A fierce dispute between an American venture capital firm and the family investment office of a Russian billionaire has trickled down into the Bay Area. In December and January, four local biotech companies with stakes in the battle each filed for bankruptcy.

The argument pits New York’s Apple Tree Partners, a biotech-focused venture investor, against Rigmora, an investment entity owned by the family office of Dmitry Rybolovlev, who made his billions in the Russian fertilizer industry. Over the past 13 years, almost all of Apple Tree’s funding — north of $2.3 billion — has come from Rigmora, with the firm then directing that cash toward biotech startups tackling cancer, blindness, opioid addiction, obesity and other medical challenges.

In the cash-intensive world of pharmaceutical research, Apple Tree’s portfolio companies have benefited enormously from their deep-pocketed Russian backer. But now the relationship is unraveled; last year, Apple Tree and Rigmora launched legal suits against each other and began throwing barbs in the press. Cash for the biotech startups dried up, and Apple Tree’s CEO said in court that the companies cut 70% of their total workers.

Apple Tree mostly won its case, with a Delaware judge ordering Rigmora in December to cough up $97 million to give to the biotech companies. Rigmora’s case, filed in the Cayman Islands, aims to push Apple Tree out of the picture by liquidating the partnership and giving Rigmora full control over their venture. Rigmora accused its longtime partner of “a serious lack of probity” in the petition and wrote that it’s “irretrievably lost all trust and confidence” in Apple Tree’s management of the partnership. The litigation is ongoing.

Hence, the bankruptcies. Apple Tree is in the tough spot of battling its primary funder in court while also trying to keep its startups afloat. The venture firm filed its own Chapter 11 bankruptcy petition on Dec. 9, attempting to stall the Cayman Islands litigation and give itself room to reorganize. In another filing, Apple Tree director Seth Harrison said Rigmora’s refusal to honor funding requests caused a “severe liquidity crisis” across the biotech startups, and he called the funding gap “existential.”

“Years of research and pre-clinical drug development conducted by the Portfolio Companies have been severely disrupted, with scientists cut off from funding in the middle of critical experiments and clinical trials reduced in scope,” Harrison wrote. Elsewhere, he added, “The situation is dire.”

He noted that it’s difficult to find funding outside Rigmora because of what he called the “Russian effect,” where investors and lenders are hesitant to involve themselves with people who could get caught up in international sanctions. Plus, biotech funding began to slump in 2022. Harrison wrote, “when Dr. Rybolovlev became less interested in continuing to invest in biopharmaceutical research like that conducted by the PortCos (due to his own reputational issues and dwindling liquidity), the Debtors had no access to replacement capital.”

More here

Tagged: World News BACK TO HOMEPAGE