Shares in niche pharmaceutical company Akorn (AKRX) are plunging 27% in Thursday’s pre trading on the news that the company has filed for voluntary protection under Chapter 11 of the U.S. Bankruptcy Code.
The filing, made in United States Bankruptcy Court for the District of Delaware, is to execute an in‑court sale of its business while addressing litigation-related overhangs and best positioning the business for long-term success under new ownership.
In connection with the filing, the company announced that it has also executed a Restructuring Support Agreement with lenders representing more than 75% of its secured debt, who will collectively serve as a “stalking horse” bidder in the company’s sale process. This means they will provide additional liquidity to fund the Akon’s business operations during this process.
To help fund and protect its operations during the Chapter 11 process, Akorn will use cash collateral from all of its existing lenders, and has received commitments from certain of its lenders for $30 million in debtor-in-possession financing.
Doug Boothe, Akorn’s CEO, commented, “We look forward to separating legacy litigation and debt from the Company’s most valuable assets – our products, our people, our manufacturing facilities and our knowledge – so that we can move forward unencumbered by these liability exposures under new ownership that believes in our future.”
The Chapter 11 cases include Akorn and each of its U.S. subsidiaries. The company’s entities in India and Switzerland are not included in the Chapter 11 filing.
RBC Capital’s Randall Stanicky previously rated the stock a hold with a $2 price target, writing “Given the magnitude of risk and uncertainty involved, we believe our price target and implied return support our Sector Perform, Speculative Risk rating.”
He also notes that the company’s attempted sale process was negatively impacted by broader market uncertainties related to COVID-19. Akorn announced at the end of March no bids in its ongoing sale process sufficient to pay off the company’s Term Loan obligations, resulting in an immediate event of default.
So far year-to-date AKRX is trading down over 80%. (See Akorn stock analysis on TipRanks)
Gilead and Galapagos Score Positive Topline Results For Ulcerative Colitis Trial
Moderna Spikes 21% Amid “Positive” Early-Stage Covid-19 Vaccine Data
AstraZeneca-Merck Lynparza Prostate Cancer Treatment Gets FDA Approval