Timber Pharmaceuticals: $14.35M Credit-Bid Sale to LEO Pharma and Liquidating Plan
ElevenFlo Research
June 6, 202612 min readUpdated September 8, 2026
Timber Pharmaceuticals, Inc. filed for chapter 11 in the U.S. Bankruptcy Court for the District of Delaware on November 17, 2023, opening a sale-and-wind-down case under lead case number 23-11878 (Judge J. Kate Stickles). The clinical-stage dermatology developer entered bankruptcy with a prenegotiated stalking-horse transaction already in hand, built around LEO Pharma A/S — the same counterparty that had agreed to acquire Timber by merger weeks earlier, had funded the company's prepetition bridge loan, and would go on to serve as post-petition DIP lender and credit-bid buyer.
The architecture put LEO in nearly every seat in the case. The Debtors converted a failed out-of-court merger into a section 363 credit bid, sold substantially all assets — anchored by the Phase 3 congenital ichthyosis program TMB-001 — within roughly 66 days of filing, and then prosecuted a liquidating plan that returned the estates' residual value to a Liquidating Trust. General unsecured creditors were projected to recover between 11.1% and 44.3%; existing equity was canceled. The cases were closed by final decree in January 2025, ending a 14-month chapter 11 with a small claims pool of about 35 filed claims.
Trex Wind-down, Inc. f/k/a Timber Pharmaceuticals, Inc. (3 jointly administered debtors)
Court
U.S. Bankruptcy Court, District of Delaware
Case Number
23-11878
Petition Date
November 17, 2023
Sale Closing
January 22, 2024
Confirmation Date
May 6, 2024
Effective Date
May 9, 2024
Final Decree
January 29, 2025
Judge
Hon. J. Kate Stickles
DIP Facility
$13.9 million senior secured facility from LEO US Holding ($6.5 million bridge-loan roll-up plus ~$7.4 million new money), credit bid for the assets
Liquidating Trustee
Jeffrey T. Varsalone (TMBR Liquidating Trust)
Case Snapshot
Single-Asset Distress and the TMB-001 Program
Timber was a publicly traded (NYSE American: TMBR) clinical-stage biopharmaceutical company founded in February 2019 and focused on therapies for rare and orphan dermatologic diseases. Its development pipeline centered on a single lead asset: TMB-001, a topical isotretinoin formulation in a Phase 3 trial for congenital ichthyosis that had received Breakthrough Therapy designation from the U.S. Food and Drug Administration. Timber acquired the TMB-001 program from Patagonia in February 2019 and held the asset through subsidiaries Timber Pharmaceuticals, LLC and BioPharmX Inc., both of which filed alongside the parent.
The Debtors attributed the filing to three converging pressures. The Phase 3 TMB-001 trial and continued regulatory development had become increasingly capital-intensive, and the company needed significant additional cash to advance the program. At the same time, the Combined Disclosure Statement describes contractual limitations under a Securities Purchase Agreement that constrained Timber's ability to raise new financing. Those constraints met a balance sheet that had never turned a profit: the company reported a net loss of $8.1 million for the six months ended June 30, 2023, on top of an accumulated net loss of $56.4 million since its 2019 inception. At filing, Timber listed both assets and liabilities in the $1 million to $10 million range.
NYSE American delisting. The exchange moved quickly after the filing. NYSE Regulation announced delisting proceedings against Timber on November 21, 2023, and the company confirmed the commencement of those proceedings on November 28, with the common stock expected to begin trading on the OTC market. The shares moved to OTC trading under the TMBRQ symbol, later carried under the Trex Wind-down name.
From the LEO Merger to an In-Court Sale
The chapter 11 followed an extended, unsuccessful effort to sell or merge the company out of court. Beginning in June 2022, Timber's chief executive conducted informal outreach to four major dermatology companies. When that effort did not produce a transaction, the Debtors retained LifeSci Consulting, which contacted an additional 36 companies; five of them entered into confidentiality agreements. That process ultimately produced a merger agreement with LEO Pharma A/S, executed October 27, 2023, under which LEO would acquire the entire company.
The merger required a shareholder vote that Timber did not obtain. With the out-of-court transaction blocked and liquidity running out, the Debtors and LEO pivoted to an in-court sale that preserved the economics of the deal while removing the shareholder-approval condition. The combined disclosure statement frames the bankruptcy filing as the mechanism to deliver substantially all of Timber's assets to LEO through a court-approved section 363 sale rather than a merger. The result reset LEO's role from acquirer-by-merger to stalking-horse bidder and secured lender, a structure that let the parties move from petition to closing on a compressed schedule.
Bridge Loan and LEO's DIP Financing
LEO began funding Timber before the petition. On August 30, 2023, the Debtors entered into a secured Bridge Loan Agreement with LEO US Holding, Inc. (LEO Parent) providing $3.0 million in liquidity. On October 27, 2023 — the same day the merger agreement was signed — the parties executed a First Amendment adding $3.5 million in two draws, with $1.8 million funded on October 30 and $1.7 million on November 13, 2023. By the petition date, $6.5 million in principal was outstanding under the bridge facility, and that balance was carried into the post-petition financing.
LEO Parent then provided the post-petition senior secured DIP facility described in the Debtors' motion to approve the combined plan. The commitment totaled $13.9 million, consisting of a $6.5 million roll-up of the prepetition bridge loan outstanding at filing plus approximately $7.4 million of new money to fund operations through the sale. The financing carried adequate-protection liens running to LEO and authorized the Debtors' use of cash collateral alongside the new-money draws. Under the stalking-horse asset purchase agreement, LEO agreed to credit bid the full $13.9 million facility, plus the assumption of certain liabilities, in exchange for substantially all of the Debtors' assets. The revised combined plan records that the DIP facility was paid in full in connection with the sale closing on January 22, 2024.
Credit-Bid Sale to LEO Pharma
The sale process ran on the stalking-horse track without a competing bid. The bid procedures order set a bid deadline of January 5, 2024 at 4:00 p.m. ET, and no qualifying competing offers were received, so no auction was held. LEO Pharma A/S, acting through LEO Spiny Merger Sub, Inc., took substantially all of the Debtors' assets — the TMB-001 program and related Patagonia agreement rights, BioPharmX intellectual property, and assumed and assigned executory contracts. The purchase price was $14.35 million, comprising the $13.9 million DIP credit bid plus the assumption of certain cure and contract obligations. The court entered the sale order on January 22, 2024, and the transaction closed the same day.
The Debtors and LEO filed notices of potential assumption and assignment fixing zero-dollar cure amounts for the large majority of assumed contracts, including agreements with Catalent Pharma Solutions, Cromos Pharma, Sinclair Research Center, Solaris Pharma, Pharbil Pharma, and MBI Pharma. The court entered the post-closing contract assumption order following a certification of counsel filed March 5, 2024. Covington & Burling LLP served as counsel to LEO in the sale negotiation and post-closing matters.
LEO Pharma reported in August 2024 that the Phase 3 ASCEND trial for TMB-001 did not meet its primary and secondary endpoints, a result that would not support a New Drug Application to the FDA.
Liquidating Plan and Creditor Recoveries
With the assets sold, the Debtors pursued a combined disclosure statement and joint plan of liquidation rather than a standalone reorganization. The original Combined Disclosure Statement and Plan was filed February 27, 2024, revised on March 18 and March 20, supplemented April 12, and confirmed by the court on May 6, 2024. Law360 reported that the skin-care drug company secured approval of its chapter 11 wind-down plan in early May. The plan went effective on May 9, 2024.
The confirmed plan sorted claims and interests into the classes below, with recoveries funded from residual estate cash routed through the Liquidating Trust.
Class
Description
Treatment
Projected Recovery
Class 1
Other Priority Claims
Cash equal to unpaid allowed amount
100%
Class 2
Other Secured Claims
Cash, reinstatement, or return of collateral at Debtors' option
100%
Class 3
General Unsecured Claims
Pro rata share of Liquidating Trust cash after the wind-down reserve
11.1% – 44.3%
Class 4
Subordinated Claims
No distribution
0%
Class 5
Interests in Timber Pharmaceuticals, Inc.
Canceled and extinguished
0%
Class 6A/6B
Intercompany Claims and Interests
Adjusted, settled, or eliminated at Trustee's discretion
0%
General unsecured creditors — the only impaired class projected to receive a meaningful distribution — were estimated to recover between 11.1% and 44.3% on an estimated allowed claim pool of roughly $812,000 to $1.5 million, depending on final claims reconciliation. The confirmation order records that Classes 4, 5, 6A, and 6B were deemed to reject and were not entitled to vote, that existing equity interests were canceled without distribution, and that the estates' remaining assets and retained causes of action would fund the Liquidating Trust. The plan supplement filed April 12, 2024 identified the Liquidating Trustee, attached the Liquidating Trust Agreement, and listed the retained causes of action.
Liquidating Trust, Claims, and the Final Decree
Jeffrey T. Varsalone serves as Liquidating Trustee of the TMBR Liquidating Trust, which was funded with residual Debtor cash after satisfaction of secured and administrative claims, net of the wind-down reserve. Approximately 35 proofs of claim were filed across the three cases, and the Liquidating Trustee filed two omnibus objections on October 18, 2024 — a first, substantive omnibus objection and a second, non-substantive objection — to clean up the register before distributions.
Counsel and advisors. The Debtors retained Morris, Nichols, Arsht & Tunnell LLP as co-counsel, with Eric D. Schwartz appearing as lead, and Lowenstein Sandler LLP as special corporate counsel. Kroll Restructuring Administration LLC served as claims, noticing, and solicitation agent. All three filed final fee applications on June 21, 2024.
The case stayed largely consensual through the wind-down. The principal litigated-track items were a stipulation extending LEO's proof-of-claim bar date to allow post-closing reconciliation of true-up and indemnification claims under the purchase agreement, an early exclusivity and lease-deadline extension request filed March 15, 2024, and the two omnibus claims objections; no adversary proceedings were prosecuted. The Liquidating Trustee's motion for entry of a final decree, filed January 9, 2025, confirmed that no pending motions, contested matters, or adversary proceedings remained. The court entered the final decree closing the cases on January 29, 2025.
Key Timeline
Date
Event
Feb 2019
Timber acquires TMB-001 rights from Patagonia
Jun 2022
CEO begins informal strategic outreach to dermatology companies
Aug 30, 2023
$3.0 million bridge loan signed with LEO US Holding
Oct 27, 2023
Bridge loan amended (+$3.5 million); merger agreement signed with LEO
Nov 17, 2023
Chapter 11 petitions filed in Delaware (lead case 23-11878)
Nov 21, 2023
Joint administration order entered; NYSE delisting announced
Jan 5, 2024
Bid deadline; no qualifying competing bids received
Who is the claims agent for Timber Pharmaceuticals?
Kroll Restructuring Administration LLC served as the claims, noticing, and solicitation agent. The firm maintained the official claims register and distributed case notifications to creditors and parties in interest.
Who bought Timber Pharmaceuticals' assets?
LEO Pharma A/S acquired substantially all of the Debtors' assets, including the TMB-001 congenital ichthyosis program, for $14.35 million through a credit bid of its $13.9 million DIP facility plus the assumption of certain liabilities. The sale closed on January 22, 2024 with no competing bid and no auction. LEO had previously completed the acquisition after serving as the Debtors' merger counterparty and bridge lender.
What did general unsecured creditors recover?
The confirmed plan of liquidation projected a recovery of 11.1% to 44.3% for general unsecured creditors, paid pro rata from the TMBR Liquidating Trust after funding of the wind-down reserve. Existing equity interests were canceled without any distribution.
This article was researched and written with AI assistance, using court filings, public records, and news sources. AI-generated content can contain errors. Verify all information against primary sources before relying on it. This is not legal or financial advice. Read our full disclaimer.
