Melinta’s Chapter 11 Auction Draws No Bids, Deerfield to Get Assets

Xconomy New York — 

The assets of Melinta Therapeutics will go to creditor Deerfield Management after no bidders for the company emerged, the antibiotics developer announced Wednesday.

Under a court-approved Chapter 11 bankruptcy plan, any bids for the company were due by March 2. An auction was scheduled for March 6 in the event any bids were submitted. But with no other proposals made, the $140 million minimum bid that Deerfield had set to start the auction process becomes the winning proffer.

Deerfield had provided financing for Morristown, NJ-based Melinta in connection with the biotech’s 2018 acquisition of the infectious disease business of The Medicines Company. (MedCo has since been acquired by Novartis.) Melinta’s Deerfield-financed deal covered three FDA-approved antibacterial products: delafloxacin (Baxdela), oritavancin (Orbactiv), and minocycline (Minocin).

According to Melinta’s 2018 annual report, the agreement with Deerfield provided up to $240 million in debt and equity financing over six years. Deerfield initially loaned the biotech $147.8 million, and then purchased Melinta shares worth $42.2 million.

Like many antibiotics companies, Melinta struggled to sell its products. The company’s annual and quarterly reports warned that the firm was not generating enough revenue to cover its expenses. On Dec. 27, 2019, the struggling biotech filed for Chapter 11 bankruptcy protection and entered into a restructuring agreement with Deerfield.

The auction process for Melinta’s assets was approved by the bankruptcy court. But with no bidders, the company falls back to the terms of its restructuring agreement with Deerfield. According to that pact, Deerfield will acquire the company by exchanging its claims as a creditor for 100 percent of the equity to be issued by the reorganized company under the pre-negotiated Chapter 11 bankruptcy plan.

Melinta says it will seek court approval on March 13 to move forward with its agreement with Deerfield. The biotech expects to get the court nod to proceed with that plan on April 2. The transaction with Deerfield becomes effective after the court confirms the Chapter 11 plan. When that happens, equity in Melinta will be cancelled and equity holders will receive nothing.

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