Humanigen: Insider DIP Drives 363 Sale to Taran Therapeutics

Humanigen’s January 2024 chapter 11 case in Delaware centered on a court-supervised sale followed by a liquidating trust. Bankruptcy filings described limited liquidity, litigation exposure, and disputed obligations, and management attributed the distress largely to the FDA’s denial of emergency use authorization for lenzilumab and related downstream effects on capital access and vendor relationships.

The case combined three features: (1) an insider-provided DIP to fund the sale process, (2) a compressed 363 sale calendar with a stalking-horse transaction approved by the court, and (3) a post-sale liquidating trust structure that shifted the remaining case into claims reconciliation and reserve-setting.

Insider DIP and 363 Sale: $2M Financing, Compressed Calendar, and Liquidating Trust Administration

What Humanigen was developing: lenzilumab and other programs described in the filings. Humanigen described itself as a clinical-stage biopharmaceutical company developing anti-inflammatory immunology and immuno-oncology monoclonal antibody programs, with lenzilumab as the lead program in its distress narrative. The business overview referenced ifabotuzumab (EphA3) and HGEN005 (EMR1), indicating an IP portfolio with multiple development paths that could be sold or licensed if the company could not remain a standalone going concern. The declaration described operations as “virtual,” with a principal business address in Burlingame, California, and referenced non-debtor international subsidiaries in the United Kingdom, Australia, and Ireland as part of the broader corporate structure.

For readers who want the context of what lenzilumab was intended to do, contemporaneous reporting described it as a treatment for hospitalized COVID-19 patients designed to target GM-CSF. Fierce Pharma described the GM-CSF targeting approach. The bankruptcy filings treated the FDA’s EUA denial as the inflection point after which capital access deteriorated and liquidity constraints intensified.

The LIVE-AIR trial and the EUA decision: why timing mattered for a small-cap company’s runway. Humanigen’s prepetition story includes a common biotech pattern: a late-stage clinical result that was publicly framed as supportive, followed by a regulatory decision that did not yield the anticipated commercialization path. ClinicalTrials.gov describes the LIVE-AIR study as a phase 3 randomized, double-blind, placebo-controlled trial evaluating lenzilumab plus standard of care in hospitalized COVID-19 patients, with “survival without ventilation” through day 28 as the primary endpoint. MedPage Today reported that the LIVE-AIR results showed a reported improvement in survival without ventilation among certain populations as Humanigen pursued the EUA path.

ClinicalTrials.gov also lists the study under identifier NCT04351152 and describes lenzilumab plus standard of care compared with placebo plus standard of care in hospitalized patients. The registry lists the primary endpoint as survival without ventilation through day 28 and describes the study as a Phase 3 trial.

On September 8, 2021, Reuters reported that the FDA denied emergency use authorization for lenzilumab and described the intended use case and share-price reaction. BioSpace covered the denial and described the approximately 60% premarket decline and the agency’s conclusion that the clinical data did not support authorization.

Why the company filed: the filing narrative tied FDA denial, delisting, and dispute pressure to a sale solution. Bankruptcy filings framed Humanigen’s distress as due “in large part” to the FDA’s rejection of the EUA request for lenzilumab and to litigation and arbitration pressures that intensified as the company struggled to pay for manufacturing and commercialization services entered in 2020–2021. The filings described suspension from trading and delisting and the resulting reduction in capital-raising capacity at a time when liquidity was already constrained.

The first-day declaration also described operating losses and clinical setbacks in the prepetition period. The declaration reported net losses of $236.649 million in 2021 and $70.730 million in 2022 and referenced the NIH-sponsored ACTIV-5/BET-B trial failure in July 2022, followed by continued delisting impacts and liquidity pressure.

The declaration described manufacturing and commercialization commitments entered in 2020–2021 with contract manufacturing and commercialization counterparties, and stated that those obligations continued as liquidity tightened and disputes escalated. The filing narrative tied those commitments to the disputes and claims described in the declaration that the debtor was addressing through the chapter 11 process.

External biotech coverage described Humanigen’s chapter 11 filing to sell assets after the COVID drug rejection, while Bloomberg Law reported the January 3, 2024 filing in Delaware. The first-day declaration similarly described a plan to pursue a sale of assets through the chapter 11 process.

Prepetition debt profile: no secured debt as of the petition date and a concentrated unsecured dispute stack. Humanigen’s first-day declaration described no outstanding secured debt as of the petition date. The declaration stated that the debtor owed approximately $44.1 million of unsecured obligations and had no outstanding secured debt. The declaration referred to those unsecured obligations as “Debt Obligations.” The same declaration described earlier financing history, including a term loan with Hercules Capital that was later repaid in full.

The plan chart later listed Class 1 secured claims and Class 2 non-tax priority claims at $0 estimated allowed claims and treated those classes as unimpaired. The plan chart also listed Class 3 general unsecured claims at $44.1 million and identified that class as impaired and entitled to a pro rata share of liquidating trust proceeds.

The first-day declaration described key disputes. The declaration summarized an arbitration with Eversana relating to commercialization support for lenzilumab, where Eversana claimed approximately $4.5 million for services rendered and the debtor disputed the claims. It also described litigation with Patheon (a Thermo Fisher subsidiary) relating to manufacturing of drug product, where Patheon claimed $25.9 million for allegedly out-of-spec unreleased batches and Humanigen counterclaimed for more than $37.5 million in damages. The declaration further described securities class action litigation and a derivative lawsuit, including a settlement that was pending approval and required bankruptcy court approval and stay relief mechanics to access insurance proceeds.

The declaration further quantified the Eversana and Patheon disputes. It stated that Eversana’s claim was approximately $4.5 million and described the debtor’s dispute of that amount, while the Patheon litigation involved an alleged $25.9 million claim and a debtor counterclaim exceeding $37.5 million. The declaration also described pending securities litigation and a derivative action that required coordination with insurance proceeds and court approval. dispute amounts and litigation summary

The inside/outside alternatives process: two LOIs, a special committee, and an insider-backed path. The first-day declaration described a process in which, after delisting and with “extremely limited liquidity,” the debtor’s advisors solicited letters of intent and received two LOIs—one from a strategic partner and one from an insider entity affiliated with the company’s chairman and CEO. The board formed a special committee to oversee negotiation of the insider LOI, which contemplated debtor-in-possession financing to fund a chapter 11 case and a credit bid under section 363(k) to purchase substantially all assets.

The declaration described the special committee negotiating through advisors and the non-insider LOI exiting the process, leaving the insider transaction as the “best—and only—alternative” available to maximize value.

DIP financing: insider funding tied to sale timing. The DIP motion identified Taran Therapeutics, Inc. as the lender and an insider controlled by the CEO and chairman. The terms included 5.0% non-default interest, 2.0% default interest, and a 5% exit fee payable only if the DIP obligations were repaid in full and not converted to a credit bid.

The DIP motion described Taran Therapeutics as an insider acquisition vehicle formed by the CEO.

The DIP’s stated maturity was the earlier of five months after the petition date, a sale closing, or an event of default. The DIP motion also described a lien and priority package that included a first priority DIP lien on DIP collateral subject to a carve-out and senior third-party liens, superpriority administrative expense status, and an avoidance-actions exclusion with a carve-in for section 549 actions.

The DIP motion stated that avoidance actions were excluded from the collateral package and described proceeds treatment mechanics for certain avoidance action recoveries. It also described the DIP lien as senior to other liens on DIP collateral subject to the carve-out and valid senior third-party liens.

The DIP motion also granted the lender a superpriority administrative expense claim and a first-priority DIP lien on DIP collateral subject to the carve-out and valid senior third-party liens.

One additional term in the DIP motion is the linkage between liquidity and insurance proceeds. The motion described that advances above $1.0 million were conditioned on exhaustion of insurance proceeds on operating expenses.

363 sale process: a compressed calendar. The bidding procedures order set a sale calendar with a February 12, 2024 bid deadline, a February 14 sale hearing, and a February 20 target closing date, with an auction date of February 13 if needed. The calendar moved from bid deadline to sale hearing within two days.

The bidding procedures order also specified times for key milestones, including a 4:00 p.m. Eastern bid deadline, a 10:00 a.m. Eastern auction time (if needed), and a 1:30 p.m. Eastern sale hearing. All listed times were stated in Eastern Time in the order.

Sale economics and what was carved out: a $2 million headline price with exclusions and litigation value left behind. The first-day declaration described the stalking horse structure at a high level as a $2 million purchase price that included a credit bid of the DIP loan and carved out certain assets such as cash on hand and certain claims and causes of action. The buyer acquired IP and operating assets while the estate retained certain assets and claims.

The declaration stated that the debtor entered into an asset purchase agreement with Taran Therapeutics as the stalking horse purchaser.

Sale order terms: purchase price mechanics, credit bid authorization, and free-and-clear protections. The sale order approved the sale of substantially all assets to the stalking horse purchaser after the bid process described in the bidding procedures order and entered findings supporting the transaction. The order described a purchase price including a $2,000,000 cash payment reduced dollar-for-dollar by DIP obligations and authorized the purchaser to credit bid all outstanding secured obligations under the DIP facility, including permitted fees and expenses. The order also stated that the sale consideration could include milestone payments and cure costs above the cure cap.

The sale order’s consideration mechanics reflected a mix of cash and credit-bid components. It described how the cash payment could be reduced by DIP obligations, authorized a credit bid of all outstanding DIP obligations and related fees, and referenced potential milestone payments and cure costs above the cure cap as part of the consideration framework.

The sale order included a section 363(m) good-faith purchaser finding and provided for a transfer free and clear of claims, liens, and liabilities other than assumed liabilities and permitted encumbrances.

External coverage also described the sale outcome and the insider affiliation in plain terms. Law360 reported that the bankruptcy court approved a sale of assets to an entity controlled by the CEO and identified the presiding judge in the case. Coverage from Taran's legal counsel confirmed the sale closed on February 20, 2024, following court approval on February 14.

Procedural timeline summary. The case began with the January 3, 2024 petition date. The bidding procedures order set a February 12, 2024 bid deadline and a February 14, 2024 sale hearing, with a February 20, 2024 target closing date. The court entered the sale order on February 17, 2024, and the buyer reported that the sale closed on February 20, 2024. The court entered the confirmation order on June 18, 2024, and the effective date occurred on July 12, 2024. The effective date notice set an August 12, 2024 administrative expense bar date and the same date for professional fee and rejection damages claims. Post-confirmation reporting for the quarter ended September 30, 2024 summarized trust cash transfers and receipts, including $650,742 transferred to the trust, $325,000 in settlement proceeds, and $1,021,106 in total receipts.

Liquidating plan and liquidating trust: how the case moved from sale to distributions. Humanigen filed a further modified combined plan and disclosure statement on June 13, 2024, and the court entered the confirmation order on June 18, 2024, implementing a liquidating trust structure. The confirmation order approved a liquidating trust agreement and appointed Dundon Advisers LLC as the liquidating trustee, providing the governance structure for post-effective administration. The plan’s class structure treated secured and priority claims as unimpaired (with $0 estimated allowed claims in those classes in the plan chart) and treated general unsecured claims as the impaired voting class entitled to a pro rata share of liquidating trust proceeds, with an estimated recovery range of 0.39% to 19.25%.

The plan chart identified the voting class and its estimated claims pool. The plan listed Class 3 general unsecured claims at $44.1 million and treated that class as impaired, while showing Class 1 secured claims and Class 2 non-tax priority claims at $0 estimated allowed claims with unimpaired treatment.

The plan also defined a claims objection deadline of 180 days after the effective date (subject to extension) and set a general bar date of April 22, 2024 and a governmental bar date of July 1, 2024 for filing proofs of claim. The plan specified that both bar dates were set for 5:00 p.m. prevailing Eastern Time.

The confirmation order also provided that estate property vested in the liquidating trust on the effective date, including specified litigation-related assets and sale-agreement-related items described in the order.

The confirmation order also canceled equity interests without distribution under the liquidating plan structure.

The liquidating trust structure provides that general unsecured creditors receive distributions from the trust’s net proceeds. The plan stated that Class 3 general unsecured claims would share pro rata in liquidating trust proceeds and specified a recovery range of 0.39% to 19.25%. general unsecured treatment and recovery range

Effective date and post-effective deadlines: locking the estate for wind-down administration. The plan became effective on July 12, 2024, and the effective date notice set key deadlines that mattered for the estate’s “closed universe” of administrative requests. The notice set a final administrative expense bar date of August 12, 2024 for administrative expense claims arising between February 21, 2024 and the effective date, and it set August 12, 2024 as the deadline for professional fee claims for work performed and expenses incurred prior to the effective date. The notice also set August 12, 2024 as the deadline for rejection damages claims arising from deemed rejection of executory contracts and unexpired leases.

These deadlines govern the timing of administrative expense claims, professional fee applications, rejection damages claims, and proofs of claim in the post-effective period.

Post-confirmation report: early indicators of what the liquidating trust was collecting and what it expected to pay. Post-confirmation reporting for the quarter ending September 30, 2024 provides an early snapshot of trust receipts and anticipated distributions. The report stated that the effective date occurred July 12, 2024 and described $650,742 of cash transferred to the trust as of the effective date. It also described $325,000 of settlement proceeds from a settlement with former directors and officers and $1,021,106 of total trust receipts from inception through September 30, 2024.

The report listed anticipated payments to general unsecured creditors of $172,000 and described no distributions to general unsecured claims as of the reporting date. The report also noted that the financial information was preliminary and subject to change.

Claims agent and noticing: Epiq’s role in the short case and the post-effective tail. The court authorized Epiq Corporate Restructuring, LLC as claims and noticing agent effective as of the petition date, with an order that included a $25,000 retainer and replenishment mechanics. The order also stated that Epiq could not cease providing services without a court order and described monthly invoicing and service mechanics. The effective date notice also used the claims agent as a service and filing point for post-effective requests and deadlines.

Key professionals: debtor counsel, investment banker, committee counsel, and committee advisor. Retention applications identified Potter Anderson & Corroon LLP as debtor counsel and SC&H Group, Inc. as debtor investment banker. On the creditor side, the official committee retained Kilpatrick Townsend & Stockton LLP and Womble Bond Dickinson (US) LLP as counsel, and retained Dundon Advisers LLC as a financial advisor. The confirmation order later appointed Dundon Advisers LLC as liquidating trustee.

Frequently Asked Questions

When did Humanigen file for chapter 11 bankruptcy and where was the case filed?

Humanigen filed chapter 11 in the U.S. Bankruptcy Court for the District of Delaware on January 3, 2024.

What was Humanigen developing (and what was lenzilumab)?

Humanigen described lenzilumab as a GM-CSF neutralizing monoclonal antibody program in its bankruptcy filings, alongside other referenced programs such as ifabotuzumab and HGEN005. Contemporaneous coverage described lenzilumab as intended to treat hospitalized COVID-19 patients by targeting GM-CSF.

What happened with Humanigen’s FDA emergency use authorization request in 2021?

Reuters reported that the FDA denied emergency use authorization for lenzilumab on September 8, 2021. BioSpace described the approximately 60% premarket decline, and Fierce Pharma described the agency’s view that the clinical data did not support authorization.

How was Humanigen’s chapter 11 case funded (what were the DIP terms and who provided the DIP)?

The case was funded through an insider DIP facility from Taran Therapeutics, Inc. with a commitment up to $2.0 million, 5.0% interest accrued to maturity, a 5% exit fee payable only if the DIP was repaid in full and not credit-bid, and a maturity tied to the earlier of five months, a sale closing, or a default. Reporting on the filing also described the insider-provided financing connected to management.

Who bought Humanigen’s assets and how did the sale process work?

The debtor sold substantially all assets to Taran Therapeutics, Inc. through a court-supervised section 363 sale after a compressed bid calendar. Coverage from Taran's legal counsel confirmed the sale closed on February 20, 2024.

Did Humanigen receive any competing bids at auction?

The bidding procedures order included an auction date “if needed”, but the sale order approved the stalking horse bid as the highest and best offer and approved the transaction under the court’s sale findings.

What did the confirmed liquidating plan provide for general unsecured creditors and equity?

The plan materials described general unsecured creditors as sharing pro rata in liquidating trust proceeds and stated an estimated recovery range of 0.39% to 19.25%. Equity interests were canceled with no distribution under the liquidating plan structure.

When did the plan become effective and what happened after the effective date?

The plan’s effective date occurred on July 12, 2024. Post-confirmation reporting described cash transferred to the liquidating trust, a $325,000 settlement with former directors and officers, and an anticipated $172,000 payment to general unsecured creditors.

Who is the claims agent for Humanigen?

Epiq Corporate Restructuring, 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.

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