A once highly-regarded Charlottesville-based biotech firm appears to have burned through at least $40 million in government money, stiffed local vendors and has declared bankruptcy. Charlottesville-based MicroGEM U.S. Inc. filed for Chapter 11 bankruptcy protection earlier this month, a move that typically leaves unsecured creditors unlikely to get paid.
“They screwed us out of $8,000,” Mike Toney, owner of Blue Ridge Pack & Ship, told The Daily Progress. “For a small business, that’s a killer.”
Toney contended that the firm strung him along for months with promises that it was on the verge of big contract.
“We got emails and emails and emails,” said Toney.
The firm, which formerly operated from a low-rise office building near Preston Avenue in the city, has liabilities over $50 million, but its assets are less than $10 million, according to the May 8 bankruptcy petition filed by Chief Revenue Officer Heather Williams.
In her filing with the U.S. Bankruptcy Court for the Western District of Virginia, Williams lists the corporate address as 705-D Dale Avenue. However, former landlord William Nitchmann told The Daily Progress that the firm furloughed its employees there several months ago, and he ended up selling the building. But he’s still somewhat bullish on MicroGEM.
“They’ve got a wonderful product with wonderful potential,” Nitchmann said. “They just had the wrong guy in the presidency.”
Corporate records indicate that the president of MicroGEM is Jeff Chapman, a holder of advanced degrees in immunology and neuroimmunology, according to his LinkedIn profile.
The company’s woes date back at least to 2021 when that year’s annual report warned that the firm’s English parent company, MicroGEM International, had just lost $11.6 million that year. The company was burning through so much cash that “a material uncertainty exists that may cast significant doubt on the group’s ability to continue as a going concern.”
The corporate travails intensified in November when the U.S. Department of Labor filed suit against Chapman, the company and two other officers, alleging that they stopped paying employee wages after Aug. 31. That legal action, which claimed a violation of the Fair Labor Standards Act of 1938, was dismissed in February when the government failed to file timely paperwork.
Publicly accessible records indicate that the company received $24.4 million in 2021 and another $9.8 million in 2022 from the National Institutes of Health. One journal article put the NIH contribution under the RADx, or Rapid Acceleration of Diagnostics project, at $41 million. A former vendor has asserted that MicroGEM itself once claimed additional funding on its website to suggest that the U.S. government’s total payout neared $50 million.
Public money flowed because MicroGEM developed a mobile, noninvasive and yet clinical-quality test for COVID-19 that allegedly delivered results in just 27 minutes.
“The MicroGEM Sal6830 SARS-CoV-2 Saliva Test has proven to be robust through the viral mutations that have occurred,” the company wrote in an April 2022 press release announcing that the Food and Drug Administration had granted the system an emergency use authorization.
The company sometimes called this product “Spitfire 6830” because instead of a swab in a nose it required just a bit of spit.
A little over a year before getting the emergency authorization from the FDA, the parent company bought Jump Start Manufacturing LLC, a New Hampshire company with a 14-year track record.
“The acquisition allows MicroGEM to rapidly scale production of its innovative Spitfire 6830,” according to a January 2021 company statement.
Today, the address on the outskirts of Nashua, New Hampshire, that Jump Start lists on its website is held by another company. The company voicemail storage was full when The Daily Progress attempted to contact the business. And text messages to Jump Start’s founder were not immediately returned.
The company commercialized innovations by James P. Landers, a UVa chemistry professor. While Landers could not be immediately reached on Thursday, the University of Virginia’s Licensing & Ventures Group continues to laud the company for “democratizing molecular diagnostics.”
Even the local stiffed landlord Nitchmann has a few encouraging words for the company.
“They had a lot of good people working there,” Nitchmann said. “It was just plain poor management.”
Nitchmann said that MicroGEM’s diagnostic test for cattle would have been a boon to ranchers because it facilitated an on-farm test instead of requiring a time-consuming visit from a veterinarian.
“Out west, that that could be a two-hour drive,” said Nitchmann. “With their piece of equipment, they could do it all right at the farm in 30 minutes or less.”
Nitchmann said that he hopes that MicroGEM gets resurrected because its products had value. But he says he remains stunned by the spending.
“They went through millions of dollars in a short period of time,” said Nitchmann. “I wish somebody gave me $43 million.”