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Zymergen Inc. – Boston-Based Ginkgo Bioworks Puts Onetime Biotech Darling ($3bn Market Cap After April 2021 IPO) into Bankruptcy; Will Look to Keep IP Assets Now Valued at $5.0mn Plus Liabilities Relating Employee Severance Costs

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[Just filed. Developing story.] October 3, 2023 – Zymergen Inc. and three affiliated debtors (together “Zymergen” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of delaware, lead case No. 23-11661 (Judge Karen B. Owens). The Debtors, "a biotech company that designs and produces molecules, microbes and materials for diverse end markets," are represented by Curtis S. Miller of Morris, Nichols, Arsht & Tunnell LLP. The Debtors' lead Petition does not list any further adviser appointments.

The Debtors’ lead petition notes between 200 and 1,000 creditors; estimated assets between $100.0mn and $500.0mn; and estimated liabilities between $100.0mn and $500.0mn. Documents filed with the Court list the Debtors’ three largest unsecured creditors as: (i) Wilmer, Cutler Pickering ($2.1mn legal fees claim), (ii) BRE-BMR 5300 Chiron LP ($1.8mn lease claim) and (iii) DPR Construction ($864k trade claim). Other law firms exposed include Morgan Lewis & Bockius LLP ($823k), Morrison Foerster ($436k), Ehrlich & Craig LLP ($69k) and Cooley LLP (escaping with just $5k).

Zymergen is a wholly-owned subsidiary of Ginkgo Bioworks Holdings, Inc. (NYSE: DNA, “Ginkgo”), with Ginkco having taken Zymergen private in October 2022. Ginkgo noted then as to price: "As consideration for the transaction, we delivered to Zymergen common stockholders 99,422,907 shares of Ginkgo Class A common stock for an aggregate purchase price of $231.8 million."

That acquisition followed a much-hyped April 2021 IPO which saw Zymergen debut with a @$3.0bn market cap. That froth was short-lived, however, with an SEC filing four months later (8-K and press release here) noting Zymergen had become aware "of issues with its commercial product pipeline that will impact the Company’s delivery timeline and revenue projections. Accordingly, the Company no longer expects product revenue in 2021, and expects product revenue to be immaterial in 2022." The announcement also noted that CEO (and co-founder) "[Josh] Hoffman will step down as CEO and as a member of the Board, effective immediately." 

A year on from its October 2022 acquisition, Ginkgo appears to be calling it quits, with Ginkgo now proposing to sell certain Zymergen IP (spinning off to itself) for $5.0mn and liabilities capped at $77.0mn; the balance of the Zymergen business presumably headed for a wind-down (those liabilities to include "compensation and severance costs").

A Ginkgo October 3rd 8-K provides: "On October 3, 2023, Zymergen Inc. ('Zymergen'), a wholly-owned subsidiary of Ginkgo Bioworks Holdings, Inc. (“Ginkgo”), and certain of its subsidiaries, filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware. Neither Ginkgo nor any of its other subsidiaries are filing for bankruptcy protection, and Ginkgo and its other subsidiaries will continue to operate their businesses as usual. Ginkgo ended the second quarter of 2023 with $1.1 billion of cash and cash equivalents and remains well capitalized to execute on its long-term strategy.

At the time Ginkgo acquired Zymergen in October 2022 (the “Acquisition”), Ginkgo was aware of Zymergen’s significant contingent liabilities, and Zymergen was always operated as a distinct legal entity, separate and apart from Ginkgo. Shortly after the Acquisition, Ginkgo entered into an arms-length non-exclusive license with Zymergen with respect to Zymergen’s intellectual property, including its databases, automation, and software capabilities. Zymergen’s bankruptcy process will not impact this non-exclusive license, and Ginkgo’s rights under this license will not be affected. 

In connection with Zymergen’s bankruptcy filing, on October 3, 2023, Ginkgo entered into an asset purchase agreement with Zymergen as the stalking horse bidder under Section 363 of the U.S. Bankruptcy Code to acquire exclusive rights to substantially all of Zymergen’s intellectual property assets and certain other assets that are relevant to Ginkgo’s business going forward. Ginkgo’s bid includes a $5 million cash component and assumption of up to $77 million of potential future liabilities, including a lease (currently included in Ginkgo’s consolidated financial statements) and employee compensation and severance costs.

About the Debtors

According to the Debtors: "Zymergen is a biotech company that designs and produces molecules, microbes and materials for diverse end markets. Zymergen partners with nature to make better products, a better way, for a better world."

About Ginkgo

According to Ginkgo: "Headquartered in Boston, Ginkgo Bioworks is building a platform to enable customers to program cells as easily as we can program computers. Our cell programming platform enables the growth of biotechnology across diverse markets, from food to fragrance to pharmaceuticals. Ginkgo has also actively supported a number of COVID-19 response efforts, including community testing, epidemiological tracing, vaccine development and therapeutics discovery."

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The post Zymergen Inc. – Boston-Based Ginkgo Bioworks Puts Onetime Biotech Darling ($3bn Market Cap After April 2021 IPO) into Bankruptcy; Will Look to Keep IP Assets Now Valued at $5.0mn Plus Liabilities Relating Employee Severance Costs appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.


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