Melinta files for bankruptcy, agrees to acquisition by lenders

Struggling antibiotics maker Melinta Therapeutics, one of New Haven’s earliest biotechnology companies, filed for Chapter 11 bankruptcy on Friday as part of a plan to sell the company to its principal lenders.

Melinta said it has reached an agreement to sell the nearly 20-year-old company to its senior credit facility lenders, Deerfield Private Design Fund III and Deerfield Private Design Fund IV, which are affiliated with New York-based health care hedge fund firm Deerfield Management Co.  

Under the agreement, the lenders would acquire Melinta by exchanging $140 million of secured claims for 100 percent of equity, to be issued through a pre-negotiated Chapter 11 reorganization plan. 

“We are confident that this process will secure new ownership of the business with the financial resources to support the company’s antibiotics portfolio and ensure these potentially life-saving products continue to get to patients in need,” interim CEO Jennifer Sanfilippo said in a statement. 

Friday’s filing was not unexpected. New Haven BIZ first reported Melinta was considering Chapter 11 bankruptcy last month after it warned investors in a third-quarter earnings report that it was in danger of defaulting on credit agreements.

“While we have successfully conserved cash and enhanced revenue over the past several quarters, we nevertheless anticipate challenges in meeting the company’s obligations, including near-term compliance with certain covenants,” Sanfilippo reiterated Friday in explaining the reason for the bankruptcy. 

Now headquartered in Morristown, N.J., the company was founded in New Haven as Rib-X Pharmaceuticals in 2000 by Yale scientists, including the late Nobel Prize-winning biophysicist Thomas Steitz.

The bankruptcy caps a difficult year for the drugmaker, which implemented a drastic downsizing in late 2018 and shuttered its flagship New Haven office at 300 George St. in March as it struggled with low sales of its newly approved MRSA (methicillin resistant staphylococcus aureus) antibiotic Baxdela.

Melinta said it will continue to operate the business during the bankruptcy court proceedings. However, in a U.S. Securities & Exchange Commission filing Friday the company said it will lay off an additional 60 employees, mostly related to sales of Baxdela, by Feb. 14, 2020, to maximize its value for the sale. 

The company hopes to complete the sale by the end of the first quarter of 2020. However, it said the transaction remains subject to a court-supervised competitive process, which could result in other offers.

“Melinta and its advisors will evaluate competing bids that may be submitted. . .to ensure the company receives the highest and best offer for its business,” the company said. 

Melinta officials could not immediately be reached for further comment. 

The Infectious Diseases Society of America issued a statement on the bankruptcy Friday, saying it underscores the need for government incentives to ensure the availability of effective antibiotics. 

“Melinta is the second antibiotic company this year forced into bankruptcy because it could not make a sufficient return on its investment in medicines that are urgently needed to protect individual health and national security,” the organization said.

Melinta’s stock plunged 67 percent to 48 cents on the news, down from Thursday’s closing price of $1.49. It was trading at 68 cents as of early Friday afternoon.