K-V Pharmaceutical (>> KV PHARMA'B') is protesting drug maker Hologic Inc.'s (>> Hologic, Inc.) "brazen" attempt to circumvent bankruptcy law to get its hands on the rights to Makena, a drug that reduces the risk of premature births.
K-V Pharmaceutical, which filed for bankruptcy last month, said in a court filing Thursday night that Hologic is trying to derail its restructuring efforts in order to reacquire the worldwide rights to Makena. The premature birth drug is crucial to K-V's business and reorganization efforts.
"Without Makena, the debtors will have no prospects for a successful restructuring," K-V's lawyers said in a filing in U.S. Bankruptcy court in New York.
Hologic developed Makena and then sold the rights to K-V Pharmaceutical four years ago. Last year the Food and Drug Administration granted Makena exclusive "orphan drug" status for seven years, prompting some industry analysts to peg the value of the drug at more than $2 billion.
But Hologic says K-V's missteps and mismanagement are rapidly depleting the drug's value and it wants to reacquire its rights to the drugs.
K-V initially marketed the drug at $1,500 per shot, a price which prompted howls of protests from women, obstetricians and members of Congress. The public outcry resulted in the Food and Drug Administration's decision to refrain from taking action against "compounders" that make far cheaper premature-birth drugs using the same active ingredient as Makena's.
While K-V later cut the price, the damage was done. K-V is suing the Food and Drug Administration in Washington over its decision. The company says it was the "misguided policy decisions by the FDA"--and not its own missteps--that caused it to miss a $45 million August payment due to Hologic and file for bankruptcy.
In any event, K-V said Hologic's allegations of mismanagement are "just plain wrong." In fact, the company says its recent negotiation strategies with state Medicaid agencies and targeted litigation with the FDA are growing Makena's market share and increasing revenue.
That's important because Hologic wants a bankruptcy judge to lift the automatic stay, barring it from reacquiring the rights to the drug.
The automatic stay, a cornerstone of U.S. bankruptcy law, bars creditors from interfering with a company's property, pursuing lawsuits or trying to collect payment for debts. To get a judge to lift the stay, Hologic needs to prove the value of its interest in Makena is declining in value and that K-V can't protect it.
A Hologic lawyer wasn't immediately available for comment.
A preliminary hearing on the dispute is slated for Monday.
(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection. Go to http://dbr.dowjones.com)
-Joe Checkler contributed to this article.
Write to Patrick Fitzgerald at firstname.lastname@example.org. Follow him on Twitter @WSJBankruptcy
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