Description

This Company is either worth zero, or "a lot more".

Size accordingly. 

Elevator pitch:  You are buying a $2.5m option on a $700m drug that Blackstone really wants -- it is well worth it for them to give this waiter a decent "tip" versus running out without paying the check...

Phase Bio is bankrupt.

On Oct 24, 2022 the Company filed a voluntary petition under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware. Under Section 363 of the U.S. Bankruptcy Code the Company is requiring interested parties to submit binding offers to acquire PhaseBio’s bentracimab program assets, which would be purchased free and clear of liens and interests.

What is Bentracimab?

Bentracimab (PB2452)is a novel reversal agent for the antiplatelet drug ticagrelor.

Ticagrelor is the preferred antiplatelet therapy of the American College of Cardiology, the American Heart Association and the European Society of Cardiology resistant hypertension and potentially other cardio-renal indications.

Please... in English...!

As everybody knows, surgical procedures present many risks for compromised patients (such as those that are on blood thinners like ticagrelor).

During early surgery, a patient (on ticagrelor) can experience significant bleed risk.

Later surgery poses thrombosis risk.

Oral agents like ticagrelor are required to be "washed out" - this is what Phase Bio's drug, Bentracimab, achieves.

Urgent surgery often cannot wait 5 days. There is a higher thrombotic risk during washout.

In Phase 1 and Phase 2a studies, bentracimab was observed to immediately and sustainably reverse ticagrelor inhibition of platelet activation which enables immediate surgery.

Bentracimab is the only specific reversal agent in development for ticagrelor for both surgical and active bleed indications.

Bentracimab clinical data to date have demonstrated both immediate (<5 min) and sustained (~24 hours) reversal of ticagrelor antiplatelet effects.

In short - Bentracimab helps save lives by reversing the effects of blood thinner. It has no natural competitor and was WIDELY anticipated to be approved next year.

Peak sales were estimated to be over $700m.

So What Happened? Why Did Phase File?

In Jan of 2020, Phase Bio entered into a financing and co-development agreement with SFJ Pharma. SFJ Pharmaceuticals is a global drug development company backed by Blackstone Life Sciences and Abingworth.

https://www.globenewswire.com/en/news-release/2020/01/10/1968967/0/en/PhaseBio-Announces-Financing-and-Co-Development-Collaboration-with-SFJ-Pharmaceuticals-for-PB2452.html

Under the terms of the agreement, SFJ has agreed to fund up to $120 million to support the clinical development of PB2452 (Bentracimab) and to assume a central role in global clinical development and regulatory activities for PB2452 (Bentracimab) outside the United States. SFJ will fund up to $90 million of development expenses through the end of 2021 and up to an additional $30 million based on PhaseBio meeting specific, pre-defined clinical milestones for PB2452.

SFJ Pulls Ripcord

In Early Oct, SFJ Pharmaceuticals sued PhaseBio Pharmaceuticals Inc Pennsylvania Eastern District Court to enforce the 2020 development agreement. The suit, brought by Orrick, Herrington & Sutcliffe, claimed that PhaseBio is on the verge of insolvency but has refused to transfer the ongoing Phase 3 clinical trial of bentracimab to the plaintiff.

Basically SFJ asserts it owns all of the data for the Bentracimab.

Phase responded to the suit by putting the company into BK.

Auction begins

On Nov 7, Phase entered into a confidential non-binding agreement with Italy-based Chiesi Farmaceutici SpA’s offer that could be as high as $100 million.

The deal with Chiesi is for $40MM upfront plus $60MM upon regulatory milestones, along with assuming current liabilities.

Chiesi would make a $4MM deposit into escrow, and if approved as the stalking horse bidder, would be entitled to a break-up fee of $2MM and reimbursement of $750k in fees if betracimab is ultimately sold to another buyer.

To continue normal operations through its Chapter 11 proceedings and sale of bentracimab, Phase secured a financing commitment of $15MM from JMB Capital Partners.

So now what?

There are THREE things that can happen here.

First off -- the auction activity is robust.

It was revealed that there are 12 parties under NDA now, with 8 more under LOI.

Under the Chiesi stalking horse bid, $30m of cure claims would be assumed.

Scenarios:

ONE:
SFJ and Phase enter mediation in the coming days and strike a deal. SFJ does not want to see this judge rule on their suit. There is too much risk. The suit by SFJ seems fairly amateurish -- how could they not anticipate that Phase would just put the company into bankruptcy? What could the deal look like?

Maybe Phase gets a royalty on future sales of the drug.
Maybe Phase gets 1-10% of NewCo after a SFJ Pref or Convert

No matter what the scenario - option ONE says Phase equity holders get something... and that something is going to be worth more than the current 50m shares x $0.05c market cap ($2.5m) where Phase currently trades.

TWO:
Phase completes an auction and sale process of its assets by December 2022, and equity holders recoup value via a third part bid.

THREE:
SFJ prevails, takes all of the clinical data, and we are left with nothing.

** Here is why we like our odds of an equity recovery.... **

What incentive does Phase have to settle with SFJ if they are getting ZERO?

If SFJ rolls the dice and lets the judge rule on their suit, they risk losing more to Phase than if they just settle.

POTENTIAL VALUES:

Another scenario that investors have discussed is the idea of a royalty post approval.

Even if Phase were awarded a 2% royalty on future sales of Bentracimab, the equity would be worth a lot more than the current market cap.

Catalyst

Phase and SFJ agree to settle and the equity is given a lifeline.  An equity committee could also be formed here, giving a voice to the common holders.