Sangamo Therapeutics Inc. (SGMO) filed for Chapter 11 bankruptcy protection on Tuesday, turning its gene therapy and genome-editing platforms into a fire sale that has already attracted big pharma buyers. The company has lined up affiliates of Eli Lilly and Co. (LLY) and Astellas Pharma Inc. (ALPMF) as stalking horse bidders for key assets, while also securing a commitment for up to $30 million in debtor-in-possession financing to keep the lights on during the process.

Think of a stalking horse bid as setting a floor price at an auction — it ensures the assets don't go for peanuts, but also gives other buyers a target to beat. In this case, Lilly and Astellas have essentially said, "We'll pay this much; anyone want to top it?"

Lilly and Astellas Set the Floor

Ahead of the bankruptcy filing, Sangamo entered into separate asset purchase agreements with Lilly and Gene Therapies Inc., a subsidiary of Astellas. Under the deal with Eli Lilly, Sangamo agreed to sell several of its technology platforms, including its AAV capsid engineering platform, zinc finger protein technology, Modular Integrase genome editing platform, and prion disease program ST-506. Lilly's bid carries a total consideration of $50 million, plus the assumption of certain liabilities. That $50 million is the minimum bid for those assets, subject to higher or better offers during the bankruptcy process.

Separately, Astellas agreed to acquire assets primarily related to isaralgagene civaparvovec, Sangamo's Fabry disease candidate. The transaction includes $25 million payable at closing, with up to an additional $25 million tied to specified milestones. Both proposed transactions require bankruptcy court approval.

Keeping the Engine Running

To support operations during the restructuring, Sangamo secured a commitment from Northridge for debtor-in-possession financing of up to $30 million. This type of financing is like a bridge loan for a company in bankruptcy — it provides working capital, funds bankruptcy-related expenses, and supports ongoing operations. Sangamo is seeking interim approval to immediately access up to $10.5 million, with final approval for the full facility expected at a later hearing.

Workforce Cuts Follow

As part of its restructuring, Sangamo's board approved a workforce reduction that will eliminate approximately 51 U.S. positions, representing roughly 40% of its workforce. After the layoffs, Sangamo expects to retain about 77 employees to continue advancing the programs and platforms included in the proposed Lilly and Astellas transactions. The company expects restructuring-related charges of approximately $3 million to $4 million, primarily tied to severance and employee benefits.

For investors, this is a classic tale of a biotech that burned through cash on promising but expensive gene therapy research, only to run out of runway. The good news is that the technology itself is valuable enough to attract big pharma buyers. The bad news is that shareholders are likely to get little to nothing in the bankruptcy — the assets are being sold to pay creditors, not to reward equity holders. But for the gene therapy field, the sale could mean that Sangamo's platforms live on under deeper pockets.