Commonwealth Biotechnologies Inc., a local research and development firm founded nearly 20 years ago by four Virginia Commonwealth University scientists, has filed for Chapter 11 bankruptcy protection.
The company was the first business to occupy space in the Virginia Biotechnology Research Park in downtown Richmond in 1994. In 1999, two years after it sold stock publicly, Commonwealth Biotechnologies moved to a new headquarters and laboratory building in Chesterfield County.
Over the years, it has provided research services to the biotech industry and completed several mergers. But after reporting millions of dollars in annual net losses since 2006, the company announced plans last year to divest its assets, pay off its debts and seek a merger partner.
On Thursday, however, the company filed for bankruptcy court protection to shield itself from creditors and to stop an auction of its building on Biotech Drive in Chesterfield that had been scheduled to be sold that day. The company had defaulted on a $1.9 million loan.
Richard J. Freer, Commonwealth Biotechnologies' CEO and one of its founders, said Friday that the bankruptcy filing was necessary because of "the confluence of timing pressures and the actions of secured creditors seeking to collect on debt owed."
Yet the company still wants to complete its plan to sell its assets, pay off its debts and find a merger partner, he said.
"While bankruptcy sometimes carries a negative connotation, the company believes this is the best way for the company to satisfy all debt, not just secured debt," Freer said in a statement. "Our ultimate goal remains unchanged from previous communications to the market - that is, to emerge from this filing debt-free with the ability to return shareholder value as well."
Selling its assets would make Commonwealth Biotechnologies a shell company, which would then seek to complete a "reverse merger." That would involve finding a privately owned company looking to become public by acquiring a shell business with stock that is already publicly traded. The goal would be for Commonwealth Biotechnologies shareholders to retain an equity interest in the new firm.
The process could take 12 to 18 months, the company said.
In 2009, Commonwealth Biotechnologies sold two operating units, CBI Services and Fairfax Identity Laboratories, to Bostwick Laboratories Inc., a Henrico County-based clinical testing company. Bostwick also signed a 10-year lease agreement for Commonwealth Biotechnologies' laboratories in Chesterfield.
In its initial bankruptcy court filings, Commonwealth Biotechnologies said it had total assets of $9.8 million and liabilities of $4.9 million.
Its quarterly earnings reports through September 2010 said it was struggling to generate cash. The report filed with the Securities and Exchange Commission said Commonwealth Biotechnologies lost $238,000 in the three months ending Sept. 30 and had a loss of $711,000 for the first nine months of 2010.
Among the assets the company wants to sell is its 32,000-square-foot building at 601 Biotech Drive. The company's only remaining operating unit is a drug discovery and research business in Australia, Mimotopes Pty Ltd.
It has only a few employees in the Richmond area, including part-time consultants.
While it is unclear what a sale of the remaining assets would generate, Freer said Friday that the company would seek to raise enough to cover its debts and to pay its creditors.
The company's 20 largest unsecured creditors are owed between $6,451 and $90,232 each, according to court documents.
Commonwealth Biotechnologies shares, which trade over-the-counter, traded at about 3 cents Friday.
October 28, 2010 09:00 AM Eastern Time
Commonwealth Biotechnologies, Inc. Announces Signing of Share Purchase Agreement to Sell Mimotopes Pty Ltd to Leadtec Systems Australia Pty Ltd.
RICHMOND, Va.--(BUSINESS WIRE)--Commonwealth Biotechnologies, Inc. ("CBI") (CBTE.PK) is pleased to announce that it has signed a Share Purchase Agreement to sell its Australian subsidiary, Mimotopes Pty Ltd to Leadtec Systems Australia Pty Ltd. ("Leadtec") for a cash consideration of $950,000 and an earn out potential of $100,000 if Mimotopes reaches certain milestone earnings in 2011. The transaction will require shareholder approval and is expected to close in late 2010 or early 2011.
"Australia is renowned for its vibrant life sciences research and education industry and we are excited about the opportunity to leverage Mimotopes' 20 years of expertise and international reputation in this sector."
The purchaser of the business operates a complementary business in the life sciences services sector, Life Research Pty Ltd. ("Life Research"). Life Research offers custom antibody services and catalogue antibodies, proteins and kits to the research community and pharmaceutical industries.
Dr. Richard J. Freer, CEO of CBI said, "The sale of this business unit is the first step in the company's publicly announced strategy to divest all assets and generate a clean, debt-free shell for which we will seek a growth oriented reverse merger partner." Freer added, "We are also pleased that this sale places Mimotopes in a circumstance whereby it can grow and prosper."
Mr. Scott Needham, Managing Director of Leadtec and CEO of Life Research said, "Australia is renowned for its vibrant life sciences research and education industry and we are excited about the opportunity to leverage Mimotopes' 20 years of expertise and international reputation in this sector.
"Since its inception in 2009, Life Research has achieved strong growth and gained substantial support from the Australian research community. Mimotopes' high quality research products and services provide an excellent offering for the global market, and we look forward to supporting the renewed growth of the business."