Melinta Therapeutics, founded in 2000 as Rib-X Pharmaceuticals, is an American publicly traded biopharmaceutical firm that focuses on the design and development of novel broad-spectrum antibiotics for the treatment of antibiotic-resistant infections in hospital and community settings. Melinta Therapeutics, filed for chapter 11 bankruptcy protection on December 27,2019 with a Financial Health Rating of 20 (High Risk).
FHR at time of default: 20, High Risk
Melinta said it has reached a restructuring agreement with the lenders under its senior credit facility, Deerfield Private Design Fund III, L.P. and Deerfield Private Design Fund IV, L.P. The lenders have agreed to acquire the company by exchanging $140 million of secured claims for 100% of the equity to be issued by the reorganized company according to a pre-negotiated bankruptcy.
What the ratings indicate:
Melinta Therapeutics had an FHR of 20 which is at the bottom end of High Risk spectrum, boarding on the Very High Risk category with an Estimated Probability of Default of 11.41%. As shown below in the FHR Trend, Melinta Therapeutics has remained High Risk over the past few years, staying below the global sector average, signaling the need for risk mitigation.
As seen above, the global drugs and pharma sector remained steady at a rating of approximately 54 while Melinta Therapeutics never achieved that level and in the most recent years was trending lower. This was concerning for the continued sustainability for this company.
Where our analysis tells the story:
The Performance Scores and Resilience Indicators break down the deterioration.
Melinta Therapeutics showed significant weakness in six of our seven performance categories highlighted above, resulting in a High-Risk rating indicating a substantial probability of default within the next twelve months. Please click the Peer Benchmark Report link for further analysis.
We can see how Melinta Therapeutics had been performing compared to the rest of their sector in our Default Risk Quadrant Analysis. The upper x-axis is default risk/FHR (a measure of default risk in the short term) while the y-axis is the Core Health (which shows medium-term sustainability based on efficiency and competitiveness). The peer group is straddling the A and B category. This is not ideal, as you would like to see all companies in the A category where financially healthy vendors and suppliers should appear. The C category is extremely problematic and shows companies with low Core Health with a high risk of default in the coming twelve months.
The Financial Dialogue below shows five items of concern and will provide questions regarding each concern that is important to discuss with your supplier. The Financial Dialogue is most effective when used in conjunction with our suite of reports (FHR and Peer Benchmark Report) to help with analysis and due diligence.