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Court Approves First Bankruptcy Sale of a Major Opioid Drug

Steven Church

(Bloomberg) -- Insys Therapeutics Inc. won court approval to sell the rights to its highly addictive painkiller, Subsys, after a last-minute deal with state officials that imposes tight restrictions on the future marketing of the fentanyl-based drug.

The restrictions adopted by BTcP Pharma, LLC, the buyer, are designed to ensure the spray is marketed only to cancer specialists, not doctors in general, U.S. Bankruptcy Judge Kevin Gross said in approving the sale. In May, Insys founder and former Chief Executive Officer John Kapoor and four former executives were convicted of bribing doctors to boost off-label prescriptions of Subsys, even though it was originally intended to treat cancer pain.

Insys was the first drugmaker pushed into bankruptcy by an onslaught of lawsuits filed across the U.S. intending to hold pharmaceutical companies responsible for America’s opioid addiction crisis. The sale approved Thursday in federal court in Wilmington, Delaware, marks the last major step in dismantling Insys. In June, the company agreed to sell its assets in bankruptcy to raise money to cover a $225 million settlement with the U.S. Justice Department and others.

To win support from Maryland and a number of other states, BtcP agreed to limit how it markets Subsys in the future, Jim Morgan, an attorney for BTcP said in court. Those concessions came from discussions held in the last 48 hours, he said.

The sales aren’t likely to raise enough money to cover the government settlement or other debts. Under the deal, BTcP will split future profits on the sale of Subsys and related products with creditors. Insys bankruptcy attorney Candace Arthur said the deal may be worth $20 million in the future, in addition to as much as $5 million raised from existing inventory and accounts receivable.

The Chapter 11 case of Chandler, Arizona-based Insys was a dress rehearsal for the biggest opioid-related bankruptcy, filed Sunday in New York by Purdue Pharma LP. Like Insys, Purdue will attempt to monetize all of its assets to settle the more than 2,000 lawsuits it faces. And like Insys, Purdue faces opposition from many state attorneys general to a proposal to temporarily halt all litigation during the bankruptcy.

When Insys moved to shut down all unsettled suits it faces, the move was opposed by states including Maryland and Florida. The states argued their regulatory and police powers are exempt from the federal law that gives bankrupt companies a temporary respite from litigation. Before Gross could rule on that dispute, the states and the company settled, allowing the sales to go forward while the lawsuits were delayed.

Purdue said in court papers that it expects similar opposition in its bankruptcy.

The case is Insys Therapeutics, No. 19-11292, U.S. Bankruptcy Court for the District of Delaware (Wilmington).

(Updates with dispute over litigation halt beginning in fifth paragraph.)

To contact the reporter on this story: Steven Church in Wilmington, Delaware at schurch3@bloomberg.net

To contact the editors responsible for this story: Rick Green at rgreen18@bloomberg.net, Dawn McCarty, Nicole Bullock

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