April 13, 2023 – As flagged by an April 12th press release, PLx Pharma Inc. and one affiliated debtors (NASDAQ: PLXP; together “PLx” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Delaware, lead case No. 23-10456 (Judge Mary F. Walrath). The Debtors, "a commercial-stage drug delivery platform technology company," are represented by Robert F. Poppiti, Jr. of Young Conaway Stargatt & Taylor, LLP. Further Board authorized appointments include: (i) Olshan Frome Wolosky LLP as general bankruptcy counsel, (ii) SierraConstellation Partners providing Lawrence Perkins as CRO, (iii) Raymond James as financial advisors and investment bankers and (iv) Donlin Recano as claims agent.

The Debtors’ lead petition notes over 100,000 creditors; estimated assets between $10.0mn and $50.0mn ($21.75mn as at December 31, 2022); and estimated liabilities between $10.0mn and $50.0mn ($12.3mn as at December 31, 2022). Documents filed with the Court list the Debtors’ three largest unsecured creditors as (i) Patheon Pharmaceuticals, Inc ($8.6mn trade debt claim), (ii) Patheon Manufacturing Services LLC ($1.8mn trade debt claim) and (iii) Altasciences CDMO Philadelphia LLC ($89k treade debt claim).

In their April 12th press release, the Debtors provided as to their then imminent bankruptcy filing: "The Company today announced that it entered into a stalking horse asset purchase agreement (the 'APA') with PLx Acquisition Company, LLC, a wholly-owned subsidiary of Greenwood Brands, LLC ('Buyer'), to acquire substantially all of the Company’s assets (the “Sale”)….Pursuant to the terms and subject to the conditions of the APA, the purchase price is $100,000 in cash, plus a credit bid of $3 million, plus Buyer’s assumption of certain liabilities….The Company intends to file voluntary petitions for relief under Chapter 11 of Title 11 of the U.S. Code in the U.S. Bankruptcy Court for the District of Delaware…within the next two business days."

The Greenwood Brands asset purchase agreement was filed with an April 12th 8-K. The Buyer lists a contact address of: c/o Greenwood Brands LLC, 4455 Genesee Street, Buffalo, New York 14225 and George Cleary of Princeton, NJ-based  Market Performance Group is listed as the Buyer's contact.

The Perkins Declaration (defined below) states as the identity of the stalking horse bidder, "The Debtors are also party to commercial agreements with Market Performance Group, LLC ('MPG') and its affiliate Greenwood Brands, LLC ('Greenwood' and, together with MPG and their designated purchasing entity, PLx Acquisition Company, LLC, a wholly-owned subsidiary of Greenwood, the 'Stalking Horse Bidder'). MPG, together with its affiliated companies (the 'MPG Group') provides the Debtors with warehousing, distribution, sales, management, logistics, fulfillment and customer and collections support in respect of VAZALORE. The Debtors market VAZALORE to retailers and consumers exclusively through the MPG Group’s network. Retailers transact with the MPG Group — not the Debtors — they purchase or return VAZALORE. For example, VAZALORE is sold to retailers under the MPG Group’s vendor identification number. In short, the MPG Group is the face of VAZALORE to the Debtors’ retail customers."

Goals of the Chapter 11 Filings

The Perkins Declaration provides, "The Debtors have entered chapter 11 to (i) pursue a value-maximizing sale process that builds upon the Debtors’ prepetition marketing efforts and (ii) promptly distribute all available funds to creditors… Further, while the Debtors are positioned to close on going-concern bids for their business, they intend to market their assets more broadly postpetition, including by contacting potential purchasers that may be interested in only certain business segments or assets."

Events Leading to the Chapter 11 Filing

In a declaration in support of the Chapter 11 filing (the “Perkins Declaration”), Lawrence Perkins, the Debtors’ chief restructuring officer, detailed the events leading to PLx’s Chapter 11 filing. The Perkins Declaration provides: “Several factors contributed to the Debtors’ need to commence the Chapter 11 Cases, including operational, financial, and macroeconomic challenges in the pharmaceutical business that have, over time, complicated the Debtors’ operations and limited the Debtors’ access to capital.

The current inflationary environment has put pressure on consumer behavior, including on adoption of new products and fostering an increased price sensitivity. The market acceptance and sales of VAZALORE have taken longer than anticipated to develop, due in part to difficult macroeconomic conditions that affected both the broader markets and biotech markets, and unfavorable COVID-19 market impacts, such as restrictions that have limited face-to-face medical communications with healthcare professionals and their patients.

In addition, in October 2021, negative media coverage of the United States Preventative Services Task Force (USPSTF)’s therapy guidelines on use of aspirin in prevention of cardiovascular disease created confusion among consumers and health care professionals, and unfavorably impacted the heart health aspirin category, resulting in an immediate and continued decline in the category reflected in both dollars and units sold.

In February 2022, the Debtors began evaluating financing and other strategic alternatives in order to secure additional capital to continue to grow the business and their pipeline. Due to a downturn in actual sales compared to the Debtors’ forecasts, the Debtors began implementing spending reduction measures during the second quarter of 2022 to reduce their cash burn, including: (i) reducing its media spend for the second half of the year; (ii) reducing their 27- person outsourced sales force; (iii) cancelling remaining open purchase orders for inventory; (iv) deferring a planned manufacturing site scale up and deferring work to establish a second manufacturing site; and (v) reducing other expenses, including consultants and advertising agency projects. The Debtors were also engaging in strategic discussions with other pharmaceutical companies to discuss a potential partnership with the Debtors or a sale of the Debtors’ business.

Following a selection process, in July 2022 the Debtors engaged Raymond James and commenced a marketing process for a strategic going concern or asset sale. Despite the Debtors’ efforts, however, the Debtors were unable to mitigate the challenges they faced leading up to the commencement of the Chapter 11 Cases. In the nine months ended September 30, 2022 and the year ended December 31, 2022, the Debtor incurred a net loss of $31.1 million and $48.9 million, respectively. The Debtors’ accumulated deficit was, as of September 30, 2022 and December 31, 2022, $179.4 million and $197.1 million, respectively."

Prepetition Indebtedness

The Debtors have no funded secured indebtedness, and have approximately $9.4 million of unencumbered cash on hand to administer the Chapter 11 Cases.

As of March 30, 2023, the Stalking Horse Bidder asserts secured claims against the Debtors in excess of approximately $7.5 million, subject to further reconciliation, on account of, among other things, return liability, expired and expiring products that are subject to return, product discontinuations, trade promotions and other unpaid amounts due and owing under the MPG Agreements. The Stalking Horse Bidder asserts liens on, among other things, the Debtors’ inventory that it lawfully possesses pursuant to the W&D Agreement and net payables, if any, in respect of VAZALORE sales.

As of the Petition Date, the Debtors’ estimated consolidated outstanding unsecured indebtedness, including raw materials purchases based on the Debtors’ forecast, manufacturing capacity reservation fees, returns from retailers for expired and excess product at retail stores and trade payables, excluding MPG’s deficiency claim, is approximately $11 million.  

Prepetition Shareholders

The Debtors list Level One Partners, LLC; Park West Asset Management LLC; and White Rock Capital Management L.P. as each holding at least 5% of their equity.

About the Debtors

According to the Debtors: “PLx Pharma Inc. is a commercial-stage drug delivery platform technology company focused on improving how and where active pharmaceutical ingredients (APIs) are absorbed in the gastrointestinal (GI) tract via its clinically validated and patent protected PLxGuard™ technology. PLx believes this platform has the potential to improve the absorption of many drugs currently on the market or in development, and to reduce the risk of stomach injury associated with certain drugs. “

 Corporate Structure Chart

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