Southern California-based Sienna Biopharmaceuticals filed for bankruptcy Tuesday, which sent share prices tumbling more than 73%. The dermatological drug maker will use Chapter 11 protection to restructure the company, including a possible sale of assets, and will delay development of its Phase III-ready psoriasis treatment.

Frederick C. Beddingfield III, president and chief executive officer of Sienna, said filing Chapter 11 is in the “best interests” of the company and its stakeholders. He noted that the company will be able to maintain its business activities while under Chapter 11. Also, he said the bankruptcy proceedings will give Sienna time to explore a wide range of strategic alternatives and focus its resources on “locating a purchaser or strategic partner to maximize the value of the company.”

Sienna’s decision is not completely out-of-the-blue. Last month, the company tapped Cowen as an independent financial advisor in order to assist it with the exploration of “financial and strategic alternatives” that would maximize shareholder value. When Sienna presented its first quarterly report of 2019 in May, the company noted it was eying a Phase III trial for its psoriasis drug, SNA-120 (pegcantratinib), a topical, non-steroidal Tropomyosin receptor kinase A (TrkA) inhibitor. In a Phase IIb trial, the TrkA inhibitor posted meaningful and statistically significant improvement in the epidermal thickness at 12 weeks. In addition, the data demonstrated a statistically significant reduction in T cell and dendritic cell counts, confirming an immune response to treatment with SNA-120, the company said in May when the data was announced.

Sienna Biopharmaceuticals had already met with the U.S. Food and Drug Administration to lay out the framework of a Phase III trial, including primary endpoint. However, with the bankruptcy filing, the company will hold off on initiating that late-stage trial until it has the capital to do so, which was also something the company noted last month when it hired Cowen.

At the end of the first quarter, the company reported it had approximately $57.2 million in cash and cash equivalents.

Sienna has retained Latham & Watkins as legal counsel and Cowen and Company as its investment bank to review financial and strategic alternatives with the goal of maximizing stakeholder value.

Since Tuesday’s sell-off of stock, share prices are bouncing back somewhat in premarket trading. On Tuesday, the stock fell 50 cents per share to close at 18 cents. This morning, the stock has gone up more than 15% to 20 cents per share.

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