Garnet BioTherapeutics, Inc. is a development stage biopharmaceutical company that developed a unique cellular therapy with the potential to significantly improve upon the treatment of numerous diseases. This therapy, comprised of human adult bone marrow-derived somatic cells, is designed to supplement and stimulate the body’s natural repair mechanism when it is overwhelmed by illness or injury. By promoting the repair and regeneration of damaged tissue, this investigational treatment may also have the potential to reverse or significantly modify the course of certain diseases, unlike existing therapies which may only slow or halt the progression of the disease.
As a development stage business, Garnet had no commercial revenues. Therefore, the continuation of Garnet’s business was wholly dependent on continuing rounds of investor funds. In the middle of 2010, the Company commenced discussions with potential investors for additional funding in support of four business initiatives:
- Expanded clinical trial for efficacy in healing of incisional scars;
- Extension of the therapy technology to additional, less expensive to develop applications, i.e. a cellular ‘device’ prototype for tendon repair and healing;
- Further development of an automated, improved method of cell production that lowers manufacturing costs and provides quicker timeframes for production; and
- In the above automated cell production process, equine cells were used to evaluate improvements in the cell manufacturing process (so as to not waste human cells). Because the equine cells proved to be so prolific in the manufacturing optimization studies, the Company began to investigate veterinary opportunities for use of these cells for animal injuries.
In early October, 2010, Garnet’s potential investor group expressed discord with the Garnet’s future business direction. The proposed investment did not close, leading to a severe liquidity crisis. Employees were furloughed while Garnet’s management searched for alternative sources of financing.
Garnet filed for bankruptcy protection pursuant to Chapter 11 of the Bankruptcy Code on December, 28, 2010 to give it the opportunity to restructure its debt and capital structure. Sullivan • Hazeltine • Allinson LLC was lead counsel to Garnet in its bankruptcy proceeding.
On March 3, 2011, Garnet filed its plan of reorganization and disclosure statement. The plan provided for a new equity infusion by certain of the existing shareholders. The Bankruptcy Court entered an order approving Garnet’s plan of reorganization on May 13, 2011 and Garnet emerged from bankruptcy on May 31, 2011, just over 5 months after Garnet’s bankruptcy filing. The Bankruptcy Court entered a final decree closing Garnet’s bankruptcy case on September 26, 2011.