KV Pharmaceutical ($KV.A) has been offering Medicaid programs discounts on its premature birth drug Makena to try to gin up some sales. Now it is offering a discounted settlement to the drug's developer, Hologic ($HOLX), in an effort to keep the only product it has to sell.
KV, which filed for Chapter 11 bankruptcy protection Aug. 4, said in an SEC filing Monday that it has agreed to pay $60 million to settle a $95 million claim Hologic filed against KV in U.S. Bankruptcy Court. The deal, struck last week, is contingent upon KV receiving by Dec. 31 so-called debtor-in-financing, or DIP, funding from a lender to keep its operations going. The agreement with Hologic should go a long way toward making that happen.
In an emailed statement, KV noted the agreement still needs bankruptcy approval, but said, "The settlement is the result of several months of extensive negotiations between KV and Hologic and we are pleased with the outcome.... We view this as a critical step forward in the Company's plan to emerge from bankruptcy."
The FDA last year approved Makena, a hormone given to pregnant women with a history of giving birth prematurely. The agency, however, refused to ban compounded versions of the drug, which go for $10 to $20 a dose compared to the $595 price KV finally landed on. The St. Louis, MO-area company sued the FDA and said if the agency didn't ban compounded versions of the drug, it would have to file for bankruptcy. The FDA didn't and KV did. It has since agreed to sell the drug for less than $300 a dose to some state Medicaid programs as it seeks to find a market for its only product. It has also sued several states to try to get them to pay for the drug and has gotten a favorable ruling in Georgia.
KV missed a $45 million licensing payment to Hologic in August and then filed for bankruptcy. Hologic returned fire, filing its $95 million claim and pleading to the bankruptcy judge to let it reacquire the rights to Makena, which it sold to KV four years ago. It said KV's mismanagement of the drug was destroying Makena's value. KV disputed the mismanagement label and told the court that if it has to forfeit the drug, it is pretty much all over for the company and any hope of Hologic or any debtors getting repaid.