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Case Study – Affymax, Inc. (biopharma)

Case Study – Affymax, Inc. (biopharma)


Affymax, Inc. (NASDAQ:AFFY) was a public biopharma company with a single drug, OMONTYS, that aided blood thinning problems experienced by dialysis patients. The company had been public for a year and was growing rapidly until a series of sudden patient deaths caused the company to voluntarily remove the drug from the market, pending a full investigation in concert with the FDA.

Because the drug was its only source of revenue, the company was forced into a significant restructure to survive long enough for the investigation to finish and hopefully receive FDA approval to re-introduce the drug. The company’s cash position was marginally insolvent given all its obligations, and the company was quickly beset by multiple shareholder class action lawsuits, which were expected to be expensive and prolonged.

The company retained Armanino to act as Chief Restructure Officer reporting to the Board, and during the next three months our restructure team accomplished the following:

  • Resized the company from 200+ employees to 4
  • Relocated the company from a sprawling three building campus in Palo Alto to a 1,000 square foot office in Cupertino securing full termination of its long term facilities leases
  • Conducted an auction of the company’s physical assets yielding over $1M in cash
  • Negotiated settlement with the company’s 100+ creditors saving over $4M
  • Took responsibility for the company’s finance and accounting department, including all SEC compliance items, and managed the company’s audit and SEC requirements
  • Managed the company thorough a NASDAQ delisting process, once the company’s assets and revenues dropped below minimally acceptable levels
  • Worked with counsel and insurance providers to ensure proper coverage was maintained and coverage consideration was optimized to offset legal expenses
  • Successfully managed the company’s cash and reduced its liabilities and burn rate to allow it to survive almost indefinitely

Once the company was successfully restructured, the Armanino team took on Officer and Director roles to manage the inactive but solvent company through the FDA investigation and open litigation, which was ultimately settled. Should the FDA investigation permit re-release of the drug, Armanino would work with the Board to manage the restart of the company by seeking fresh capital and turning the company over to a new management team.

Unfortunately, the results of the FDA investigation were inconclusive, which precluded re-release approval from the FDA. At that point, the company had few good options and the Board elected to solicit M&A or takeover bids from select third parties. Approximately 18 months after the engagement began, the Board and shareholders agreed to give control of the company to an investor group who took over, replaced the Board with their own slate, and continues to control the company today.