Generic drugmaker Akorn has filed for Chapter 11 protection in bankruptcy court in Delaware following a series of quality-control problems that led to the breakup of a $4.3 billion takeover offer from the German medical company Fresenius.
In its petition, Akorn listed $10 billion of debt and $10 billion of assets. In a statement it said it has reached an agreement with lenders representing more than 80% of its secured debt who will provide liquidity to fund operations and serve as a stalking horse for the sale of the company. It also has the consent to use cash collateral for $30 million in debtor-in-possession financing.
In 2018, Delaware Chancery Court Judge Travis Laster ruled Fresenius could back out of the proposed takeover after allegations that four Akorn executives, including its former head of quality control, had altered data or provided fraudulent data in new-drug applications to the U.S. Food and Drug Administration.
The breakup resulted in the FDA sending two warning letters to Akorn over manufacturing violations at two of its plants. The judge is still considering a claim by Fresenius for $70 million in damages.
“The overhang of the Fresenius litigation, related shareholder litigation with the remaining opt-outs, and ongoing debt service obligations have obstructed out-of-court solutions” to the company’s problems, Duane Portwood, the chief financial officer of Akorn, said in court filings.
Akorn had a market cap of more than $4 billion in 2017, but the company has not made an annual profit in two years and generated $310 million in negative EBITDA in 2018, it said. Its market cap fell to about $28 million following the failed Fresenius deal.
Akorn’s stock fell 25% premarket in reaction to the bankruptcy filing. Shares were down more than 34% by early afternoon
The company said the sale process is expected to be completed in the third quarter.