New Chapter 11 Bankruptcy Filing - Valeritas Holdings Inc. $VLRX

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Valeritas Holdings Inc.

February 9, 2020

After a particularly active year in 2019 for both biopharma and biotech, we were wondering when 2020 might usher in its first case in the category. Now we have it.

New Jersey-based Valeritas Holdings Inc. ($VLRX) and three affiliates (the “debtors”) filed for bankruptcy to effectuate a sale of its Chinese-manufactured insulin delivery device (V-Go) and associates assets to Zealand Pharma A/S ($ZEAL) for $23mm in cash plus the assumption of certain liabilities.

On the surface, there’s not much new here: most of these biotech cases follow the same pattern. The debtors get to a certain stage of development and then run out of cash and try to find a strategic partner. That’s what happened here. Except the debtors also ran into a manufacturing issue. Consequently, they had to halt product delivery and take time to identify and solve for the issue, suffering a $3.5mm inventory write-off in the process. All of this scared away any potential buyers.

This is where the coronavirus comes in. Per the company:

Notwithstanding the Company’s quick response to address the manufacturing yield issue, it could not resurrect the Out of Court Process. Moreover, the yield issue unfortunately coincided with certain external factors impacting production. The CMO and the Company’s other manufacturers and suppliers in China are closed for the Lunar New Year (Chinese New Year) celebrations, which took place this year between January 27, 2020 through February 3, 2020, which was extended through February 9, 2020 by the Chinese government due to the coronavirus epidemic in China.

There’s more:

Additionally, many Chinese businesses, including the Company’s CMO, employ rural workers and, as a result, may experience production capability issues due to the uncertainty surrounding when these rural employees will return to work. All of the foregoing unanticipated delays further strained the Company’s balance sheet and truncated its financial runway, although, due to careful planning, it generally has not impacted the Company’s ability to make V-Go® available to the majority of patients to date. Specifically, these delays have impacted new production, retesting of existing V-Go® kits, and the packaging and shipping of finished goods to the United States.

Oooof. Talk about bad timing. Query whether this depressed the purchase price. 🤔

So, there you have it folks: our first coronavirus mention in US-based bankruptcy papers. We reckon it won’t be the last.

  • Jurisdiction: D. of Delaware (Judge )

  • Capital Structure: $20mm Term Loan (Capital Royalty Group)

  • Professionals:

    • Legal: DLA Piper LLP (Rachel Albanese, Maris Kandestin)

    • Financial Advisor: PricewaterhouseCoopers LLP

    • Investment Banker: Lincoln International Inc.

    • Claims Agent: KCC (*click on the link above for free docket access)

  • Other Parties in Interest:

    • DIP Lender: HB Fund LLC

    • Senior Secured Lender: Capital Royalty Group

    • Stalking Horse Purchaser: Zealand Pharma A/S