The parade to bankruptcy court continues for biotech companies as Chapter 11 filings have continued rising each year since 2021.

A total of nine biotech firms filed for bankruptcy in 2021, but Chapter 11 filings more than doubled to 20 filings in 2022 and continued rising further to over a dozen in 2023.

Among the biotech companies filing in 2023 was cancer drug developer Sorrento, which filed for Chapter 11 in February 2023 after losing a lawsuit over its Cynviloq drug that cost it a $172 million judgment.

Digestive disease drug developer 9 Meters Biopharma filed for bankruptcy in July 2023 after clinical trials for its drug Vurolenatide failed and the company was forced to shut down.

Novan, a producer of medical dermatology products, also in July 2023 filed for bankruptcy protection seeking a sale of all of its assets to Ligand Pharmaceuticals.

As we enter 2024, more biotech firms are filing bankruptcy. Biomaterials and biotechnology company InVivo Therapeutics Corp. on Feb. 1 filed for Chapter 11 protection in the U.S. Bankruptcy Court for the District of Delaware with plans to wind down its operations after two clinical trials for its acute spinal cord injury treatment, Neuro-Spinal Scaffold device, failed to produce necessary results.

Genetics testing company files bankruptcy

Finally, pioneer medical genetics testing company Invitae NVTA on Feb. 13 filed for Chapter 11 protection seeking to safeguard its business, customers, patients and employees, while it pursues a sale of its assets with the support of its senior noteholders.

Invitae filed motions in the U.S. Bankruptcy Court for the District of New Jersey seeking approval of bidding procedures for an auction of its assets, as well as use of its cash collateral, payment of prepetition claims from vendors and other claimants and authorization to pay prepetition wages, salaries, other compensation, reimbursable expenses and to continue employee benefit programs.

The San Francisco-based debtor has not filed a motion seeking approval of debtor-in-possession financing.

Invitae had been managing its costs and restructuring its business out of court over the past 18 months in an effort to solve its financial distress. In July 2022, the company implemented several strategic initiatives, including the replacement of its CEO, a layoff of 1,200 of its employees and deprioritized its hyper focus on growth. The company at the time also provided guidance that lowered expectations through 2024.

“We have been working diligently over the past eighteen months to improve our cash position by realigning our portfolio and focusing on our most impactful business lines,” Invitae CEO Ken Knight said in a statement. “These strategic initiatives have accelerated our path to positive cash flow in order to realize our potential as an industry-leading genetics platform.

“However, we still need to address the company’s debt position through these chapter 11 proceedings. I want to thank our incredibly talented and hard-working employees for their continued focus on our patients and customers,” Knight said. 

Invitae made a name for itself by disrupting hereditary cancer testing. Invitae’s approach relied on low selling prices and high volumes, essentially making clinical-grade genetic testing available to the masses. It quickly became the volume leader.

Invitae made 13 acquisitions between 2019 and 2021

Between 2019 and 2021, the company made 13 acquisitions, increasing the company’s funded debt obligations by $1.5 billion. The acquisitions also increased operating expenses and cash burn significantly and many of the businesses it acquired were precommercial and unprofitable, according to a declaration by CFO Ana Schrank. Inflation and rising interest rates also contributed to the company’s financial problems.

The debtor listed over $535 million in assets and over $1.6 billion in liabilities in its petition.

One of the companies Invitae acquired was ArcherDX in June 2020 for $1.4 billion. The company had developed tools for monitoring individuals with confirmed cancer diagnosis. Unfortunately, ArcherDX/Invitae in May 2023 lost a jury verdict in a patent infringement lawsuit brought by Natera  (NTRA) , which awarded the plaintiff a $19.35 million judgment.

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