The opioid drugmaker Insys Therapeutics, whose products include the fentanyl-based spray Subsys, has filed for Chapter 11 bankruptcy in the wake of a $225m settlement with the US government.
The government had been pursuing criminal and civil claims against the company over its role promoting the opioid during an epidemic of abuse. Insys is also struggling to fund liabilities after being named in about 1,000 lawsuits, with potentially more to come.
About 90 per cent of the group’s revenue comes from opioids that clinicians are increasingly reluctant to prescribe due to the addiction crisis. Losses were compounding at the company, which reported a net loss of $125m in 2018 on top of a $227m loss in 2017.
Insys shares dropped 45 per cent in Monday morning trading in New York after it said it would pursue court-supervised sales of substantially all of its assets and address its legacy legal liabilities.
It said it intended to carry on doing business using cash on hand and operating cash flows to pay employees and fund operations. The company had $104.1m in cash, cash equivalents and short-term and long-term investments at the end of 2018.
Insys had already said it was considering selling Subsys, as it tried to move away from opioids into developing pharmaceutical-grade cannabinoids.
Andrew Long, who was appointed chief executive in April, said Insys had “compelling assets” and a “highly talented team”.
“We believe this process will provide us with a forum to negotiate an equitable resolution with our creditors and represents the best opportunity for our people and our business,” he said in a statement.
The bankruptcy filing comes after Insys agreed last week to pay $225m to settle all the outstanding US criminal and civil claims against the company. The US government is listed as the largest unsecured creditor with the right to recover up to $195m. If the bankruptcy court does not approve the settlement, the government may be able to assert a claim of more than $1bn.
In total, eight former Insys executives have been prosecuted, including John Kapoor, the founder. Along with four of his colleagues, he was found guilty last month of racketeering conspiracy, for a bribery scheme that boosted the sales of Subsys. Mr Kapoor owns 63.2 per cent of Insys stock, according to the bankruptcy filing.
Insys also owes $30m to the healthcare fraud unit of the US attorney’s office for the district of Massachusetts, and a total of about $11m for counsel for Mr Kapoor. In total, there are more than 5,000 creditors and interested parties.
The opioid maker admitted illegal conduct when promoting Subsys, a very powerful opioid that was designed for the worst “breakthrough” pain suffered by cancer patients but was prescribed more widely. The accusations included paying kickbacks to clinicians, encouraging them to prescribe beyond cancer patients and lying to health insurers about diagnoses.
As the opioid epidemic roared across the US, with 2m people suffering from opioid use disorder, according to estimates from the Centers for Disease Control and Prevention, thousands of lawsuits have been filed against opioid makers. Purdue Pharma, owned by the Sackler family, has also said it is considering bankruptcy because of its large legal liabilities.
Insys aims to complete the asset sales and address its liabilities within 90 days.
Insys shares have fallen more than 97 per cent since their peak in 2015.