Biostage lays off 71% of workforce after delisting
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Biostage CEO Jim McGorry (left) and Chief Medical Officer Saverio La Francesca. The company has laid off 71 percent of its employees.
After being delisted on NASDAQ last week, Holliston biotech Biostage has laid off 17 of its 24 employees, a 71-percent reduction, the company announced Thursday.
The company attributed its financial situation to what it called a breach and failure to fund by Dallas investment firm First Pecos, which had agreed to a $3 million investment with Biostage, but the agreement feel through.
According to Biostage, First Pecos claims Biostage is in breach of its obligations pursuant to the investment agreement. Biostage claims it met new demands of First Pecos, but the company still did not deliver the funding.
As a result, Biostage's current financial obligations exceed its cash on hand.
The layoffs will cost the company $153,000 in one-time termination benefits in the fourth quarter. The company will move forward with a core group of scientists and engineers who have been with the company and helped develop its organ transplant technology.
The company finds itself in a weakened financial position, said Jim McGorry, Biostage’s CEO, in a press release.
“After months of good faith negotiations by Biostage, we sincerely believed we had a solid path forward for our technology and shareholders,” he said. “We believe the fact pattern of constant funding delays and increasing demands demonstrates First Pecos had a different agenda.”
According to Biostage, First Pecos delivered a notice on Tuesday indicating the agreement has been terminated due to alleged breaches by Biostage. In addition, First Pecos is demanding a $500,000 termination fee, Biostage said.
Biostage refutes it was in breach of the agreement and does not believe First Pecos is entitled to termination fees.
“The company is reviewing all of its rights and remedies against First Pecos,” Biostage said.
Biostage was delisted from NASDAQ as of last Friday after a yearlong process because its stock price fell below the minimum required. The company’s stock is now listed on the OTCQB marketplace.
Biostage claimed the delisting was due, in part, to the break down in agreement with First Pecos.
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