Unable to consummate a merger with Elitech of France that was announced last year, San Diego’s Nanogen says it has filed for Chapter 11 bankruptcy and plans instead to sell its assets to Elitech for $25.7 million.

Nanogen, which specializes in molecular diagnostics kits and reagents for rapid, point-of-care, diagnostic tests, revealed its merger plans with Paris-based Elitech last August. The deal was structured as a reverse merger, allowing shares of Elitech, which sells chemistry and microbiology-based diagnostics, to be traded on the Nasdaq exchange.

But in January, the companies said they were exploring alternatives to the merger. Nanotech and Elitech explained that market conditions had made it unlikely they would be able to secure needed working capital financing by March 31, which was among the terms set in the merger agreement.

In a statement yesterday, Nanogen says “despite extensive and thorough efforts” by the company and its advisors, Nanogen was unable to secure sufficient working capital to service its debt and fund its operations. Nanogen says it will not have sufficient proceeds from its packaged bankruptcy deal to permit distributions of cash or other property to shareholders, unless it can sell its assets through a court-supervised bankruptcy auction for significantly more than $25.7 million.

Nanogen said it plans to continue to operate under the bankruptcy court’s supervision until its asset sale is completed. The biotech was founded in 1993 by Howard Birndorf, a prominent figure in San Diego’s biotech industry.

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Last night we reported that Mansfield, MA-based Innovative Spinal Technologies, a maker of implants to correct degenerative spinal disorders, had gone dark—the company’s website was down and phone calls were going unanswered. A former employee who recently left the company now tells Xconomy that IST shut its doors on Friday, filed for bankruptcy protection, and let the last of its employees go after a planned sale of the seven-year-old startup to another medical device company fell through.

The source identified the potential buyer as Biomet Spine of Parsippany, NJ. IST was “in the process of selling” but Biomet backed out for unknown reasons, the source says. “They had no more options and were out of money,” hence Friday’s closure.

If all this proves right, IST used up almost $75 million in venture and private equity funding before its demise. That funding included a $6.2 million Series A round raised shortly after the company was spun out by the Texas Back Institute in 2002; a $39 million Series B round in 2005, the same year the company moved from Plano, TX, to Mansfield; an $18 million Series C round last September; and a previously undisclosed $10 million venture debt deal.

Participants in IST’s 2005 Series B round included Boston-based MPM Capital and New York-based Orbimed Advisors. We’ve contacted both firms for comment on IST’s shutdown, with no reply as of this writing. We have also been unable to locate a bankruptcy filing for Innovative Spinal Technologies in online indexes of court documents.

The former employee we spoke with, who continues to work in the medical industry and therefore requested anonymity, says the company shed staffers throughout 2008 in an effort to cut costs. After peaking at over 100 employees in 2007, the company was down to 50 employees by March 2008, 30 by May, and 20 by the fall, the source says, and only about 10 employees remained at IST by last week.

The source attributes IST’s failure mainly to poor management decisions, rather than difficult business conditions or any lack of fundamental demand for its products, which were designed to help people with damaged intervertebral disks by fusing or stabilizing their spinal segments.

“If you look at the spine market, it’s a growing market,” the source says. “There are many thriving companies. The problem was that we were not one of them.”

The company, which had several FDA-approved spinal products on the market, earned only about $5 million in revenues in 2007-2008, according to the source. That was partly a result of problems shifting from an internal sales force to an outside distributor, the source says.

The source also says the company suffered from high management turnover. “Starting in March of 2007, we lost our VP of sales, then one every month or two, until every senior manager had turned over.” To the source, at least, that was an indication of dissatisfaction or difficulty with … Next Page »

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Woburn, MA-based Demandware, which offers an on-demand e-commerce platform for online retailers, has acquired all of the remaining assets of N2N, a competing e-commerce startup formerly based in Cambridge, MA, that shut down at the end of 2007 after raising $30 million in venture funding from General Catalyst Partners and other investors. Demandware won the assets for an undisclosed amount in a sealed-bid auction that was completed May 2, according to an announcement today from attorneys for N2N’s creditors.

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Lucid Commerce, a Seattle-based provider of on-demand business intelligence for direct marketers, announced today that it has raised $2.5 million in Series A funding. The round was led by Kirkland, WA-based OVP Venture Partners. Lucid said the funding will be used to add capacity and scale the company’s operations.

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