Report: OxyContin maker exploring bankruptcy filing
Filing for Chapter 11 protection would stanch the litigation and allow Purdue to negotiate claims with plaintiffs under the supervision of a U.S. bankruptcy judge, sources told Reuters, which first reported the possible action, citing unnamed people familiar with the matter. While estimates vary about the size of potential damages or settlements, a major resolution could cost many billions of dollars, a total that could far exceed Purdue’s annual revenues.
“As a privately held company, it has been Purdue Pharma’s longstanding policy not to comment on our financial or legal strategy. We are, however, committed to ensuring that our business remains strong and sustainable,” Purdue said in a statement Monday. “We have ample liquidity and remain committed to meeting our obligations to the patients who benefit from our medicines, our suppliers and other business partners.”
The company’s advisers include AlixPartners LLP, a New York-based consulting firm known for its restructuring work, the Wall Street Journal reported Monday. Last year, Purdue hired law firm Davis Polk & Wardwell LLP for restructuring help and appointed corporate-turnaround specialist Steve Miller as its new board chairman.
A bankruptcy filing is not certain, according to the sources cited by Reuters. The company could continue to fight the lawsuits.
Meanwhile, Purdue faces unrelenting legal pressure.
On Monday, it filed a motion to dismiss a headline-grabbing lawsuit filed by Massachusetts, whose allegations have ratcheted up the scrutiny of the company.
Massachusetts and Connecticut are the only states so far to not only sue Purdue, but also members of the Sackler family who own the company.
“We will oppose any attempt to avoid our claims and will continue to vigorously and aggressively pursue our claims against Purdue and the Sackler family,” Connecticut Attorney General William Tong said in a statement Monday.
Meanwhile, about 1,500 other lawsuits against Purdue and several other pharmaceutical companies have been consolidated in “multidistrict litigation” in federal court in Cleveland.
“We don’t want any of these companies to go out of business; this is not an act of vengeance,” Paul Hanly, co-lead counsel for the multidistrict plaintiffs, said in a recent interview. “This is litigation to recover money that these government entities have spent and lost as a consequence of the defendants.”
Some critics have suggested Purdue and other pharmaceutical companies that have been sued pay into a massive fund comparable to one financed by tobacco companies as part of a nationwide settlement in 1998 that was worth nearly $250 billion.
A comprehensive settlement — which would probably be reached through the multidistrict proceedings — could take several more months, even years, to reach.
“These defendants need ‘eternal peace,’” Hanly said. “That’s why this settlement is incredibly complex … because it has to be completely buttoned up. Otherwise, if there’s an escape hatch, the companies are presumably paying all this money to get sued (again), maybe not tomorrow, but perhaps a year from now, or three years from now.”
The extent to which Purdue and its owners, members of the Sackler family, could contribute to a settlement is debatable as the company does not publicly disclose its finances. The Sacklers’ combined net worth has been estimated at $13 billion.
Third-party estimates suggest OxyContin is still lucrative, but less so than at its peak. The drug’s sales in 2017 totaled $1.8 billion, down from $2.8 billion five years earlier, according to data from health care analytics company Symphony Health Solutions. Competition from generic drugs has contributed to the decline.
“One of the issues that we face is not all these companies are financially that cash-flushed,” then-Connecticut Attorney General George Jepsen said in an interview last year. “If you force them into bankruptcy, it might feel good. But it means you’re cutting off your nose to spite your face about getting some kind of future income stream, on a pay-as-you-go basis. But there’s just not the money in the industry that makes it like tobacco.”
Purdue’s declining headcount suggests it may be feeling fiscal strain. Last June, it announced approximately 350 layoffs, about half of which were linked to the elimination of its already-downsized sales force. Those job losses followed earlier cuts arising from its announcement in February 2018 that it would stop marketing OxyContin and other opioids to prescribers.
About 550 remain with the company, including 250 at its Stamford headquarters, according to the most recent count provided by the company. About a year ago, the firm reported employing about 1,100.
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