Essential drugmaker to sell, liquidate in Chapter 11 bankruptcy

Bankruptcy filings in the healthcare sector rose significantly over the last three years, rising from 25 in 2021 to 46 in 2022 and 79 in 2023, which was the highest level in five years, according to a Gibbins Advisors report.

For the first two months of the year, bankruptcies rose from about five filings in January to 12 more in February, according to data from S&P Global Market Intelligence. The most notable Chapter 11 filings in February were Cano Health, which filed on Feb. 4 with over $1 billion in assets and liabilities, and Invitae Corp., which filed on Feb. 13 with $500 million to $1 billion in assets and over $1 billion in liabilities.

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Chapter 11 filings are not slowing down yet, as a major biopharmaceutical company that sells essential drugs for serious life-threatening diseases has filed for bankruptcy in April.

Parkinson's, multiple sclerosis drug company files bankruptcy  

Pearl River, N.Y.-based Acorda Therapeutics  (ACOR) , maker of Parkinson's disease and multiple sclerosis therapies, on April 1 filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York with a restructuring support agreement backed by its ad hoc noteholder group that seeks a sale to stalking-horse bidder Merz Therapeutics for a $185 million bid and an eventual confirmation of a liquidation plan to wind down operations after a sale.

The drug company will also seek $60 million in debtor-in-possession financing to fund operations during bankruptcy from its ad hoc noteholders, consisting of  $10 million available on interim approval by the court, $10 million provided on final approval and a roll up of $40 million in debt.

The debtor listed $266.2 million in debt and $108.5 million in assets in its petition.

Acorda, founded in 1995, markets its Ampyra drug, which improves walking in adults with multiple sclerosis. The company manages the production and distribution of the drug through a third-party contract with Pantheon Inc. The drug is known as Fampyra outside the U.S. and produced and distributed by Biogen International GmbH, though the parties' contract is set to terminate on Jan. 1, 2025.

The biopharmaceutical company's other product is Inbrija, the first and only levodopa inhalation powder approved by the Food and Drug Administration for intermittent treatment of episodic motor fluctuations in adults with Parkinson's disease treated with carbidopa/levodopa regimen. Catalent Massachusetts manufactures the drug under contract through 2030.

Pharmaceutical company purchase failed to generate revenue

Several factors caused the company's financial distress, according to a declaration by CFO Michael Gesser, including the company's 2016 acquisition of Biotie Therapies for about $363 million, which did not generate any revenue for the company and instead had net operating losses of $120 million.

The company also suffered an adverse court ruling that invalidated several of its Ampyra patents, which allowed generic versions of the drug to enter the U.S. market in late 2018 and caused a rapid loss of substantial revenue, the declaration said.

Finally, slower than expected sales of its Inbrija drug, due to the Covid-19 pandemic and prescribing challenges had a material adverse effect of the company's business and the inability to invest in its pipeline of drugs and other development opportunities also harmed the company financially.

The debtor seeks to set a May 16 deadline for potential qualified bids for an auction to be held May 22. A sale hearing to approve a sale would be scheduled for May 31 if an auction is held and on May 24 if no auction is held.

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