Apple Tree Partners Files for Bankruptcy amid Funding Dispute with Backers linked to Russian Billionaire
A biotechnology venture firm, Apple Tree Partners (ATP), filed for Chapter 11 bankruptcy on Wednesday to safeguard funding for its portfolio companies as a contentious legal battle with its primary investors unfolds. The bankruptcy filing stems from a months-long dispute with entities associated with Russian billionaire Dmitry Rybolovlev, specifically Rigmora Biotech Investor One and Two, who ATP alleges withheld promised funds.
In December,a Delaware court sided with ATP,ordering Rigmora to release approximately $97 million in funding. However, Rigmora swiftly responded with a counter-suit filed in June in the Cayman Islands, alleging mismanagement of funds by ATP and seeking the firm’s liquidation. Litigation in the Cayman Islands remains ongoing.
ATP’s decision to file for bankruptcy under Chapter 11 of the U.S. bankruptcy code is a strategic move designed to shield the firm and its investments from creditors while a reorganization plan is implemented. according to a company statement, the bankruptcy will protect “funding and other resources required to continue their critical missions to research and develop novel breakthrough treatments for cancer, neurological disorders, infectious diseases, and other serious diseases.”
A $1.5 Billion investment and a slowing Pace
The relationship between ATP and Rybolovlev’s family trust dates back to 2012, when the trust committed to providing $1.5 billion in funding for biotech investments. Since then, ATP has cultivated a portfolio of roughly 30 companies, many of which are focused on pioneering areas of drug progress, including genetic editing and self-replicating RNA.
While ATP claims to have delivered “an industry-leading” return on invested capital over its 25-year history,the firm’s investment activity has slowed recently. the only publicly announced funding this year involved medtech startup Galvanize Therapeutics.
conflicting Accusations and Imminent Collapse
Court filings reveal a stark contrast in perspectives. ATP asserts that rigmora’s withholding of funds has left some of its portfolio companies facing “imminent collapse.” Conversely, Rigmora contends that it “lost trust and confidence in ATP” due to concerns over “mismanagement and lack of probity.”
In an email to BioPharma Dive, Rigmora accused ATP of circumventing “legitimate requests for data” regarding fund management and even attempting to seize half of its stake in the fund. Rigmora’s ultimate goal is to initiate a court-ordered winding down of the fund.
The Court’s Reasoning and Rigmora’s Response
delaware Chancery Court Judge Kathaleen St. J. McCormick, in her December 5th ruling, emphasized Rigmora’s obligation to honor the funding commitments made to startups for which ATP had already established budgets. She stated that “the public interest strongly favors preserving potentially life-saving research programs.”
However, Rigmora points out that judge McCormick did not grant all of ATP’s requests, including the relinquishment of Rigmora’s contractual approval rights. The firm dismissed the bankruptcy filing as a “delay tactic” and a maneuver to “avoid oversight” by the cayman Islands courts.
According to Rigmora, ATP’s bankruptcy petition is not driven by a lack of funds, but rather by dissatisfaction with the terms of their partnership agreement as affirmed by the Delaware Chancery Court.
Seth Harrison, ATP’s founder and managing partner, expressed confidence in the underlying strength of the firm’s investments, stating, “We have no doubt that the fundamentals underpinning our investments are strong, and that our portfolio companies have shown and continue to show great promise to deliver significant returns on investment and meaningful new treatments and cures.”
The situation remains fluid as legal proceedings continue in both Delaware and the Cayman Islands, with the future of ATP and its portfolio companies hanging in the balance.
