Two affiliates of Apple Tree Partners have filed for bankruptcy, a move designed to continue funding the venture firm’s portfolio biotechs as a funding dispute with a top investor plays out.
Yesterday, the life sciences VC filed two petitions for Chapter 11 relief, a form of bankruptcy that allows for a business reorganization instead of liquidation.
The limited partner entities “ATP Life Science Ventures” and “ATP Life Science Ventures” both filed in the U.S. Bankruptcy Court for the District of Delaware, according to legal documents.
The Chapter 11 filings will ensure “portfolio companies have the funding and resources required to continue their critical missions to research and develop novel breakthrough treatments,” according to a Dec. 10 company release.
The company has undergone the restructuring to “serve the best interests” of everyone involved, ATP founder and Managing Partner Seth Harrison, M.D., said in the release.
ATP and its affiliates will keep operating during the reorganization, according to the company.
Collectively, all ATP affiliates’ own estimated assets worth between $1 billion and $10 billion, according to court filings. Meanwhile, ATP’s estimated liabilities—or debts—range somewhere between $100,000 and $500,000.
As of publication, the VC has not responded to Fierce Biotech’s request for comment.
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The bankruptcy announcement comes five days after Delaware’s Court of Chancery delivered a verdict ordering ATP’s controlling limited partners to meet investment requests from ATP to the tune of $96.9 million.
In May, the life sciences VC sued its controlling limited partners for allegedly failing to meet monetary commitments, warning that its portfolio companies “face imminent collapse” as a result of a funding standstill.
The alleged funding cutoff “already caused layoffs and will trigger further layoffs” that could impact hundreds of people, ATP said in May.
The VC is funded mainly via Rigmora Biotech Investor One and Rigmora Biotech Investor Two. Both funds are part of Rigmora Holdings, a family office that manages the wealth of Russian billionaire Dmitry Rybolovlev.
Apple Tree alleged that Rigmora purposely withheld funds over 18 months and refused to approve any new budgets. The venture firm claimed that the family office said it would become available for budget discussions if the VC winds down or liquidates certain companies.
The court has since ruled in favor of ATP, determining that Rigmora’s “grab-bag” of arguments fail to defend the lack of payment. Rigmora had rested its case on claims that ATP acted in bad faith when requesting funds and that the approved budgets called for tranched funding tied to milestones which the projects did not achieve.
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The court demanded that Rigmora “perform its obligation to fund the capital calls,” for 13 impacted companies, excluding one: the once-cancer, now-rabies vaccine biotech Replicate Biosciences.
The companies involved in ATP’s monetary requests are preclinical companies Aethon Therapeutics, Apertor Pharmaceuticals, Deep Apple Therapeutics, Evercrisp Biosciences, Initial Therapeutics, Marlinspike Therapeutics, Nine Square Therapeutics and Red Queen Therapeutics, while the clinical-stage biotechs listed are Aulos Bioscience, Ascidian Therapeutics, Marengo Therapeutics and Replicate.
While Rigmora was ordered to pay $96.9 million, ATP had also asked the court to forfeit voting and budget approval rights for the family office.
When contacted by Fierce Biotech for comment, Rigmora said the court had “rejected” certain “punitive measures” that were brought forward by ATP’s founder Harrison, citing the move to “strip the limited partners of critical voting and economic rights” as an example.
“While the court determined, contrary to the limited partnership agreement and overwhelming evidence, that the disputed capital calls remain payable, that aspect of the ruling will be subject to appeal,” Rigmora told Fierce in a Dec. 10 statement.
“The ruling nevertheless underscores that the Fund has been mismanaged,” Rigmora continued. “The limited partners remain confident that the Cayman courts will put Dr. Harrison’s mismanagement to an end in early 2026 as part of the winding up proceedings commenced earlier this year.”
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The limited partner has brought a separate lawsuit against ATP in the Cayman Islands, and the Delaware court has deferred consideration on some of ATP’s claims to that court.
Rigmora has been the key financier for Apple Tree for 15 years, a relationship that apparently worked smoothly until late 2021. More recently, the office’s enthusiasm “disappeared entirely following Russia’s invasion of Ukraine in early 2022,” according to the May lawsuit.
