A “Pleitegeier” vulture figurine representing bankruptcy sits on display inside a museum in Frankfurt, Germany. (Photographer: Alex Kraus/Bloomberg)

Opioid Maker Insys May File Bankruptcy as Cash Crunch Grows

(Bloomberg) -- Insys Therapeutics Inc. said it may seek bankruptcy protection after bleeding tens of millions of dollars on legal settlements and the costs of defending former executives convicted of bribing doctors to prescribe the company’s ultra-powerful opioid painkiller.

Insys said late Friday it has $87.6 million in cash and equivalents at the end of the first quarter, and $240.3 million in liabilities. It said it also may not be able to “complete” a $150 million settlement with the U.S. Justice Department over illegal marketing of its Subsys drug.

“These factors raise substantial doubt about the company’s ability to continue as a going concern,” Insys said in a press release. The company said it may have to liquidate its assets and that investors could lose all or part of their investments in the company.

Insys shares have plummeted more than 90 percent since their 2015 peak, when questions arose about the company’s aggressive promotion of Subsys, a powerful opioid painkiller that’s administered with a mouth spray.

The company didn’t say when it might file for Chapter 11 protection, and there’s no guarantee that it will. Jackie Marcus, an Insys spokeswoman, didn’t immediately respond to a phone call seeking comment after regular work hours Friday.

The announcement could mark the beginning of the end for the Chandler, Arizona-based drugmaker. Earlier this month, Insys founder John Kapoor and four ex-executives were convicted of engaging in a racketeering conspiracy to use a sham speaker’s program to bribe doctors into ramping up off-label Subsys prescriptions and then duping insurers into covering the shady scripts.

Kapoor and the others -- who haven’t yet been sentenced -- face a maximum of 20 years in prison each on the charges. With his conviction, the former billionaire becomes the first pharma CEO to face significant jail time in connection with allegations he helped fuel the U.S.’s current opioid epidemic.

Insys said in March that it had hired Lazard Ltd. to advise it on capital planning and the evaluation of strategic alternatives. The company said Friday that it will continue to look at strategic alternatives or selling assets.

In the filing, Insys warned investors that “there are no assurances that the company will be successful in implementing a strategic plan for the sale of its assets in order to address its impending liquidity constraints.”

Insys agreed last year to pay $150 million to resolve the government’s civil and criminal probes into illegal marketing tactics used to lure doctors into writing more Subsys prescriptions. Under the deal, Insys was slated to pay the money over five years and meet other requirements.

The company’s dwindling cash reserves, however, have raised doubt about whether Insys can complete the settlement.

Insys is also paying legal-defense costs under an indemnity agreement, common at many large companies, requiring it to cover any investigation, defense, settlement or appeal-related expense for Kapoor and other former managers. Insys said last year Kapoor’s defense alone had cost the company $28 million so far.

In Friday’s release, Insys officials said indemnity defense costs “increased to $25.7 million for the first quarter of 2019, compared to $10.3 million in the first quarter of 2018.” That figure included more than $18 million Kapoor’s defense lawyers racked up preparing and putting on his defense during a two-month trial in Boston, the company said.

“Management is disputing the reasonableness of certain indemnification-related expenses for this quarter and prior periods,” Insys said in the statement. Beth Wilkinson, Kapoor’s lead defense attorney in the Boston case, didn’t immediately respond to phone and email messages seeking comment on the company’s challenges to her client’s legal bills.

The criminal case is U.S. v. Kapoor, 16-cr-10343, U.S. District Court, District of Massachusetts (Boston).

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