NanoString files for bankruptcy after costly 10x feud

Biotech claims action was necessary due to unfavourable rulings after being targeted by a rival | Accuses gene technology firm of attempting to shrink the competitive landscape for different spatial biology platforms.

NanoString Technologies has filed for bankruptcy in a Delaware court, citing debts of $325 million, after it was found to have infringed three gene technology patents owned by 10x Genomics late last year.

The biotech filed for Chapter 11 protection, a form of bankruptcy involving the reorganisation of a debtor's business affairs, debts and assets.

Campaign target

In a statement released on February 4, NanoString confirmed the move, levelling several complaints against 10x.

According to NanoString, it has emerged as the “current primary target of an extensive litigation campaign” conducted by 10x Genomics, and that since May 2021, 10x has brought multiple infringement lawsuits against NanoString in the US and the European Union.

These complaints have mostly taken aim at NanoString’s GeoMx Digital Spatial Profiler (DSP) and CosMx Spatial Molecular Imager (SMI) product lines, it adds.

“10x is engaging in its litigation campaign with the apparent goal of shrinking the competitive landscape for different spatial biology platforms to the detriment of the public good,” says the statement.

NanoString argues that in one unnamed case,10x acquired patents from a defunct company for the “apparent purpose of generating litigation” with NanoString.

Pointing to another case allegedly waged by 10x, NanoString says that it was granted a motion to add counterclaims for antitrust and unfair competition violations, as well as the affirmative defence of “unclean hands” by the plaintiffs.

Proactive steps

According to NanoString, Chapter 11 protection paves the way for a court-supervised restructuring process that would stay all ongoing patent litigation against it worldwide while allowing it to explore the potential sale of all or part of the company’s business.

The biotech attributes its actions to the effects of a November ruling by a Delaware federal court in favour of 10x’s infringement claims—over a hardware that profiles the spatial distribution of RNA and protein expression across a tissue sample.

It went to award 10x around $31 million in total damages—including $25 million linked to lost profits and $6 million in royalty payments. NanoString insists there are strong grounds for appeal.

Commenting on the move, Brad Gray, president and CEO of NanoString, said: “The unexpected outcome of the November GeoMx patent litigation trial in Delaware and the unusually large magnitude of the damages awarded by the jury have forced us to take proactive steps to protect our stakeholders, customers and employees.”

In its Sunday statement, NanoString says it has reached an agreement “in principle” with certain of its incumbent lenders to provide it with at least $40 million in new capital in the form of 'debtor-in-possession' financing.

Upon approval of the bankruptcy court, this financing facility is expected to provide NanoString with sufficient liquidity to operate the company's business during the pendency of the cases.

NanoString, adds the statement, remains confident “in the fidelity of its innovation and product development process”, and believes “it has strong legal defences and counterclaims”.

Unfavourable rulings

However, it admits that a slew of unfavourable initial rulings had impacted its business trajectory and financial position.

“While the company believes that it has strong grounds for appeals, these initial litigation outcomes, including the cost burdens associated with continued engagement in extensive litigation with a large well-funded competitor, have syphoned resources from innovation and customer support activities and placed a significant strain on the company’s business and financial resources,” it says.

As part of the restructuring process, NanoString is set to file customary ‘first day’ motions to allow it to maintain normal operations.

The company, it adds, “expects and intends to pay vendors under customary terms for goods and services received on or after the filing date, and to pay its employees in the usual manner and to continue their primary benefits without disruption”.

NanoString is represented by Willkie Farr & Gallagher as counsel, AlixPartners as restructuring advisor and Perella Weinberg Partners as restructuring investment banker.

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