Biostage scores $4M private investment, eyes turnaround
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Biostage CEO Jim McGorry (left) and Chief Medical Officer Saverio La Francesca.
Two months after laying off more than 70 percent of its workforce and being delisted from Nasdaq, Holliston biotech Biostage announced on Thursday a $4-million private investment for more than half of the company's ownership.
“This agreement is a fantastic next step forward,” Biostage CEO Jim McGorry said in the announcement. “Our focus is on closing the private placement, funding and being back in operation at a more efficient size and structure.”
The $4-million deal includes the private placement of 40 million of the company’s common stock at 10 cents a piece, and gives the right to purchase another 60 million shares. The deal is structured in such a way the investor will own more than 50 percent of the company's stock.
The investor advanced a $300,000 deposit on the private placement with the execution of the agreement, which was agreed upon Monday. The investor's name is Bin Zhao, according to Biostage's U.S. Securities and Exchange Commission filings, although the company provided no other details.
In exchange for the $4 million, Biostage gave two of its board seats to Bin Zhao. If the investor ends up owning more than 50 percent of the Biostage stock -- as the deal is structured to do -- then Biostage will give Bin Zhao a majority of the seats on the board.
As part of the agreement, McGorry and Thomas McNaughton, Biostage's chief financial officer, agreed to waive their rights to any severance pay as a result of the company changing ownership, according to the SEC filings.
McNaughton did not return calls seeking comment on Thursday evening.
In the press release, McGorry said Biostage has been in survival mode for the past two months since an investment agreement with Texas investor First Pecos fell through. In October, the company laid off 17 of its 24 employees. This week, the Nasdaq finalized its plans to delist the company on Monday.
“Over the past 60 days we preserved our technology by securing all the data, know-how and mission-critical resources,” he said. “What has emerged is a smaller company with a reduced cash burn and with all critical functions, partnerships, know-how, and assets in place.
The private placement and funding is expected to occur later this month, Biostage said.
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