Argos Therapeutics Files Bankruptcy to Pursue a Sale

 Argos Therapeutics filed for chapter 11 protection in Delaware on Nov. 30th with a proposed buyer in hand. The bankruptcy follows the termination of an unsuccessful phase 3 clinical trial of its most advanced cancer-treatment product. Now, Argos seeks to run a going-concern sale process with Cellscript, LLC as a “stalking horse” buyer.  Argos values Cellscript’s opening bid at $3.8 million.

Who Is Argos Therapeutics?

Argos is an immunotherapy company based in North Carolina. It is publicly traded, with shares trading on the NASDAQ until April 23. After its common stock was de-listed as of April 25, Argos transferred its common stock to the OTCQB Venture Market.

Argos focuses on developing individualized immunotherapies to treat cancer and infectious diseases. The company derives its primary revenue from third-party license agreements and government grants. But the company has been far from profitable, with a net loss of $40.6 million for 2017.

The company built its immunotherapies on its Arcelis® technology platform.

Arcelis is a precision immunotherapy technology that captures the spectrum of mutated and variant antigens that are specific to each patient’s individual disease . . . to overcome immunosuppression by enabling specifically targeted, durable memory T-cells without adjuvants that may be associated with toxicity.

Confused?  Here’s a helpful diagram.

Argos-Arcelis-Platform_AGS-003_Activate-Neo-Immunity.png

Ummm…. Still confused? If you have 15 minutes, Jeff Abbey provides a thorough explanation here.

Practically speaking, a buyer might use the Arcelis platform to treat a range of different cancers and infectious diseases. And according to Argos (notwithstanding its bankruptcy), the platform is valuable because it may circumvent manufacturing and commercialization challenges that have impeded other personalized immunotherapies.

The Proposed Sale to Cellscript

Argos has engaged in an extensive marketing effort to capitalize on its intellectual property, its manufacturing capabilities, and its position as a publicly traded entity.  Ultimately, Cellscript – one of Argos’ largest unsecured creditors – presented a purchase offer. The bid includes $1.675 million in cash, cure costs and assumed liabilities valued at no less than $1.4 million, and the “release” of Cellscript’s $2 million unsecured claim against Argus, valued at a minimum of $700,000.

Argos has proposed a $75,000 breakup fee and a $75,000 expense reimbursement. Initial overbids must total at least $4,095,330, with subsequent overbid increments of at least $100,000.  And it proposes the following sale timeline:

  • Bid deadline: Jan. 16, 2019
  • Auction: Jan. 22, 2019

The court has scheduled the bid procedures motion for hearing on Dec. 20, 2018.

Case Information

Argos is represented by Landis Rath & Cobb as bankruptcy counsel, Wilmer Cutler Pickering Hale and Dorr as special corporate counsel, and SSG Advisors as investment banker. Judge Kevin Carey is presiding over the case (#18-12714).

Mette K.

Promise Healthcare Files For Bankruptcy, Promises Improved Financial Health

Promise Healthcare Group and numerous affiliates filed for Chapter 11 protection Sunday night in Delaware.

What Ails Promise Healthcare?

Promise Healthcare is a Florida-based specialty post-acute care healthcare provider operating several hospitals and skilled nursing facilities across nine states. It operates two short-term acute care hospitals, 14 long-term acute care hospitals and two skilled nursing facilities. According to the company, Promise Healthcare is one of the largest long-term acute care hospital operators in the U.S.

“While I believe that the Debtors’ overall business is fundamentally strong, [Promise Healthcare has] been operating with an unsustainable balance sheet due to current industry dynamics and certain underperforming facilities within [its] portfolio.”  – Andrew Hinkelman, FTI Consulting, Chief Financial Officer

Like many hospital operators that have filed chapter 11 recently, such as ManorCare Health Services, Promise Healthcare has suffered from significant reductions in reimbursement rates from The Centers for Medicare & Medicaid Services. Average reimbursement rates for non-qualifying patients have dropped roughly $41,000 per stay industry wide. Coupled with Promise’s inability to adjust operating cost structures, this has directly impacted profitability.

What Are the Next Steps on the Road to Recovery?

Step 1: Sell Non-Core Assets.

Promise Healthcare has already received  purchase offers for several non-core assets.  Offers in hand, it hopes to complete sales and use the proceeds to pay down secured loans over the next three months.

  • The Silver Lake Facility:  L.A. Downtown Medical Center has offered to purchase Promise Healthcare’s Silver Lake facility section for $84.15 million. The offer will be subjected to overbids in a bankruptcy auction.  A sale closing is planned for January or February of 2019.
  • The St. Alexius Facility: Promise Healthcare has been looking for a buyer for its facility in St. Louis for the past year-and-a-half to two years. However, it has been hindered by the termination of its Medicare program in November, the need for substantial capital improvements, and heavy operating losses.  Despite these challenges, Promise Healthcare is negotiating a stock sale which it hopes to conclude by year end.
  • San Diego Property: Promise Healthcare is also in final negotiations to sell its San Diego property.  It hopes to conclude this sale as well by year end.

Step 2: Obtain Postpetition Financing.

Promise Healthcare has requested $85 million in postpetition financing, including a rollup of its $65 million prepetition asset-based revolving loan facility and a new money commitment of $20 million, with prepetition revolving lender Wells Fargo Bank as agent.

Step 3: Come Up With an Exit Strategy.

Over the next 6 months, Promise Healthcare will search for an exit. That could be a buyer for the business. Or an equity sponsor who will support a reorganization.  Houlihan has already contacted 77 financial and strategic partners and received “several” indications of interest. Ultimately, Promise Healthcare hopes to file a bid procedures motion by the end of the year, with the intention of closing a sale around April 2019.

Prime Clerk is the claims agent. Additional information about the case is available here.

Mette K.