant on balance sheet cash from capital raises, borrowing under the LSA, and financial support from their development partners….As part of their strategic and business development initiatives, the Debtors engaged in discussions with various potential transaction partners to generate further cash from their assets, which transactions could have taken various forms. In recent weeks, the Debtors were in advanced discussions with one counter-party for a potential transaction, but were unable to agree on final terms for that transaction. The Debtors, however, are continuing to engage in discussions with that party on potential transactions.

With negotiations for the Debtors’ most-advanced business development initiative reaching an impasse in the second half of March, the Debtors began to explore further initiatives to streamline their cost structure and best-position themselves to maximize the value of their assets and business for their stakeholders. The Debtors engaged Province, LLC as financial advisor and Young Conaway Stargatt & Taylor, LLP as restructuring counsel, to assist in this process. After assessing the near-term prospects to generate cash from their assets and on-going operations, their on-going cash needs, and their cash position, the Debtors determined that it would be in the best interests of their stakeholders to pause substantially all of their on-going development efforts, further reduce their spending run-rates, and focus exclusively on monetizing their assets. In connection with this decision, the Debtors engaged in a further reduction in force, that will result in all but 15 of the Debtors’ 51 employees ceasing employment by April 7….The Debtors also determined that it would be in the best interest of all of their stakeholders to commence a chapter 11 process to leverage the tools available under chapter 11 as part of their efforts to maximize the value of their assets and business—including the automatic stay under section 362, the power to sell assets free and clear under section 363(f), and the power to assume and assign valuable contracts and leases under section 365. To further their efforts to realize and maximize value, the Debtors will market their core assets for sale, primarily their intellectual property, state of the art lab equipment, the Lonza manufacturing credits, and their Cambridge, Massachusetts leasehold that includes a fully built-out lab in a highly-desirable
location."

Prepetition Shareholders

• ARCH Venture Funds – 24.02%
• Fidelity – 15.43%
• Flagship Venture Funds – 14.12%
• Armistice Capital, LLC – 7.23%
• Laurion Capital Management LP – 5.46%

About the Debtors

According to the Debtors: Codiak is a clinical-stage biopharmaceutical company pioneering the development of exosome-based therapeutics, a new class of medicines with the potential to transform the treatment of a wide spectrum of diseases with high unmet medical need. By leveraging the biology of exosomes as natural intercellular transfer mechanisms, Codiak has developed its proprietary engEx® Platform to expand upon the innate properties of exosomes to design, engineer and manufacture novel exosome therapeutic candidates. Codiak has utilized its engEx® Platform to generate a pipeline of engineered exosomes aimed at treating a broad range of disease areas, spanning oncology, infectious disease and rare disease. 

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