Joseph Finn on the ABCs of Biotech Liquidation: Beware of Collusion!
Companies in innovation sectors often have multiple lives. I followed, for example, the rebirth of Franklin, MA, biotech firm Sontra Medical, which laid off its entire staff to cut expenses in late 2006, and was back in business in less than a year with new investors and a new name, Echo Therapeutics. But when the last life ends, someone must salvage whatever’s still valuable from the remains. The man many struggling Boston-area firms—including former Lexington, MA, biotech firm ActivBiotics and e-commerce software developer N2N Commerce, of Cambridge, MA—have been calling on lately for this difficult job is Wellesley, MA, accountant Joseph Finn.
Joseph Finn is part numbers cruncher, part salesman, and part auctioneer (but he says not to confuse him with the totally unrelated Newton, MA, auctioning firm Joseph Finn Company). Yesterday I caught up with Finn while he was driving to a meeting with a potential bidder for the intellectual property of newly defunct biotech Spherics, of Mansfield, MA. He had been on the Spherics case for three weeks, and he had already attracted eight to 10 potential buyers.
Finn specializes in a liquidation alternative to bankruptcy called assignment for the benefit of creditors, or ABC. What’s that? “I do a sealed-bid auction. I don’t do an open, in-the-room auction,” he says. “I found that you get a better price in the long run. And also you’re able to control whether there is collusion among potential bidders. You always have to worry about collusion.”
Finn says he got the Spherics job because of his experience with ActivBiotics, which threw in the towel after its lead drug, rifalazil, fell short in clinical trials to treat peripheral arterial disease last year. He says he auctioned the rifalazil IP to the former CEO of ActivBiotics, Chalom Sayada, who plans to renew development of the antibiotic drug with a new firm called ActivBiotics Pharma, based in Atlanta. Other ActivBiotics compounds were sold to Inotek Pharmaceuticals in Beverly, MA. The total take from the auction was of $3.5 million. “That was a good price,” he says.
In a less lucrative sale, albeit in a different industry, the assets of n2N were auctioned recently for much less, according to Finn. “The software price I got was disappointing on n2N,” he laments. (Both auctions brought just fractions of the many millions of dollars in venture capital n2N and ActivBiotics raised over the years.)
Finn was unable to venture to guess the sum he would fetch for the assets of Spherics, which had been in mid-stage clinical trials for an extended-release version of Johnson & Johnson’s epilepsy and migraine drug, Topamax. Yet he was more certain of his own value to companies in financial distress.
“I’m sort of one-of-a-kind,” he says. “That’s why I’m so busy.”