BIOMILQ—a startup culturing mammary cells to produce bioactives found in breastmilk—has filed for bankruptcy amid a protracted IP dispute with the ex-husband of one of the cofounders that she says rendered the firm “uninvestable and unacquirable.”

Founded in 2020 by cell biologist Dr. Leila Strickland and food scientist Michelle Egger, North Carolina-based BIOMILQ originally planned to produce cell-cultured human milk in bioreactors full of “lactating” mammary epithelial cells. It later pivoted to using the cells as mini-biofactories to produce high-value bioactives found in breastmilk such as human milk oligosaccharides, osteopontin, and exosomes.

The firm, which has raised $24.5 million from investors including multiple billionaire-backed Breakthrough Energy Ventures and Novo Holdings, has developed cell lines that can produce a wide range of human milk oligosaccharides in a scalable system, claims Strickland, who took over as CEO in March 2023 following Egger’s departure.

However, a legal dispute with her ex-husband (Shayne Guiliano at 108Labs) over IP has effectively prevented the company from raising money or finding a buyer, she told AgFunderNews.

“The decision to file Chapter 7 comes after a long legal dispute that has haunted the company since its founding. My former husband has asserted marital, fiduciary, and inventorship interests in BIOMILQ IP through a complex series of cases in district and state, and federal courts.”

‘We have no choice other than to take the final steps to shut down the company’

The legal spat between the two heated up in early 2022 when BIOMILQ accused* Guiliano of stealing trade secrets in a complaint that describes him entering Dr Strickland’s home without her knowledge or permission and photographing pages from a BIOMILQ notebook.

Guiliano, in turn, has argued in publicly-available court filings** that he should be listed as a co-inventor on foundational patents assigned to BIOMILQ based on IP he says he developed with Strickland between 2013 and 2020 while they were both working at 108Labs.

He has also argued that IP assigned to BIOMILQ should have been assigned to 108Labs and asserted marital rights to assets including IP that was developed at BIOMILQ well after the couple split. As such claims could potentially impact the entire IP portfolio, this has deterred potential investors and acquirers, said Strickland.

Intellectual property can be treated as marital property to the extent that it has any demonstrable value. And when a marriage dissolves, it is divided with the marital estate. Strickland says that she and Guiliano finalized their divorce in 2023, but their marital estate remains locked in a civil proceeding because of the dispute about BIOMILQ’s IP. In court filings, Guiliano asserts that “Spouses owe to one another a mutual obligation to manage, control and preserve their community assets with the utmost care and loyalty. Strickland breached her marital obligations in her dealings with BIOMILQ.”

According to a recent court filing from Guiliano, “But for its misappropriation of Guiliano, Strickland, and 108Labs’ proprietary technology, BIOMILQ would never have existed as a viable company.” BIOMILQ in turn claimed that his request for inventorship correction “fails to identify with sufficient particularity any claim elements of BIOMILQ’s patents that Mr. Guiliano purports to have contributed to or conceived.”

While several of Guiliano’s legal claims against BIOMILQ and other parties have been dismissed or voluntarily withdrawn, the litigation is ongoing and has “had the effect of simultaneously shortening our runway while making us uninvestable and unacquirable,” claimed Strickland. Despite an “exhaustive effort” to raise funds throughout 2024, BIOMILQ was unable to close its round.

Strickland added: “We had so much enthusiasm from investors who all wanted us to get past this. We had a likely lead identified but they understandably couldn’t proceed while this was going on. By the end of the summer, I started talking to a number of candidates who might want to acquire the technology but of course we ran into the same issues.”

According to Strickland, “We finally went into a 12-hour mediation session in December that didn’t resolve this and we have had no choice other than to take the final steps to shut down the company.”

“With regard to securing capital for ongoing operations, Mr. Guiliano’s conduct is impeding BIOMILQ’s ongoing (and crucial) efforts to find new
investors and raise additional funds from existing investors. Raising capital in the current high-interest rate environment is challenging under the best of circumstances but is particularly difficult when a substantial portion of BIOMILQ’s capital must be diverted to this litigation where Mr. Guiliano’s persistent abuse of the judicial process has impeded a reasonable path to resolution.” Affidavit from Dr. Christine Ring, independent board member, BIOMILQ, July 2024

Asked to comment on the litigation, Guiliano told AgFunderNews: “I think the public record probably speaks for itself.”

Asked to comment on Dr. Ring’s statement regarding the impact of the litigation on the viability of the company, Guiliano’s lead counsel in that action, James C. White at J.C. White Law Group, said: “We believe that Shayne’s ‘conduct’ consists of asserting valid claims regarding his rights. We stand by the claims in the pleading.”

‘A devastating ending’

Strickland added: “This is a particularly devastating ending as our progress last year was off the charts. Beyond the HMO program, we created an unprecedented collection of mammary cell lines and a raft of patents related to just a few of the things you could do with them. The fate of these assets is uncertain, but my hope is that they will be made available in a public sale in the Chapter 7 process.”

With the Chapter 7 filing, Strickland and BIOMILQ’s board of directors have now been discharged. The company’s affairs have been turned over to a court-appointed trustee and the pending litigation against the company has been stayed while the bankruptcy process plays out. Strickland said that the complexity of the situation makes it difficult to predict how things will unfold, but she hopes that the process will move quickly to establish a free-and-clear title to the assets that were developed at BIOMILQ.

She added: “Our portfolio represents $24.5 million of investment, poured into the smartest people I’ve ever met, who made incredible progress on important challenges.