Antibe Therapeutics: from a 2 a.m. CCAA filing to 42% for unsecured creditors

Antibe Therapeutics had been working since 2004 on otenaproxesul, a non-steroidal anti-inflammatory "said to have the potential to provide significant pain relief" for conditions such as osteoarthritis while avoiding or minimizing side effects, such as on the liver and the gut, frequently associated with NSAIDs. By the spring of 2024 it had spent approximately CAD $124 million and some 20 years on the drug, which Justice Osborne called "for all intents and purposes the entire business of Antibe," per the Endorsement of Justice Osborne, Apr. 22, 2024, paras. 7, 68, 92 (First Report, App. A).

On February 9, 2021, Antibe licensed the drug to Nuance Pharma Ltd., a Hong Kong biopharmaceutical company, for China, Hong Kong, Macau and Taiwan, and on February 19 Nuance paid an upfront fee of US$20 million, per the First Report of the Receiver, June 18, 2024, para. 1 and the Endorsement of Justice Osborne, Apr. 22, 2024, para. 5 (First Report, App. A). A month before that payment, on January 19, Health Canada had told Antibe, while reviewing the protocol for a Canadian study, that it had serious concerns about the risk of liver-related adverse events. The study began that July and, in the words of Antibe's chief operating officer quoted by the court, "hit the required stopping criteria" on July 30. Nuance alleged that Health Canada's concerns had been intentionally withheld from it. On September 5, 2021 it gave notice rescinding the licence and demanded its money back; Antibe refused, and Nuance took the claim to arbitration at the Singapore International Arbitration Centre, per the Endorsement of Justice Osborne, Apr. 22, 2024, paras. 9–11, 36–38 (First Report, App. A) and the First Report of the Receiver, June 18, 2024, para. 2.

The endorsement dates the tribunal's final decision February 27, 2024; the receiver's reports date the determination March 1, per the First Report of the Receiver, June 18, 2024, para. 3. As the endorsement records them, the tribunal found that Antibe and its chief executive officer made material misrepresentations and/or omissions leading up to the licence; that Antibe's answers to Nuance's due diligence inquiries could "only be characterized as being so incomplete as to be affirmatively and deliberately misleading, evincing conscious mis-behaviour and recklessness, rather than an intent to be truthful or honest"; and that "no amount of due diligence would have enabled [Nuance] to discover that Antibe had omitted/misled it with respect to key regulatory information." It held the licence validly rescinded and ordered the US$20 million returned with interest and costs. On March 4, 2024, Antibe said publicly that it "respects … the final nature of the award and will accept the decision in good faith," per the Endorsement of Justice Osborne, Apr. 22, 2024, paras. 12–13, 78 (First Report, App. A).

"Antibe still refused to return the funds," the endorsement continues. Nuance's application to enforce the award in Ontario and to appoint a receiver under s. 101 of the Courts of Justice Act was issued on March 27, 2024, and a scheduling appointment was set on notice for 9:45 a.m. on April 9. At 2:11 that morning Antibe delivered an application record to commence proceedings under the CCAA. Some seven hours later the parties told Justice Black they had agreed the terms of a consent order, and he granted an initial order with a 10-day stay, per the Endorsement of Justice Osborne, Apr. 22, 2024, paras. 14–18 (First Report, App. A). Deloitte Restructuring Inc. was appointed monitor, per the First Report of the Receiver, June 18, 2024, para. 5.

Not even the germ of a plan

At the comeback hearing Antibe asked for a stay to May 24 and for its administration and directors' charges to rise from $250,000 to $500,000 and from $150,000 to $375,000. On March 28 the U.S. Food and Drug Administration had told Antibe verbally that it was placing its pending Phase II trial on hold, with a letter of reasons to follow within 30 days, and Antibe's position, as the judge put it, was effectively to "wait-and-see." The monitor supported it, as did Knight Therapeutics, another licensee of the drug. Nuance cross-applied for declarations that Antibe held the US$20 million in trust for it, or alternatively the CAD $19.6 million Antibe had on hand on April 8, 2024, and for a receiver. It said Antibe had filed "purely as a defensive tactic," per the Endorsement of Justice Osborne, Apr. 22, 2024, paras. 21, 23, 27–28, 49, 51–52, 63, 105 (First Report, App. A).

Justice Osborne terminated the CCAA proceeding and appointed FTI Consulting Canada Inc. as receiver and manager. "Without question, the filing for protection under the CCAA by Antibe was done defensively, just as Nuance alleges. But that alone is not determinative," he wrote, citing the tobacco CCAAs as cases where protection was sought primarily to stay the enforcement of a claim or judgment. He found the circumstances "unique." Even with the extension there was "no prospect whatsoever, let alone a reasonable prospect, of there being a plan, or even the germ of a plan." Antibe had approximately CAD $19 million on hand and, by its own admission, would need very significant new capital whether or not the trust claim succeeded; the award would weigh with any investor or lender, and the tribunal's findings concerned a licensee of the drug that "represents the core and only business of the company." There was no DIP lender, "nor is there even any candidate on the horizon," per the Endorsement of Justice Osborne, Apr. 22, 2024, paras. 66–67, 70, 73, 79–82, 95, 116 (First Report, App. A).

On the timing of the filing he wrote: "Antibe did not seek to restructure as a result of the clinical concerns raised by Health Canada, or even as a result of the concerns raised by the FDA. Nor did it seek to restructure even when the arbitral award granting rescission was released. Rather, it waited to seek protection under the CCAA until 2 AM in the morning before the hearing of the case conference to schedule the already pending enforcement and recognition proceeding brought by Nuance." And, "perhaps most fundamentally," Antibe had been found, in an award it had publicly accepted, "to have deliberately misled a licencing counterparty to a very significant agreement." Had he continued the CCAA, he added, he would have lifted the stay to let Nuance proceed with recognition and enforcement of the award. The trust claim he left undecided, to be determined on a full record, per the Endorsement of Justice Osborne, Apr. 22, 2024, paras. 96, 99–101, 111, 116 (First Report, App. A). The receivership order, under s. 101, is dated April 22, 2024 and was issued on April 30, per the Order (appointing Receiver), Apr. 22, 2024, para. 3 and the First Report of the Receiver, June 18, 2024, para. 9.

US$519,000 of US$20 million

The receiver was not aware of any secured creditors. On the company's information Nuance's award came to about CAD$33.8 million, approximately 82% of $40.9 million in known unsecured claims. FTI put research and development on hold, terminated nine employees and contractors and left the head office on Prince Arthur Avenue in Toronto, per the First Report of the Receiver, June 18, 2024, paras. 30, 32(c), 32(l).

On the trust claim, the receiver concluded on its counsel's advice that Nuance met the test for a constructive trust over funds traceable to the upfront payment, and traced them through Antibe's bank accounts, per the First Report of the Receiver, June 18, 2024, paras. 35–36. What remained traceable at the date of appointment was approximately US$519,000, or approximately CAD$712,000; the balance of Nuance's claim is unsecured, per the Second Report of the Receiver, Jan. 15, 2025, paras. 59, 65. An ancillary order of June 24, 2024 recognized the award, on the day the court approved a sale process and a claims procedure, per the Second Report of the Receiver, Jan. 15, 2025, para. 11.