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On September 16, 2019 (the “Petition Date”), Sienna Biopharmaceuticals, Inc. (the “Debtor”) filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware.
The Debtor is represented by Latham & Watkins LLP as lead counsel and Young Conaway Stargatt & Taylor, LLP as Delaware counsel. The case has been assigned to the Honorable Mary F. Walrath. A hearing on the Debtor’s first day motions was held on September 18, 2019. A meeting to form the unsecured creditors committee was held on September 27, 2019. The United States Trustee appointed Therapeutics, Inc.; Johnson Matthey, Inc.; and MedPharm Ltd. to the Officialo Committee of Unsecured Creditors.
Headquartered in Westlake Village, California, Sienna Biopharmaceuticals, Inc. is a clinical-stage biopharmaceutical and medical device company focused on bringing unconventional scientific innovations in biotechnology to the discovery, development, and commercialization of first-in-class, targeted, topical products in medical dermatology and aesthetics. The Debtor’s objective is to develop a unique, diversified, multi-asset pipeline of topical therapies that enhance the health, appearance, and quality of life of dermatology and aesthetics patients.
Since its inception, the Debtor had incurred significant operating losses and had an accumulated deficit as a result of ongoing efforts to develop its product candidates. The Debtor had an accumulated deficit of approximately $184.1 million and approximately $159.4 million as of June 30, 2019 and December 31, 2018, respectively. The Debtor had net losses of approximately $8.3 million and approximately $24.6 million for the three and six months ended June 30, 2019, and approximately $20.2 million and approximately $37.3 million for the three and six months ended June 30, 2018, respectively. The Debtor had a net cash used in operating activities of approximately $21.2 million and approximately $30.2 million for the six months ended June 30, 2019, and 2018, respectively. As of the Petition Date, the Debtor estimated that its unsecured obligations total approximately $2.5 million.
After full consideration of the Debtor’s potential strategic and financial alternatives, the Debtor determined that commencing the chapter 11 case was the best available option to preserve and maximize value for stakeholders. The Debtor is confident that a purchaser or strategic partner will be located in the near future which will enable the Debtor to emerge from bankruptcy and continue its business operations as a going concern.
The Debtor seeks entry of interim and final orders authorizing the use of prepetition cash collateral of the prepetition lender, Silicon Valley Bank. Pursuant to the proposed interim cash collateral order, the Debtor will be authorized to use up to $7.5 million of the prepetition cash collateral as long as it obtains one or more letters of intent from proposed purchasers of plan sponsors and files a sale motion establishing a bid process or files a chapter 11 plan and confirmation statement within forty-five days after the Petition Date. The cash collateral will be used for working capital and other general purposes in the ordinary course of business, including administration costs, other working capital needs and for costs and expenses incurred in the chapter 11 case.
$30 million plus interest which accrues on the prepetition facility at a per annum rate of the greater of (a) the Wall Street Journal prime rate plus 2.5% and (b) 7.25%. As of June 30, 2019, the interest rate was 8.0%.
As of the Petition Date, $2.5 million.
NOL’s (as of December 31, 2018)
Federal $48.8 million; state $11.2 million; foreign $41.3 million. Federal research and development tax credit carryforwards $2.9 million.
FIRST DAY RELIEF FOR AUTHORIZATION TO PAY AND PAYMENTS
SECOND DAY HEARING/FINAL RELIEF (October 15, 2019 at 11:30 a.m.)
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Interim Relief
No current prepetition amount owed.
2019 aggregate insurance costs totaled $1,863,175.
Final Relief
Unspecified.
Interim Relief
No current accrued prepetition taxes and fees.
2018 taxes and fees totaled approximately $356,157.
Final Relief
Unspecified.
EMPLOYEE WAGES AND BENEFITS MOTION
Employees: eighteen full time salaried
Union: none
Interim Relief
$220,000 in the aggregate.
Prepetition wage obligations: $20,000
Contract worker obligations: $25,000
Board and advisory fees:
Board members: $78,000
Corporate advisors: $37,000
PTO obligations: $437,000
Employee expense reimbursements: $10,000
No payment shall exceed the statutory cap of $13,650.
Final Relief
Unspecified.
EQUITY SECURITIES TRANSFER RESTRICTION MOTION
(PRESERVATION OF NOLs)
Interim Relief
Interim order was entered on September 18, 2019 at Docket No. 40.
Common shares outstanding: 30,907,542
Stock options: 2.64 million shares
Restricted stock units: 1.05 million
Warrants outstanding: 535,714
Final Relief
Objection deadline: October 8, 2019 at 4:00 p.m. (ET).
Final hearing is scheduled for October 15, 2019 at 11:30 a.m. (ET).