PhaseBio Pharmaceuticals, Inc. – Following Successful Mediation, Seeks Court Approval of Settlement (with) and Sale of Bentracimab Assets (to) Former Nemesis SFJ Pharmaceuticals X, Ltd.

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December 15, 2022 – The Debtor requested Court approval of a settlement with SFJ Pharmaceuticals X, Ltd. (“SFJ”) [Docket No. 249] further to which the Debtor and SFJ will settle their adversary proceeding and SFJ will purchase Debtor’s bentracimab assets (the “Bentracimab Assets”),

As detailed further below, SFJ will acquire the Bentracimab Assets "in satisfaction of the [$120.0mn] SFJ Secured Claim, plus..the payment by SFJ of the SFJ Consideration [ie $32.9mn in cash]." Albeit considerably more attenuated, there is also a nominal 2.5% royalty to be paid on annual global sales of the Bentracimab Assets in excess of $300.0mn with the mechanics for distributing that royalty to the Debtor's creditors across time…for the moment unclear.

A drafted, the Settlement Agreement has the Debtor pay "any expense reimbursement to Chiesi Farmaceutici S.p.A ["Chiesi"], the Stalking Horse Bidder, approved by the Bankruptcy Court;" out of the SFJ cash, without any specific reference to the quantum of the expense reimbursement (the Chiesi stalking horse agreement has it capped at $750k) or any reference at all to the $2.0mn break-up fee approved by the Court at the end of November. Chiesi has filed a motion, to be considered mid-January, requesting "that the Court award the full bid protections in this case, or in the alternative, award Chiesi the full amount of its documented expenses, which equal nearly $2.3 million" [Docket No. 274].

The Settlement Agreement and a related Program Transfer Agreement, which together implement the settlement term sheet filed with the Court on December 13, 2022 [see, Docket No. 239] are attached to this settlement motion.

A hearing to consider the motion is scheduled for December 30, 2022, with objections due by December 28, 2022.

Case Status

On October 23, 2022, PhaseBio Pharmaceuticals, Inc. (Nasdaq: PHAS, “PhaseBio” or the “Debtor”) filed for Chapter 11 protection noting estimated assets of $18.0mn; and estimated liabilities of $21.3mn. At filing, the Debtor, “engaged in the research and development of specialized, highly innovative therapies for patients with serious cardiovascular disease,” cited efforts by investor SFJ to force a transfer of the Debtor’s bentracimab assets as compelling the need to seek bankruptcy shelter. See below for more on the pivotal bentracimab assets and the Debtor’s fight with SFJ over their ownership.

On November 28, 2022, the Court hearing the PhaseBio Pharmaceuticals case issued an order: (i) approving bidding procedures for the sale of substantially all of the Debtor’s bentracimab-related assets and (ii) granting bidder protections to stalking horse bidder Chiesi Farmaceutici S.p.A (the “Stalking Horse Bidder,” $40.0mn cash bid plus an up to $60.0mn earnout) [Docket No. 199, with the Stalking Horse Bidder’s APA attached at Exhibit 2].

The Settlement Agreement

The motion [Docket No. 249] notes, “With the exceptional mediation assistance of The Honorable Michelle M. Harner, Bankruptcy Judge for the United States Bankruptcy Court for the District of Maryland, the Debtor and SFJ were able to reach a settlement of the Adversary Proceeding on December 12, 2022. The settlement provides substantial consideration to the estate for the benefit of the Debtor’s creditors and other stakeholders. Coupled with the Debtor’s liquidity constraints and the risks and costs of the Adversary Proceeding, the Debtor believes that the settlement is in the best interest of the Debtor’s estate, creditors, and other stakeholders…

The Settlement/ Sale Transaction

The Settlement Term Sheet arises from the Mediation and related negotiations between the Debtor and SFJ to resolve the Adversary Proceeding. The following is a summary of certain key terms of the parties’ agreements:

  • No later than December 31, 2022, or as soon thereafter as is practicable based on the Court’s availability, the Court shall enter the Settlement and Sale Order, which shall be in a manner and form acceptable to SFJ and the Debtor (in consultation with the Committee), and shall provide that SFJ: (i) owns the TDP; (ii) holds an allowed secured claim in the amount of $120 million (the ‘SFJ Secured Claim’); (iii) acquires the Bentracimab Assets free and clear in exchange for (a) satisfaction of the SFJ Secured Claim, plus (b) the payment by SFJ of the SFJ Consideration (as defined below) and the other consideration set forth below, plus (c) SFJ’s payment of the Cure Amounts in connection with the Assumed and Assigned Contracts (in accordance with the procedures set forth below); and (iv) upon the closing of the Settlement/Sale Transaction, (a) releases all security interests or liens in the Debtor’s remaining assets (those other than the Bentracimab Assets); (b) releases and waives all claims in the Chapter 11 Case; and (c) dismisses with prejudice its Counterclaims in the Adversary Proceeding (with the Complaint to be dismissed with prejudice) and the Prepetition Litigation.
  • The ‘SFJ Consideration’ shall mean a cash payment to the Debtor at the closing of the Settlement/Sale Transaction in the amount of $32.9 million, which the Debtor shall use to immediately pay, in full, the DIP Obligations (as defined in the Final DIP Order), to pay any expense reimbursement to Chiesi Farmaceutici S.p.A, the Stalking Horse Bidder, approved by the Bankruptcy Court, and to pay all Bentracimab-related post-petition essential vendor payments (excluding payments to BioVectra (as defined below)) incurred by the Debtor on or before December 31, 2022, and then, in its discretion and in consultation with the Committee, to pay costs necessary or appropriate to administer and wind down the chapter 11 estate after the closing of the Settlement/Sale Transaction with any excess funds from the SFJ Consideration remaining in the estate to be turned over and remitted to SFJ on the effective date of a chapter 11 plan.
  • Executory Contract and Unexpired Leases: 
    • SFJ intends to negotiate and enter into a new commercial supply agreement with BioVectra, Inc. (‘BioVectra’) in form and substance acceptable to SFJ (‘New Supply Agreement’); provided, however, such New Supply Agreement shall not be a condition to the closing of the Settlement/Sale Transaction. 
    • In addition to the SFJ Consideration, SFJ shall negotiate and agree to pay any administrative claim asserted by BioVectra for manufacturing conducted during the post-petition period to the extent allowed by the Court or agreed to by BioVectra and SFJ. Terms for payment to BioVectra shall be negotiated between SFJ and BioVectra; provided, however, that the negotiation of such new terms shall not be a condition to closing of the Settlement/Sale Transaction. 
    • In addition to the SFJ Consideration, SFJ shall pay all Bentracimab-related post-petition essential vendor payments (excluding payments to BioVectra) incurred by the Debtor, at SFJ’s direction, or SFJ on or after January 1, 2023. 
    • The Debtor shall assume and assign to SFJ, pursuant to section 365 of the Bankruptcy Code, all executory contracts and unexpired leases associated with the Bentracimab Assets as designated by SFJ in its sole discretion (together with all agreements with BioVectra as designated by SFJ in its sole discretion, the (‘Assumed and Assigned Contracts’). 
    • In addition to the SFJ Consideration, SFJ shall also pay all cure amounts (the ‘Cure Amounts’) under such designated Assumed and Assigned Contracts in the amount allowed by the Bankruptcy Court under section 365(b) of the Bankruptcy Code or in such amount and manner as may be agreed to by the counterparty to an Assumed and Assigned Contract and SFJ.
  • Royalty Payments. SFJ shall pay the Debtor an assignable royalty of 2.5% of worldwide net sales of the Product (as defined in the Co-Development Agreement), which exceed $300 million in any calendar year. For the avoidance of doubt, no royalty shall be due on the first $300 million of net sales of the Product in a calendar year.
  • Interim Funding. SFJ shall pay the Debtor $2.5 million upon execution of the Program Transfer Agreement, which shall include the Debtor’s written authorization for SFJ to communicate with the Food and Drug Administration and other regulatory authorities regarding bentracimab (the ‘Regulatory Communication Authorization’), which amounts shall be credited against the SFJ Consideration upon closing of the Settlement/Sale Transaction. If the Settlement/Sale Transaction does not close by January 31, 2023, the Regulatory Communication Authorization shall terminate, with the $2.5 million remaining available to fund the Debtor’s estate, and the SFJ Secured Claim shall be increased by the same amount, and SFJ shall hold a $2.5 million allowed administrative superpriority expense claim. For the avoidance of doubt, any liens securing the Interim Funding Amount or superpriority claims on account of the Interim Funding Amount shall be junior and subordinate to the DIP Liens and DIP Superpriority Claims and SFJ shall not receive or retain any payments, property or other amounts in respect of the Interim Funding Amount unless and until the DIP Obligations and the Prepetition First Lien Lender Secured Obligations (each of the foregoing capitalized terms in this sentence as defined in the Final DIP Order) have indefeasibly been paid in cash.
  • Debtor Employees. SFJ, in its sole discretion, will offer full-time employment opportunities at SFJ to certain employees of the Debtor. However, accepting such employment with SFJ shall not be a condition to closing the Settlement/Sale Transaction. SFJ will work with the Debtor to designate such employees. The Debtor and SFJ shall enter into a transition services agreement in form and substance reasonably acceptable to SFJ and the Debtor at no further expense to SFJ.
  • Mutual Releases and Non-Disparagement Provision. The Debtor and SFJ will also exchange customary mutual releases of claims and agree to a nondisparagement provision.”


Bentracima and SFJ Pharmaceuticals, X, Ltd


[As previously reported] The Debtor's stated catalyst for seeking bankruptcy shelter relates to a fight over the future of its lead product candidate bentracimab (or PB2452), a novel reversal agent for the antiplatelet drug ticagrelor. The "widely prescribed" ticagrelor is marketed and sold by AstraZeneca** (as “Brilinta”) to treat patients with acute coronary syndrome, or who have previously experienced a heart attack. Due to ticagrelor’s antiplatelet activity, however, patients on ticagrelor have an elevated risk of spontaneous bleeding (as well as increased risk of major bleeding during and after surgery) which explains why a "reversal agent" has potentially enormous value as a product to bolster the safety/efficacy of Brilinta. As the Perkins Declaration (defined below) puts it: "The availability of bentracimab as a specific reversal agent could expand ticagrelor’s use by mitigating concerns regarding bleeding risk and uniquely position ticagrelor as the only oral antiplatelet drug with a reversal agent."

** The Debtor acquired worldwide rights to develop and commercialize bentracimab pursuant to a license agreement the Debtor entered into with MedImmune Limited (a subsidiary of AstraZeneca) on November 21, 2017.

So how close is bentracimab to being FDA approved and available to heart patients (and monetizable)? Recent trials and an intense struggle with investor SFJ Pharmaceuticals, X, Ltd. (“SFJ,” which only stands to see a return on its $103.1mn investment if bentracimab receives regulatory approvals) suggest probably pretty close.

In November 2021, the Debtor published the results of a 200-patient trial (150 patients included in results with a further 50 subsequently enrolled) which "demonstrated that bentracimab immediately and sustainably reversed the antiplatelet effects of ticagrelor and was generally well tolerated by patients, with only five drug-related non-serious adverse events reported in three individuals….Based on feedback from the FDA, the Debtor intends to seek approval of bentracimab in the United States through an accelerated approval process to treat patients who present with uncontrolled bleeding or require surgery. The Debtor is currently targeting submission of a BLA [biologics license application] to the FDA for bentracimab in mid-2023."


In January 2020, the Debtor entered into a Co-Development Agreement (the “CDA”) with SFJ to obtain the investment funds needed to support the global development of bentracimab. Pursuant to the CDA, SFJ agreed to provide up to a $120.0mn investment, comprised of (a) $90.0mn in initial funding, and (b) up to $30.0mn in additional funding (with conditions for that additional tranche subsequently met). As of the Petition date, SFJ has invested a total of approximately $101.3 million with the Debtor pursuant to the CDA. NB: The Debtor estimates, apart from the SFJ investment, it has invested approximately $192.9mn in pursuing the development and intended commercialization of bentracimab.

As the Perkins Declaration notes as to SFJ's potential 500% return: "The CDA provides that SFJ will receive highly lucrative, return-on-investment payments only if the Debtor receives future regulatory approvals (collectively, the 'Contingent Return-On-Investment Payments')….

The Debtor’s obligation to make the following Contingent Return-On-Investment Payments is entirely contingent on bentracimab actually receiving approval by the FDA, EMA, and either of the applicable regulatory bodies for Japan or China, as follows:

  • upon FDA approval of a BLA for bentracimab, the CDA obligates the Debtor to pay SFJ up to $330 million, comprised of (a) an initial payment of $5.0 million and (b) an additional $325.0 million payable in seven annual installments;
  • if the EMA, or the national regulatory authority in certain European countries, authorizes a marketing approval for bentracimab, the CDA obligates the Debtor to pay SFJ up to $210 million, comprised of (a) an initial payment of $5.0 million and (b) an additional $205.0 million payable in seven annual installments; and
  • if either the applicable regulatory bodies for Japan or China approves a marketing application for bentracimab, the CDA obligates the Debtor to pay SFJ up to $60 million, comprised of (a) an initial payment of $1.0 million and (b) an additional $59.0 million payable in eight annual installments

In summary, if bentracimab receives broad regulatory approval, SFJ stands to receive up to $600 million, representing over a 500% return on its total committed investment of $120 million (although the Debtor estimates only $101.3 million of that commitment has been actually invested by SFJ to date), but nothing at all if regulatory approval is not obtained. To date, none of these regulatory approvals has been received."

The "Going Concern Condition"

The CDA "contains an unusual, and highly punitive, remedy."  If PhaseBio determines in accordance with GAAP that it is probable that PhaseBio will be unable to meet its obligations as they become due within a year, or (b) a “Going Concern” footnote is included in any of PhaseBio’s financial statements (a “Going Concern Condition”) and it fails to remedy the Going Concern Condition within 180 days, SFJ may elect to have PhaseBio’s business related to bentracimab transferred to SFJ for no additional consideration. Upon such a transfer, the CDA further provides that PhaseBio will not share in any revenues from the commercialization of bentracimab until (a) SFJ has received a 300% return on its investment in bentracimab, after which PhaseBio will be entitled to a mid-single-digit royalty on net sales of bentracimab in the United States and certain European countries, and (b) after SFJ has received an aggregate 500% return on its investment in bentracimab, PhaseBio will be entitled to a mid-single-digit royalty on net sales of bentracimab in the rest of the world.

On March 24, 2022, a "180-day Going Concern Cure Period" was triggered when a going concern qualifier was included in the Debtor’s audited financial statements from the period ending December 31, 2021 (10-K here).

On September 21, 2022, the day after the Going Concern Cure Period expired, SFJ notified the Debtor that, pursuant to CDA, it was electing to cause the Bentracimab Development Program to be transferred to SFJ as a result of the Debtor’s failure to remedy its Going Concern Condition within the Going Concern Cure Period….On October 1st, citing the Debtor's failure to effect a transfer of the bentracimab assets, SFJ commenced suit against the Debtor in the United States District Court for the Eastern District of Pennsylvania, asserting claims for breach of contract, declaratory relief with respect to the validity and enforceability of the CDA and Program Transfer Notice, and injunctive relief.

Asset Sale Efforts

On October 17th, the Debtor executed a confidential Non-Binding Proposal (the “Proposal”) with a large, well-capitalized pharmaceutical company (the “Counterparty” [ie Chiesi]) with "decades of experience in the areas of research, development, production, and commercialization of novel and advanced therapies and other medicines, including in the hospital and critical care space in the United States and the rest of the world." The Debtor anticipates that the Proposal will evolve shortly into a definitive asset purchase agreement (the “APA”) further to which the Counterparty will be designated as the stalking horse bidder for the Debtor’s bentracimab program assets. Under the Proposal, to be reflected in the APA, the Counterparty will (a) pay the Debtor cash in the amount of $40.0mn (the “Upfront Payment”); (b) pay the Debtor cash in the total amount of $60.0mn upon the achievement of certain regulatory milestones with respect to bentracimab; (c) satisfy the cure amounts in connection with the assumption and assignment of designated executory contracts and leases; (d) assume any agreed upon liabilities; and (e) provide cash consideration to be paid upon the Debtor’s entry into and due performance under a transition services agreement (collectively, the “Purchase Price”) for the purchase of the Debtor’s bentracimab program assets. The Counterparty will provide a $4.0mn deposit into escrow and, if approved as the stalking horse bidder, would be entitled to a break-up fee of $2.0mn and reimbursement of expenses of up to $750,000, to be paid from the proceeds of a sale to an alternative purchaser.

Events Leading to the Chapter 11 Filings

In a declaration in support of first day filings (the “Perkins Declaration), Lawrence Perkins of SCP, now serving as the debtor's Chief Restructuring Officer commented: "[The] onerous Going Concern Condition provisions, and the unreasonable positions that SFJ has taken in connection therewith, have led to the Debtor’s need for relief under chapter 11.

Developing and commercializing biopharmaceutical products, including launching new products into the marketplace and conducting preclinical studies and clinical trials, is a capital-intensive and uncertain process that takes years to complete. Prepetition, the Debtor was unable to raise additional funding needed to support that process, due principally to the significant overhang of the Contingent Return-On-Investment Payments required under the CDA and the significant spending commitments required to develop and commercialize bentracimab. The Debtor’s distressed financial condition, resulting from this inability to obtain the funding needed to meet its obligations, led to the inclusion of a going concern qualifier in the Debtor’s audited financial statements from the period ending December 31, 2021….this going concern qualifier constituted a Going Concern Condition under the CDA and initiated a 180-day Going Concern Cure Period beginning on March 24, 2022, when the Debtor provided notice of the qualifier to SFJ. The Debtor was already actively seeking to address its need for additional capital, but those efforts were accelerated upon the commencement of the Going Concern Cure Period.

About the Debtor

According to the Debtor: "PhaseBio Pharmaceuticals, Inc. is a clinical-stage biopharmaceutical company focused on the development and commercialization of novel therapies for cardiovascular diseases. The Company’s pipeline includes: bentracimab (PB2452), a novel reversal agent for the antiplatelet therapy ticagrelor; and PB6440, an oral agent for the treatment of resistant hypertension. PhaseBio’s proprietary elastin-like polypeptide technology platform enables the development of therapies with potential for less-frequent dosing and improved pharmacokinetics, and drives both internal and partnership drug-development opportunities."

PhaseBio is located in Malvern, PA, and San Diego, CA.

The Perkins Declaration adds: "Founded in 2002, PhaseBio is a clinical-stage biopharmaceutical company focused on the development and commercialization of novel therapies for cardiovascular diseases.

PhaseBio’s business strategy is to identify, develop and commercialize novel therapies for cardiovascular diseases. Its portfolio of products includes a number of clinical and pre-clinical candidates that are currently in varying stages of development, none of which has received regulatory approval to date."

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