KaloBios Pharmaceuticals Files for Bankruptcy

KaloBios Pharmaceuticals, which was rescued by Martin Shkreli last month from liquidation, has filed for bankruptcy after the CEO was arrested and knocked the brief revival of the biotech company off course.

KaloBios filed for reorganization under Chapter 11 Tuesday according to an official statement on the U.S. Bankruptcy Court website in Wilmington, Delaware.

The company, based in San Francisco, is planning to use its bankruptcy to buy time to implement a restructuring plan, said court papers.

The company announced last week that its stock was to be removed by Nasdaq on Wednesday citing the December 17 arrest of Shkreli on charges of securities fraud related to an unrelated company and the failure of KaloBios to file its financial report for the quarter.

Shkreli has already been fired by KaloBios following his arrest.

Court papers showed that KaloBios has perceived a threat that, absent a filing for bankruptcy and the imposition of an automatic stay, a substantial portion of its assets would be at risk.

It cited the delisting notice from Nasdaq, the arrest of Shkreli and the departures of its CFO, two members of its board and its accounting firm as the challenges that disrupted its ability to be able to restructure outside court.

The petition that was filed on Tuesday lists assets of $8.37 million and debt of $1.94 billion. The largest creditors of KaloBios that are unsecured include Ernst & Young and the University of Miami.

The goal in the restructuring is allowing the company to focus its limited resources on development of lenzilumab its experimental drug for leukemia.

In a prepared statement, KaloBios said that it appealed the Nasdaq delisting and a hearing was scheduled for February 25.

Trading of shares of company stock was halted shortly after the arrest of Shkreli, KaloBios has only two of its directors left after the resignations of Shkreli, Tom Fernandez, Marek Biestek and Tony Chase.

The stock plunged by 53% in early December 17 trading in the minutes following the news of the arrest of Shkreli.

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