Biora Therapeutics: 363 Sale Followed by Chapter 7 Conversion

Biora Therapeutics, Inc., a San Diego-based medical technology company best known for its “smart pill” drug-delivery platforms BioJet and NaviCap, entered a Delaware chapter 11 case in late December 2024 to run an expedited section 363 sale process under court supervision. The filing paired a lender-driven DIP facility (heavy on roll-ups of prepetition secured notes) with milestones that effectively hardwired the marketing and sale timetable into the company’s liquidity runway.

In practice, the chapter 11 case functioned as a sale-and-wind-down playbook: the secured lender group set the financing terms, served as the stalking horse through a credit-bid structure, and acquired substantially all assets through a court-approved sale. The estate then pursued a small private sale of residual laboratory equipment and later converted to chapter 7, shifting the remaining administration and claims reconciliation to a trustee.

363 Sale Process and Chapter 7 Conversion

Company background and what was being sold. Biora’s path into chapter 11 is hard to understand without its corporate history: the company originated as Ascendent MDx, later operated as Progenity, and ultimately repositioned as Biora Therapeutics as it exited legacy diagnostics operations and pursued drug-device platforms (company history). In the run-up to the filing, management messaging emphasized two platform tracks—BioJet (a liquid jet oral delivery system aimed at improving oral bioavailability of large molecules) and NaviCap (a targeted oral delivery platform designed to localize drug delivery to the gastrointestinal tract) (BioJet patent announcement; NaviCap patent announcement). Court filings similarly described the restructuring objective as a sale process intended to maximize value for these programs and related intellectual property, rather than a long-duration operating reorganization (First Day Declaration).

Public communications in 2024 also help frame what stakeholders could plausibly have been buying in a late-2024 sale process: not a scaled commercial enterprise, but an early-stage technology platform with ongoing development milestones and a need for capital. For BioJet, the company described work on a smaller “00-size” ingestible device and emphasized payload metrics, reported bioavailability comparisons, and a planned sequence of functional and feasibility testing milestones extending into early 2025 (PODD meeting BioJet update). For NaviCap, the company described the BT-600 program (a drug/device combination) and publicly stated that a Phase 1 trial had been initiated in January 2024 following FDA clearance of an IND in late 2023 (2024 outlook). Industry reporting on BT-600’s Phase 1 results described drug absorption in colonic tissue extending to the distal colon, with maximal levels occurring several hours post-administration and lower systemic exposure compared to conventional oral tofacitinib benchmarks cited in other studies (BT-600 Phase 1 results). These disclosures do not establish commercial viability on their own, but they do illustrate why a sale process could plausibly focus on platform IP and program data packages rather than operating revenue.

Liquidity constraints and the “why now” of the filing. Court filings described the filing as a response to a continuing cash drain, a lack of sufficient cash flow, and an inability to raise enough incremental capital to fund the BioJet and NaviCap development path in the face of legacy liabilities and litigation costs tied to the shutdown of the prior diagnostics business (First Day Declaration). Public disclosures in 2024 similarly framed the company as operating with a constrained cash runway and needing additional financing to support ongoing development, with management pointing to the importance of financing partners and collaborations (August 2024 funding agreement; Q1 2024 results and corporate update). In addition, the company had ongoing legacy exposures from its former genetic testing operations, including a California Attorney General settlement related to marketing of genetic testing services (California DOJ settlement announcement).

The late-2024 liquidity picture described publicly was consistent with a “short runway” situation. In November 2024, the company reported cash and equivalents of $3.2 million as of September 30, 2024 and reported operating expenses of $16.3 million for Q3 2024, while also stating that operating expenses had been reduced by approximately 40% to under a $2.5 million monthly burn rate (Q3 2024 financial results). The same update referenced a Nasdaq listing extension deadline in December 2024 with no further extensions available (Q3 2024 financial results). Against that backdrop, court filings indicating approximately $1 million of cash on hand at filing underscore how quickly the company could have faced an operational cliff absent either an incremental capital infusion or a process designed to monetize assets on an expedited timetable (First Day Declaration).

Capital structure at filing (funded debt and note tranching). The debtor reported funded debt of approximately $71.8 million as of the petition date, alongside approximately $21 million of additional unsecured claims (including vendors and service providers) and approximately $1 million of cash on hand (First Day Declaration). The funded debt stack, as described in the first day record, centered on convertible note instruments split between (i) residual 2025 unsecured notes and (ii) 2028 secured notes that were later segmented into “payment priority” and “payment junior” categories via an amended and restated indenture. A simplified snapshot of the funded debt amounts described in court filings appears below.

Prepetition efforts: financings, exchanges, and the limits of incremental runway extensions. In 2024, the company publicly described multiple transactions and funding initiatives intended to keep development work moving forward while it pursued collaborations or other value-creating outcomes, including a multiple-draw facility with existing noteholders announced in August 2024 (August 2024 funding agreement) and a sequence of note exchanges and financings described in its periodic updates (Q1 2024 results and corporate update). Court filings described the company as ultimately concluding that it could not monetize licensing transactions or partnerships at the desired level without addressing (or at least stabilizing) its capital structure and legacy liabilities, because potential counterparties raised doubts tied to the company’s financial condition (First Day Declaration). The result was a pivot from incremental financing to an accelerated, court-supervised sale strategy.

Prepetition marketing process and the decision to file. The first day declaration described management beginning to explore strategic alternatives in late November 2024, engaging Evora Partners and McDermott Will & Emery LLP, and retaining MTS Health Partners as investment banker to market substantially all of the company’s businesses and assets (First Day Declaration). Court filings described MTS contacting approximately 70 potential strategic and financial counterparties in early December, supported by an electronic data room, while the company simultaneously negotiated with secured parties to bridge liquidity and support an in-court sale process (First Day Declaration). A December 2024 press release framed the chapter 11 filing as a deliberate choice to conduct a section 363 process with prepetition creditors serving as DIP lenders and stalking horse, rather than a liquidation outside court supervision (GlobeNewswire chapter 11 sale process announcement).

DIP financing: roll-up economics, pricing, and why milestones mattered. The capital structure and short runway shaped the postpetition financing posture. The court ultimately approved a DIP facility totaling up to $46.125 million, consisting of $10.25 million of new money and a $35.875 million dollar-for-dollar roll-up of prepetition secured notes into postpetition superpriority status (Final DIP Order). This structure is common in lender-driven sale cases: it supplies cash to keep the lights on (or at least fund an orderly process), while elevating prepetition secured claims into the DIP facility, often tightening lender control through budget governance and milestones.

The milestone package embedded in the DIP facility linked liquidity to sale progress and created an accelerated “clock” for the case. Milestones included deadlines for filing the bidding procedures motion, entry of bidding procedures and DIP orders, commencement of any auction, a sale hearing, and closing—each with failure constituting an event of default absent lender waiver/extension (Final DIP Order). The first day declaration also described the then-proposed sale timetable (auction and hearing dates) that closely tracked the DIP milestones (First Day Declaration).

Bidding procedures and the sale timeline actually implemented. The court entered a bidding procedures order in late January 2025 that set bid deadlines, an auction date (if necessary), and the sale hearing date (Bidding Procedures Order). Under the implemented schedule reflected in the docket record, the key dates included (i) a bid deadline in mid-February, (ii) a late-February auction date, and (iii) a sale hearing on February 25, 2025 (Bidding Procedures Order; Notice of Successful Bidder and Cancellation of Auction). Court filings later indicated the sale closed on March 7, 2025 (Conversion Motion).

Auction cancellation and the sale outcome. Court filings indicated that no competing qualified bids were received and that the auction was cancelled, leaving the stalking horse transaction as the successful bid (Notice of Successful Bidder and Cancellation of Auction). A contemporaneous market-facing report described the stalking horse APA and associated sale approval request, including the identification of BT BidCo LLC as buyer and the broader secured creditor sponsorship context (MarketScreener report on stalking horse APA filing).

Purchase price mechanics: credit bid plus assumed liabilities. In court filings, the stalking horse purchase price structure was framed around a credit bid of DIP obligations, together with assumption of specified liabilities and treatment of excluded cash. The filed APA described a $30 million credit bid amount (subject to the amount of DIP obligations outstanding under the facility, excluding certain categories), plus assumption of “assumed liabilities” and “excluded cash” as part of the purchase price construct (Stalking Horse APA). This purchase price architecture is typical of lender-acquisition sale cases: it delivers a quick, court-supervised transfer of assets without requiring incremental third-party cash, while still requiring the buyer to assume certain liabilities (and, in some cases, to provide a baseline level of assumed obligations that can be relevant for contested issues around creditor treatment).

Sale order terms and the Oracle reservation. The sale order approved a sale free and clear, as well as assumption and assignment mechanics for executory contracts and unexpired leases, with the customary emphasis on transferring assets while channeling liens and interests to proceeds (court filings indicate) (Sale Order). One unusually explicit provision in the sale order was the Oracle reservation: pending resolution of Oracle’s objection, the order provided that no Oracle contract would be assumed/assigned/transferred to the buyer, and that the buyer would not be allowed access to Oracle’s licensed software (even on a transitional basis) absent a separate agreement with Oracle or a further court order (Sale Order). For practitioners, this kind of carve-out is a reminder that “free and clear” relief does not eliminate the operational risk of disputed licenses and enterprise software access when the acquired business relies on systems subject to anti-assignment or license restrictions.

Contested issues: U.S. Trustee objections and settlement/distribution sensitivity. The docket record reflects the U.S. Trustee’s involvement in challenging aspects of the sale-related relief, including objections framed in part around priority-skipping concerns in the context of end-of-case distributions (court filings indicate) (U.S. Trustee Objection). Even in a lender-driven sale case, these objections can matter: they can influence how settlement components are structured, how administrative expenses and priority claims are handled, and how “value” is allocated among constituencies in connection with a sale. The sale order reflects that the court nonetheless entered the relief, indicating that objections were resolved or overruled as part of the sale approval record (court filings indicate) (Sale Order).

Residual asset disposition: Dallas lab equipment private sale. After the substantially all assets sale, the estate pursued disposition of remaining tangible property not included in the primary transaction. The debtor sought approval for a private sale of equipment and other personal property located at its Dallas lab site, identifying Encompass Diagnostics, LLC as buyer for $20,000 of consideration (court filings indicate) (Private Sale Motion). The court entered an order authorizing the private sale free and clear and waiving the Bankruptcy Rule 6004(h) stay (court filings indicate) (Private Sale Order). This kind of small, residual asset sale is common in sale-and-wind-down cases: it tends to occur after the “main” transaction closes, once the estate has a clear view of what property remains and what buyer interest exists.

Case disposition: conversion to chapter 7 and trustee appointment. The post-sale endgame was not a confirmed chapter 11 plan. The debtor later moved to convert the case to chapter 7, representing that it no longer operated as a going concern after the sale closing and that it lacked sufficient liquidity or unencumbered cash to prosecute, confirm, and consummate a chapter 11 plan or continue funding administrative expenses, with no financing available (court filings indicate) (Conversion Motion). The court entered an order converting the case to chapter 7 on May 27, 2025 (Conversion Order) and a chapter 7 trustee appointment followed shortly thereafter (Trustee Appointment). From a restructuring-practice perspective, this combination—363 sale plus later chapter 7 conversion—often reflects a conclusion that the remaining estate (claims reconciliation, pursuit of any remaining causes of action, and distribution mechanics) is more efficiently administered by a chapter 7 trustee once the operating assets are gone and the case is largely a liquidation/wind-down.

Public communications after the asset sale. Public-facing communications around the transaction can be difficult to reconcile cleanly with the “estate” posture after a sale. A March 2025 announcement described the business as having “successfully” completed a restructuring and emerging as a privately held company with ownership transferred to funds managed by Davidson Kempner, Context Capital, and Highbridge, while also stating that existing public equity was cancelled (StockTitan announcement). The docket record, however, reflects that the debtor later sought and obtained conversion of its chapter 11 case to chapter 7 for ongoing estate administration (Conversion Order). In a sale case, this is not necessarily contradictory: the operating business can “move forward” inside a buyer vehicle (or successor entity) even while the selling debtor remains in bankruptcy to complete wind-down tasks and resolve creditor claims.

Key professionals and claims administration. Early public materials identified the debtor’s primary advisors as McDermott Will & Emery (lead bankruptcy counsel) and MTS Health Partners (investment banker), with references to Evora Partners in a restructuring support role (GlobeNewswire chapter 11 sale process announcement). Court filings also reflect the appointment of a claims and noticing agent (Kroll) typical for a Delaware chapter 11 case of this type (court filings indicate) (Claims Agent Application).

Consolidated timeline (case milestones and outcomes). The table below consolidates key dates reflected in public announcements and in the docket record.

Frequently Asked Questions

When did Biora Therapeutics file for chapter 11 bankruptcy, and where was the case filed?

Biora Therapeutics filed on December 27, 2024 in the U.S. Bankruptcy Court for the District of Delaware (Voluntary Petition). The company publicly described the case as a chapter 11 filing intended to run a section 363 sale process (GlobeNewswire chapter 11 sale process announcement).

What business did Biora operate, and what were BioJet and NaviCap?

Biora positioned itself as a medical technology company developing targeted oral delivery platforms. It described BioJet as a liquid jet oral delivery system supported by an issued-and-pending patent portfolio (BioJet patent announcement) and described NaviCap as a targeted oral delivery platform using autolocation technology aimed at localized GI delivery, supported by patent disclosures and public device-function data presentations (NaviCap patent announcement; DDW 2024 device-function data).

How much DIP financing was authorized, and how much was “new money” versus roll-up?

The court entered a final DIP order authorizing a $46.125 million DIP facility, including $10.25 million of new money and a $35.875 million roll-up of prepetition secured notes (Final DIP Order).

What were the headline pricing terms for the DIP financing?

Court filings described new money DIP loans as bearing interest at Term SOFR plus a 12.50% margin (subject to a 2.00% floor), with interest paid-in-kind monthly, and roll-up loans as bearing 13.00% interest paid-in-kind (Final DIP Order). The DIP terms also included closing and exit premiums for the new money component (Final DIP Order).

What happened to the auction, and who became the successful bidder?

Court filings indicated the auction was cancelled because no competing qualified bids were received, leaving the stalking horse transaction as the successful bid (Notice of Successful Bidder and Cancellation of Auction). The buyer approved in the sale order was BT BidCo LLC (Sale Order), which a market report described as the stalking horse buyer vehicle for the sale process (MarketScreener report on stalking horse APA filing).

How was the sale consideration structured?

Court filings described the stalking horse purchase price as including a credit bid instruction for $30 million of DIP obligations (subject to outstanding DIP obligations), along with assumption of specified liabilities and treatment of excluded cash (Stalking Horse APA). The sale order also included an assumed-liabilities floor of $750,000 for assumed liabilities under the APA (Sale Order).

When did the substantially all assets sale close?

Court filings in connection with the later conversion motion represented that the sale closed on March 7, 2025 (Conversion Motion).

Why was the case later converted to chapter 7, and who was appointed trustee?

The debtor represented that after the sale it no longer operated as a going concern and lacked sufficient liquidity to fund administrative expenses or prosecute, confirm, and consummate a chapter 11 plan, with no financing available (court filings indicate) (Conversion Motion). The court converted the case to chapter 7 on May 27, 2025 (Conversion Order), and Alfred T. Giuliano was appointed as chapter 7 trustee (Trustee Appointment).

What residual assets were sold after the main transaction?

Court filings reflected a private sale process for certain equipment and personal property located at a Dallas lab site, identifying Encompass Diagnostics, LLC as buyer for $20,000 of consideration (court filings indicate) (Private Sale Motion; Private Sale Order).

Who is the claims agent for Biora Therapeutics?

Kroll Restructuring Administration LLC serves as the claims and noticing agent. The firm maintains the official claims register and distributes case notifications to creditors and parties in interest (Claims Agent Application).

For more chapter 11 case research and restructuring summaries, visit the ElevenFlo bankruptcy blog.