February 25, 2009 6:54 PM

Dynogen's Chapter 7 Filing Leaves Six Firms Hanging

Posted by Brian Baxter

While many firms have been riding the bankruptcy wave to lucrative paydays, others are getting swamped by it. A relatively obscure filing for Chapter 7 liquidation by a small suburban Boston-based pharmaceutical company shows why.

On Monday, Dynogen Pharmaceuticals filed for Chapter 7 in U.S. bankruptcy court in Boston. The Boston Business Journal reports that the Waltham, Mass.-based company had raised $67 million in venture capital over the past six years.

But according to Dynogen's bankruptcy filing, most of that money is now gone. Dynogen's bankruptcy counsel at Boston's Mintz, Levin, Cohn, Ferris, Glovsky and Popeo listed the company's assets at $18,393--primarily office equipment and furnishings--and liabilities totaling in excess of $10 million.

Dynogen listed $6.5 million in secured claims, one of which includes a potential claim to "certain intellectual property" by Japan's Mitsubishi Tanabe Pharma, although the company did not give the claim a monetary value. Wages and severance due former employees accounts for about $1.1 million in priority unsecured claims.

That's bad news for the six law firms that did work for Dynogen.

Bankruptcy records show that five of those firms did patent and IP work for the company while McCarter & English handled the privately held firm's corporate legal work.

Those firms owed money for IP/patent work include: $135,914.78 to Concord, Mass.-based IP firm Hamilton Brook Smith & Reynolds; $47,311.73 to Alston & Bird; $27,609.69 to Jones Day; $3,380 to Wilmer Cutler Pickering Hale and Dorr; and $3,019.61 to Boston IP firm Lahive & Cockfield.

Dynogen also owes McCarter & English $23,172.34 for corporate work and serving as investor counsel. The pharmaceutical company planned to go public and return $98 million to investors in early 2008 after receiving an offer to be acquired by Burlingame, Calif.-based Apex Bioventures. But that deal later fell through.

One firm that has been paid by Dynogen is Mintz Levin. According to bankruptcy records, the firm was paid $96,021.50 to take the case. Court documents also show three additional payments totaling $102,039.13 to Mintz Levin that would put the firm's final bill at $198,060.13.

Bankruptcy and creditor's rights partner Kathleen Dwyer of Peabody, Mass.-based MacLean Holloway Doherty Ardiff & Morse has been appointed trustee for Dynogen.

Earlier this month The Am Law Daily reported that former student lender My Rich Uncle's Chapter 7 filing left nearly 20 law firms high and dry with more than $2 million in unpaid billables.

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