Bids under seal Credit: Mark Wragg/istockphoto

On December 8, sphingosine 1 phosphate receptor (S1P1) agonists, including preclinical and toxicology data, came under the hammer in a sealed bid auction. The small molecules on offer were generated by Lexington, Massachusetts–based EPIX Pharmaceuticals in collaboration with Amgen of Thousand Oaks, California. Earlier, EPIX was forced to shut down operations due to lack of funds. Rather than enter a formal bankruptcy proceeding, the company assigned the S1P1 agonists along with its other assets to Joseph Finn Jr., managing partner at accounting firm Finn, Warnke & Gayton, of Wellesley Hills, Massachusetts, to be offered in a bidding sale. The procedure, available in Massachusetts and other states including California, is well regarded by troubled biotechs and their creditors because it enables companies to quickly wind down operations. For instance, Source Precision Medicine of Boulder, Colorado, and Woburn, Massachusetts–based Prospect Therapeutics went through such auctions in the last few years. The process of assigning assets, finding a buyer, vetting creditors and distributing the proceeds can be wrapped up in six months, whereas chapter 7 bankruptcies typically take a year or longer. Finn requests sealed bids, which is faster than an open auction where bidders go back and forth trying to top one another as seen in chapter 7 cases. Typically 50 to 60 companies sign confidentiality agreements with about 10% of those actually making a bid. It is difficult to know whether the one-shot bid process results in higher values. Bids sometimes come in within $100,000 of each other suggesting that's the true value of the asset, although other times Finn said the creditors “catch lightning in a bottle” with one bid substantially higher than the rest. Perhaps more important than speed, the assignment process allows company founders to see where the assets they slaved to develop are headed. “I try to make the process of winding up the company one that gives them closure of their life's work,” Finn said.