A Closer Look at the Savient Pharmaceuticals Bankruptcy

Savient Pharmaceuticals, Inc. (“Savient”) filed chapter 11 petitions for bankruptcy on October 14, 2013. Savient filed for bankruptcy in the United States Bankruptcy Court for the District of Delaware.  According to the company’s bankruptcy petition, Savient heads in to bankruptcy with $73 million in assets and $260 million in liabilities.  The company’s origins go back to 1980 when it started under the name Bio-Technology General Corp and changed its name to Savient in 2003.  See Declaration of Savient’s CFO in Support of First Day Pleadings (the “Declaration” or “Decl.”) at *3.  Savient describes itself as a “specialty biopharmaceutical company” which focuses its business on the sale of Krystexxa throughout the United States and around the world.  Decl. at *4.  Krystexxa is a drug used to treat patients suffering from “Refractory Chronic Gout,”  a form of arthritic condition.  Id.

Savient does not own or operate its own manufacturing facilities.  Instead, the company utilizes third-party manufacturers and distributors such as NOF Corporation and Bio-Technology General (Israel), a former subsidiary of Savient.  Decl. at *5.  Krystexxa was approved by the FDA for the U.S. market in 2010.  The company has a limited market for its product.  A recent market study estimated there were approximately 120,000 patients with Refractory Chronic Gout.  Of these patients, 20,000 to 40,000 were being treated by rheumatologists, 9,000 of which were seen by rheumatologists likely to prescribe Krystexxa.  Despite the limited market, Krystexxa sells for $5,390.  Decl. at *6. 

Going in to bankruptcy, Savient employs 82 individuals, approximately half of which are located in the company’s Bridgewater, New Jersey headquarters.  Decl. at *8.  Approximately one quarter of the company’s employees are engaged in research, another quarter in administrative activities and approximately one half are involved in sales and marketing.  Id.

Savient attributes its need for bankruptcy protection, in part, to a lack of liquidity as the company develops and markets Krystexxa.  Decl. at *11.  In order to bring Krystexxa to market, Savient had to build its sales force, market the product and conduct multiple clinical programs. Decl. at *12.  Since the FDA approved Krystexxa in 2010, the company has spent over $73 million on research and $141 million on sales and marketing.  Decl. at *13. 

Despite increasing its product pricing and reducing staff, Savient continued to lose money over the last year.  As of June 30, 2013, Savient’s cash holdings were at $51.5 million, down from $142 million the year prior.  In September of 2013, Savient’s board implemented a plan to restructure the company.  The company engaged in a sale process which ultimately led to an acquisition agreement with US WorldMeds.  The parties agreed the sale to US WorldMeds would be completed through a sale of assets under section 363 of the Bankruptcy Code.  Decl. at *16-17.  On October 14, 2013, Savient executed an Acquisition Agreement with Sloan Holdings, C.V., a subsidiary on US WorldMeds. Under the Acquisition Agreement, Savient seeks to sell substantially all of its assets to Sloan, subject to better and higher offers through a competitive bidding process.  Decl. *17-18. 

The Savient bankruptcy proceeding is before the Honorable Mary F. Walrath.  This bankruptcy proceeding is under case no. 13-12680 (MFW).  Savient is represented by the law firm Skadden Arps Slate Meagher & Flom. 

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Jason Cornell is an equity partner with the law firm Fox Rothschild LLP. Jason is a creditors’ rights attorney who is admitted and practices before the United States Bankruptcy Court for the District of Delaware and the United States Bankruptcy Court for the Southern District of Florida. You can reach Jason at 302 427 5512 or [email protected].

Below are some additional posts Jason has written concerning Delaware bankruptcy litigation:

Ten Things Every Commercial Landlord Should Know About a Tenant in Bankruptcy.

Seeking Relief from the Automatic Stay in Delaware.

A Tale of Two Bankruptcy Auctions.

What Information is Required in a Chapter 11 Disclosure Statement?