Durham dermatology company files for bankruptcy and reaches deal for sale
Durham pharmaceutical company Novan filed for bankruptcy Monday as the publicly traded company prepares to be acquired.
“They’re using the bankruptcy process as a way to sell their company,” said Jim White, a bankruptcy attorney at JC White Law Group in Chapel Hill. “That is not uncommon in Chapter 11.”
Founded in 2006 based on research done at UNC-Chapel Hill, Novan develops dermatology treatments for skin conditions like acne and fungus. It entered this year with 90 employees, according to its most recent annual financial report.
For now, Novan executives will continue to operate the company under the bankruptcy court’s jurisdiction. But a sale is looming.
Prior to filing for Chapter 11, Novan entered what is called a stalking horse asset purchase agreement with San Diego-based Ligand Pharmaceuticals. A stalking horse agreement is an initial bid on the assets of a bankrupt company.
Ligand offered $15 million for Novan’s assets. The California company has also agreed to loan Novan another $15 million, which adds a premium cost if other firms wish to bid.
“Ligand has a proven track record of finding and investing in attractive assets that are in special situations and maximizing value,” its CEO, Todd Davis, said in a statement Monday. Ligand COO and President Matt Korenberg added that the company is particularly bullish about a berdazimer gel Novan has been developing to treat a highly contagious skin disease.
Company executives expect the deal to be completed within the next few months. The sale is subject to the approval of a bankruptcy court in Delaware, where Novan filed for Chapter 11. .
“This seems like the likely exit strategy (for Novan),” said Ed Boltz, a bankruptcy attorney at the Law Offices of John T. Orcutt in Durham.
The rise and fall of Novan
Novan was formed by UNC chemistry professor Mark Schoenfisch and one of his graduate students, Nathan Stasko. The company had raised $113 million before going public in 2016. Its early deals included landing a $7.8 million contract from the U.S. Department of Health and Human Services in 2013 to produce a treatment for thermal burns.
Novan’s stock price peaked in 2016 at more than $280 a share. It has since plummeted to less than 50 cents.
According to its annual financial reports to the U.S. Securities and Exchange Commission, Novan hired aggressively last year, as its workforce went from 29 full-time employees at the end of 2021 to 89 full-time employees at the end of 2022.
Though previously based in Morrisville, Novan’s current headquarters are just outside Research Triangle Park in Durham.
