A Medical Device Daily
Luna Innovations (Roanoke, Virginia), a company focusing on sensing and instrumentation solutions and pharmaceutical nanomedicines, reported that it has voluntarily filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Western District of Virginia. The company emphasized that it expects to continue to operate normally to serve customers, develop and manufacture products, and maintain employment at all facilities during the restructuring process.
"The jury verdict in our dispute with Hansen Medical (Mountain View, California) in April [Medical Device Daily, April 23, 2009] obviously presented a very serious potential negative outcome for Luna as well as its creditors, shareholders and other stakeholders," said Kent Murphy, chairman/CEO of Luna. "In the absence of reasonable settlement of that dispute, we believe that today's filing is in the best interests of Luna and our shareholders, creditors and communities, while providing the first step toward securing a future for Luna. We intend to build on our history of innovation and product development, outstanding products, and excellent customer service.
"As previously reported, the jury in our litigation proposed an award to Hansen in excess of $36 million," Murphy added. "Since then, we have filed motions with the court in California to have the award reduced, and Hansen has filed motions to ask the court to increase the award. While we believe we have arguments as to why the award should be significantly reduced, there is no way to predict the outcome of the litigation."
In the verdict of that trial, the jury determined that Luna breached its contract with Hansen as well as misappropriated trade secrets belonging to that company.
As part of its filing for reorganization, Luna is requesting the Virginia court to estimate Hansen's claims in litigation at less than $1.3 million. If that motion is successful before the court, the company believes the proposed reorganization plan would result in creditors receiving 100% of their allowed claims.
"The plan that we proposed and filed today, if confirmed by the court, would pay our creditors on their valid claims and leave our current shareholders in place while allowing us to continue to build upon the recent achievements of this company and the potential of our product pipeline," Murphy said. "It was after long and careful consideration with our board of directors and outside advisors that we concluded this was the right move. I believe that the actions taken today represent the best path for Luna and all of our stakeholders."
Murphy stressed that Luna's business has continued to make progress in recent quarters despite the litigation. "Since the first quarter of 2007, we have grown our revenue base by approximately 20% while reducing our baseline expenses and increasing the efficiency of operations by nearly 20%," he said.
Luna develops products for the healthcare, telecommunications, energy and defense markets. Its products are used to measure, monitor, protect and improve critical processes.
In other restructuring news, Biopure (Cambridge, Massachusetts) reported that it has filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Massachusetts.
Biopure said it will continue to manage and operate its businesses and assets during the pendency of the bankruptcy case, subject to the supervision of the bankruptcy court.
In connection with the filing Biopure entered into an agreement with OPK Biotech for the sale of substantially all of its assets. The sale is subject to customary closing conditions, approval of the bankruptcy court and the conduct of a bankruptcy court supervised auction process in which Biopure will seek competing bids to achieve the highest price possible for its assets.
If the proposed OPK Biotech transaction closes, Biopure said it expects that there will be limited, if any, value for the common stockholders in the bankruptcy liquidation process. Stockholders of a company in Chapter 11 generally receive value only if all claims of the company's secured and unsecured creditors are fully satisfied. Biopure said it expects such claims will be largely satisfied if the proposed OPK Biotech transaction closes on the contemplated schedule.
Biopure develops pharmaceuticals, called oxygen therapeutics, that are intravenously administered to deliver oxygen to the body's tissues.