Tucson-based biotech firm HTG Molecular Diagnostics has filed for Chapter 11 bankruptcy protection, with plans to continue operations as it works out a plan to pay its debts.
The company, which developed a proprietary platform to rapidly develop molecular drug compounds, plans to exit that business to focus on its own development of new drugs to treat cancer and other diseases, according to bankruptcy filings.
In a bankruptcy petition filed June 5 in Delaware, HTG’s corporate domicile, the company listed assets totaling about $6.7 million and debts of about $9 million.
HTG, which was founded in 1997 and went public in 2015, was delisted from the Nasdaq Stock Exchange on Thursday.
The company’s stock has traded as high as $24 per share in the past year but finished at 51 cents on Wednesday. For 2022, HTG posted a net loss of $21.6 million on revenue of $6.4 million.
Under Chapter 11 of the federal bankruptcy code, a debtor is protected from legal action while it works out a plan to reorganize and pay off creditors.
Among HTG’s major secured debts, HTG owes about $2.7 million on a loan originally funded by the failed Silicon Valley Bank, now owned by successor First Citizens Bank, according to a bankruptcy declaration filed by Shaun McMeans, senior vice president and chief financial officer of HTG.
HTG said in its filing that it does not expect to have money available to pay about $6.5 million in debts owed to unsecured creditors — including vendors and other creditors whose debts are not secured by collateral.
The company’s biggest unsecured creditor is NuvoGen Research, a Tucson-based company that sold HTG cancer-testing technology in 2001. HTG says it still owes NuvoGen about $3.7 million from the $15 million deal.
Company officials could not be reached for comment, and the attorney representing HTG in the bankruptcy proceeding did not immediately respond to the Arizona Daily Star’s queries.
McMeans said in his filing that the company plans to move forward with developing its own prospective drug compounds with a new drug-discovery “engine” that combines the company’s RNA-based molecular profiling system with artificial intelligence, developed in a “stealth” effort that began when COVID-19 shut down many of its research customers in 2020.
The company, which has its longtime headquarters and labs on East Global Loop on Tucson’s south side, has slashed its workforce from 88 employees last year to 15 including scientists who will continue to focus on developing new drug targets, McMeans said.
McMeans said HTG’s new drug-discovery system has already identified two promising drug targets for treatment of cancer and neurodegenerative diseases, including a drug target for a type of leukemia that could be ready for preclinical development by next year.
In the bankruptcy case, a judge has issued orders requiring utilities to continue service to HTG and allowing HTG to use its existing cash-management system.
Bankruptcy Judge J. Kate Stickles also issued a critical interim order that allows the company to temporarily use cash and equivalents — so-called cash collateral — to fund continued operations.
A hearing is scheduled for Thursday, June 15 in the Delaware court to determine if the company may use cash collateral going forward, and secured creditors may seek measures to protect their interests.
First Citizens Bank filed an objection Wednesday to the company’s use of cash collateral, saying it wasn’t advised of the bankruptcy before it was filed and doubting that the company can arrange financing to stay afloat.
The company now known as HTG Molecular Diagnostics was founded in 1997 as High Throughput Genomics Inc. by Bruce Seligmann, who had come to Tucson to head research at Selectide Corp., a University of Arizona spinoff. Selectide was later acquired and formed the foundation for Sanofi’s former drug-chemistry center in Oro Valley, which was later sold off and closed.
A scientist at HTG Molecular Diagnostics works with one of the company's molecular-profiling systems at the company's Tucson headquarters in 2015.
