Brickell Biotech to enter arbitration in federal court case after investor suspends payments

BOULDER  — Brickell Biotech Inc. (Nasdaq: BBI) has lost a major funding stream after a Florida company sued it for alleged bad-faith practices.

In filings with the U.S. Securities and Exchange Commission, the Boulder-based dermatology company said one of its backers, North Carolina investment fund NovaQuest Capital Management LLC, suspended its payments after Miami-based Bodor Labs Inc. filed suit against Brickell late last week. NovaQuest will resume payments if the lawsuit is dropped within a year.

Brickell also said the loss of funding could impact its Phase III clinical trials for Sofpironium

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That funding source, which was inherited from Brickell’s reverse initial public offering and buyout of Vical Inc., is worth up to $25 million over the course of multiple milestone-based payouts.

In the federal suit, Bodor claims Brickell licensed intellectual property to a Japanese pharmaceutical company without notifying Bodor or paying that firm its share of the sub-licensing deal. The company also accuses Brickell of trying to pass off Bodor’s research as its own when it applied for a patent earlier this May.

In a statement Wednesday, Brickell said it and Bodor will enter mandatory arbitration as per their contract and ask the arbitrator to punish Bodor executives for causing illegal harm to Brickell’s relationships.

Brickell stock rose slightly after the after-hours announcement Wednesday, reaching $2.64 per share as of 5 p.m. Mountain Time after closing the day at $2.46.