Seattle biotech PhaseRx files for bankruptcy protection as it seeks buyer

Seattle biotech PhaseRx has filed for Chapter 11 bankruptcy protection after a rocky year on the public markets.

The company, which develops treatments for inherited liver diseases in children, raised about $18.5 million when it went public in 2016.

PhaseRx needs to raise more money to sustain itself, CEO Robert Overell said Monday, and doing so would have diluted shares significantly. The best option was to file for Chapter 11 protection while the company seeks a buyer, he said.

PhaseRx is talking to a few companies about a sale and hopes to have a buyer early next year. It’s unclear if a company would want to buy just the technology or keep the employees on as well, Overell said.

The company has 10 employees, after cutting about half its staff in an attempt to save money earlier this fall.

The decision to enter the public markets in 2016 was a risk, Overell said. PhaseRx realized it needed money for clinical development, and it didn’t secure a partnership with a bigger company in time, leaving an IPO as its best option.

PhaseRx’s stock gained 2 cents on its debut day, but its share price sank from a high of $5.64 in May 2016 to $1 on Friday. Its stock plummeted nearly 45 percent Monday after the bankruptcy news was announced.

Last fall, PhaseRx saw a burst of confidence from shareholders when one of its drugs under development received orphan-drug designation from the Food and Drug Administration. The designation gave it financial breaks and incentives, designed to help companies developing treatments for rare diseases.

“This is a very interesting space, but the problem is when you’re undercapitalized as a biotech company relative to the challenges you have to face, it makes it difficult,” Overell said.

PhaseRx has a lot of biotech firepower on its team — Overell is a former Immunex manager and the company’s board chairman is Steven Gillis, a co-founder of Immunex.