7 of the biggest pharma bankruptcies this year

Sept. 23, 2019
What’s causing drug companies to go bust

Underperforming sales, government investigations, failed attempts at FDA approvals — it’s these kinds of crippling situations that often cause drug companies to go bust. But this year, the impact of thousands of lawsuits related to the opioid epidemic are also hitting some companies hard. 

Here’s a look at seven of the biggest bankruptcies in pharma this year.

Photo courtesy of Unsplash

Purdue Pharma

When Purdue Pharma filed for Chapter 11 bankruptcy protection earlier this month, the news came as no surprise. With the company staring down nearly 2,000 lawsuits from around the country related to its marketing of Oxycontin, Purdue had reportedly been floating a massive settlement plan that includes bankruptcy and restructuring. As part of the settlement, Purdue is reportedly planning to shell out $12 billion, with $3 billion coming directly from the company’s owners, the Sackler family.

But the drama is far from over. With the spotlight on the company’s financial situation, reports have also emerged that the Sackler family — who Forbes estimated are worth about $14 billion — has been transferring money from the company into personal accounts and stashing funds in overseas.

Some analysts also say that it’s unlikely that plaintiffs will ever see all of the $12 billion because the money is supposed to come primarily from the company, which doesn’t have a high value anymore, and is banking on FDA drug approvals that haven’t happened yet.

Insys Therapeutics

Of all the scandals to emerge from the opioid epidemic, the stories from how Insys Therapeutics sold narcotics have certainly been the most wild. 

Last year, Insys went to trial for accusations that the company gave kickbacks to doctors who prescribed the company’s powerful fentanyl spray, Subsys, to patients who didn’t necessarily need it. During the trial, accusations emerged that Insys hired an exotic dancer to be a regional sales manager and that she gave lap dances to doctors at parties. The company also created a rap video that was designed to motivate employees to push sales of the highly addictive Subsys spray.

This spring, the company’s former CEO and other execs pled guilty to racketeering charges. At the time, the company was also facing a $150 million settlement with the DOJ, but reported that it only had about $87.6 million in cash on hand. Ultimately, the DOJ asked for $225 million and this month, and Insys filed for bankruptcy in June — making it the first company to officially sink from the weight opioid litigations.

The company’s current chapter 11 bankruptcy plan shows that it will not be able to pay the DOJ the full settlement because the company came up short “by a wide margin” when it sold off its assets.  

Novum Pharma

The trouble for Chicago-based Novum Pharma began in 2016 when it started jacking up the price of an older eczema and acne skin cream — over a period of a few years the cost for one tube skyrocketed from $242 to $9,561. The company said it was attempting to offset its difficulties getting the cream, Aloquin, covered by insurance companies. Instead of helping Novum, the price increase only set the company on a path to its ultimate downfall.

Not only did the increase attract negative media attention, CVS soon dropped Novum’s cream from its formulary, citing the price hike. Other major PBMs, such as Express Scripts, followed suit. 

In February, Novum filed for bankruptcy, saying that the price hike, bad press and having coverage dropped by insurance companies created a financial hole the company couldn’t dig itself out from. The company also pointed to “a series of manufacturing issues” it experienced after acquiring Primus Pharmaceuticals in 2015, as well as competition from generics and a dispute with a wholesaler. 

When it filed for bankruptcy, Novum reportedly had assets worth $19.4 million but liabilities near $53 million.

Imerys Talc America

The fallout from the thousands of lawsuits alleging that Johnson & Johnson’s talc baby powder caused cancer hasn’t just been a strain on the drugmaker — it has also hit the company’s supply chain. In February, J&J’s supplier of talc, Imerys Talc America, filed for chapter 11 bankruptcy protection, citing 14,000 claims against the company’s product. Most of the plaintiffs allege that talc caused their ovarian cancer, but some have also claim that they contracted mesothelioma from the asbestos in talc. 

Meanwhile, both companies have leveraged the bankruptcy filing to potentially soften the financial blow of the talc lawsuits. As part of the bankruptcy plan, all of the cases will be put under the jurisdiction of a single judge in Delaware — and this consolidation could help Imerys seek a smaller settlement. The arrangement has also allowed J&J’s lawyers to argue that any verdicts against the J&J — including a $4.7 billion verdict that was rendered in Missouri— should be instead overseen by the Delaware judge in charge of Imerys’ bankruptcy.

Lawyers for the plaintiffs have pushed back against J&J’s attempt to consolidate the cases, saying that the company is trying to avoid state court rulings. 

J&J and Imerys continue to deny that the talc products cause cancer. 

Avadel Specialty Pharmaceuticals

In 2017, Ireland-based Avadel Specialty Pharmaceuticals snagged the first-ever FDA OK for a drug to curb nighttime urination. But the landmark approval it wasn’t enough to keep the company afloat. 

In February, Avadel’s parent company, Avadel Pharmaceuticals announced that Avadel Specialty was filing for chapter 11 bankruptcy protection as part of a wider company-restructuring plan. Avadel cited underperforming sales of its nighttime urination drug, Noctiva as the reason for bankruptcy. 

In its bankruptcy declaration, the company said its accrued debt totaled $167.4 million and that planned to sell its $79.7 million in assets.

Sienna Biopharmaceuticals

Despite positive results from phase 2 trials for its topical psoriasis treatment, California-based Sienna Biopharmaceuticals filed for bankruptcy this month, delaying late-stage trials that could win the company an FDA approval. 

At the end of Q1 this year, the company said it has $57.2 million in cash and equivalents on hand. But in its bankruptcy filing, Sienna said it will hold off on initiating a phase 3 trial for its drug, SNA-120, a non-steroidal Tropomyosin receptor kinase A (TrkA) inhibitor, until it has enough capital. 

Meanwhile, Sienna, which has two other TrKA inhibitors in its pipeline, is exploring options to the company going such as finding a strategic partner or a company to acquire the business.

Pernix Thearpeutics

When Pernix Therapeutics’ narcotic drug, Zohydro ER, an extended release version of pure hydrocodone, was approved by the FDA in 2013, the news was met with intense criticism — casting a dark cloud of suspicion over the drug’s rollout. But in its bankruptcy filing this year, Pernix cited generics competition for its migraine treatment, Treximet, as the primary cause of its decline in revenue.

In April, Highbridge Capital Management’s purchase of Pernix’s assets for $76 million was approved by a bankruptcy judge in Delaware.

About the Author

Meagan Parrish | Senior Editor