The flourishing capital markets of recent years prompted a record-breaking rush of biopharma firms to complete IPOs on U.S. markets. But the industry's stock slide, beginning last year on presidential campaign rhetoric, has created a harsh reality for some firms trying to raise money in the last several months, with two biopharmas, Bind Therapeutics Inc. and Nephrogenex Inc., disclosing bankruptcy filings Monday.

Both companies filed for Chapter 11 – not as dire as the all-but-certain equity-wiping of Chapter 7 – though investors predictably began bailing out. Shares of Bind (NASDAQ:BIND) ended the day at 37 cents, down $1.07, or 73.8 percent, while shares of Nephrogenex (NASDAQ:NRX) fell 29 cents, or 63 percent, to close Monday at 17 cents.

From there, however, the two companies' stories diverge. Just like Tolstoy's unhappy families, each firm that files Chapter 11 arrives at that eventuality in its own way.

BIND FACING REPAYMENT DEMAND

For Bind, a bankruptcy filing seems almost improbable. Founded in 2006, the Cambridge, Mass.-based firm emerged with a nanoparticle-based platform technology developed by founders Robert Langer, of Massachusetts Institute of Technology, and Omid Farokhzad, of Harvard Medical School. Dubbed Accurins, the particles were designed to encapsulate drugs and direct the payload to specific disease cells. The company attracted more than $85 million in venture funding – investors included Polaris Venture Partners, Flagship Ventures, Rusnano, DHK Investments LLC, Arch Venture Fund and Nanodimension – before going public in 2013, selling 4.7 million shares at $15 apiece for gross proceeds of $70.5 million. (See BioWorld Today, Sept. 23, 2013.)

Bind also has inked a handful of big pharma deals with the likes of Pfizer Inc. and Amgen Inc., though those still remain early stage and have yet to yield the big milestone-based payouts. (See BioWorld Today, Jan. 9, 2013, and April 4, 2013.)

In developing its own in-house R&D strategy, however, the firm appears to have taken a misstep. Opting for a less-risky development route, company execs decided first to use the Accurin technology to formulate nanoparticle versions of existing drugs, with lead product, BIND-014, comprising a docetaxel-containing Accurin targeting prostate-specific membrane antigen. (See BioWorld Today, Nov. 28, 2007.)

Early data have been good but not great – the phase II Insite 1 trial met its primary endpoint of six-week disease control rate in patients with advanced non-small-cell lung cancer of squamous histology – but a new formulation of an old drug seemed unlikely to make a big splash. "It's been very rare that those approaches have shown meaningful improvement in efficacy for patients," CEO Andrew Hirsch told BioWorld Today a month ago, as he outlined plans to reduce the firm's work force by 38 percent – to 61 employees – and shifting its development to Accurins ferrying novel payloads. It will now seek a partner for BIND-014. (See BioWorld Today, April 7, 2016.)

Hirsch also noted in April the abysmal capital markets, which prevented Bind from adding much-needed capital to its balance sheet. (Biopharmas collectively raised a mere $1.7 billion in public offerings during the first quarter, down a whopping 84 percent from the same period in 2015, according to BioWorld Insight.)

As of Dec. 31, the firm had about $37 million in cash, equivalents and short-term investments. It also faced an accelerated repayment demand from lender Hercules Technology III LP, which had extended Bind a $15 million loan. According to an 8-K filing, Bind had been unsuccessful is negotiating with Hercules, and, as of May 1, the principal amount outstanding under the credit facility was $13.2 million.

Filing for Chapter 11, Hirsch said, "minimizes the impact from the recent demand" by Hercules, noting that the firm's current assets exceed the loan and Bind is adhering to regularly scheduled repayment plans.

Bind also will review strategic alternatives, which could include raising additional capital, inking new partnerships, or licensing, selling or otherwise divesting its technologies.

"Through this process, we expect to be able to maintain ongoing financing activities and collaborator obligations while moving our R&D initiatives and pipeline forward," Hirsch said.

NEPHROGENEX TO SELL ASSETS

Though it also stated its plans to continue pursuing operations through the bankruptcy process, Nephrogenex has already decided to seek an asset sale, according to its SEC filing. Its Chapter 11 move is intended in part to seek relief from the Bankruptcy Court in order to pay its employees.

Following a "rigorous assessment," the Raleigh, N.C.-based firm said the bankruptcy process "represents the best possible solution for Nephrogenex, taking into account our financial situation," said Richard Markham, chairman.

As with Bind, the capital markets have not proved lucrative for Nephrogenex. Since pricing its IPO in 2014 – selling 3.1 million shares priced at $12 apiece for gross proceeds of $37.2 million, the firm has managed only to scrape together small fundraisings, including a $6.6 million public offering in July 2015 and a $5.5 million private placement in November.

In February, Nephrogenex's board authorized a roughly 50 percent reduction in headcount – employment of CEO Pierre Legault and Chief Scientific Officer Jaikrishna Patel was terminated two months later – and hit the pause button on the clinical program for lead drug Pyridorin, in pivotal testing for diabetic nephropathy. "Management has indicated a need for a total of roughly $25 [million to] $30 [million] in capital to complete the Pyridorin pivotal program," wrote Rodman & Renshaw analyst Raghuram Selvaraju, in an April 15 research note, in which he issued a "neutral" rating on the stock. He cited the "current market environment, the fact that the firm did not have confidence in its ability to raise the capital necessary to finish the Pyridorin phase III program itself without an unacceptable degree of dilution to current shareholders, and what we believe is a low likelihood of the firm attracting strategic partners to invest in completion of the Pyridorin program."

Nephrogenex, which was founded in 2004, licensed Pyridorin in 2006 from Biostratum Inc., which had taken the product through phase II testing before running out of money. Attracting investors had been difficult because the drug's active ingredient, pyridoxamine, had been sold for a time over the counter as a nutritional supplement. The FDA, however, ruled it a drug in 2009.

Nephrogenex launched the pivotal program in 2014. Pyridorin, which is designed to work by inhibiting formation of harmful advanced glycation-end products, is being tested on the primary endpoint of time to a 50 percent increase in serum creatinine levels, or end-stage renal disease. (See BioWorld Today, July 20, 2014.)

Nephrogenex said it has repaid in full the outstanding secured loan obligation, totaling $6.3 million, leaving it with about $11.5 million in cash, as of Feb. 23.