Essential Drug Company Files For Bankruptcy, Everything Must Go

Acorda Therapeutics, a renowned biotech company known for its pioneering treatments in the fight against Parkinson’s and Multiple Sclerosis, is facing challenges. On April 1, the company filed for Chapter 11 bankruptcy with plans to liquidate following a pending sale. This move gives insight on the broader issue.

Increased Bankruptcy Filings In Healthcare

Per a report by Gibbins Advisors, bankruptcy filings in the healthcare industry have skyrocketed, from 25 in 2021 to 46 in 2022, and 79 in 2023—the highest filings in half of a decade.

In just the early months of this year there has been a spike from approximately five filing in January to an additional 12 by February, clearly showing an unforeseen future for the industry.

Acorda Therapeutics

Acorda Therapeutics, which is located in Pearl River, N.Y.,  pursued legal action to restructure its company on April 1, seeking relief under Chapter 11 in the Southern District of New York.

They aim to negotiate a sale on Merz Therapeutics with a bid of $185 million.

Chapter 11 Cases In The Sector

High-profile Chapter 11 filings are on the rise, this includes Cano Health, which reported over $1 billion in both assets and liabilities when it filed on February 4.

Not long after, on February 13, Invitae Corp. followed by also declaring over $1 billion in liabilities against $500 million to $1 billion in assets.

Merz Therapeutics

According to this Chapter 11 bankruptcy filing, Merz Therapeutics has reached an agreement to an asset purchase with Acorda Therapeutics.

Merz is also known for developing medications for people who have movement disorders, such as MS and Parkinson’s

Expansion

Stefan König, the company’s CEO, discussed this upcoming expansion in North America in a statement.

König said, “We recognize the responsibility of providing continued patient care and support for Acorda’s well-established and innovative therapies and see this as an optimal potential portfolio expansion that underscores our ambition in key therapeutic areas.”

North America

Merz Therapeutics headquarters in Germany, is renowned for manufacturing Xeomin, a major rival of Botox. Lately, the company has been making moves to have more hold in North America.

Merz will seemingly continue to grow its presence throughout the United States, Canada, and Mexico.

Financial Strategy

Throughout this transition the company is seeking $60 million in debtor-in-possession financing.

This financing can be broken up into $10 million upon interim and final court approval, plus a $40 million debt roll-up.

Layoffs

Regrettably, Acorda Therapeutics has recently revealed that they will be letting go of many of their employees as they file for bankruptcy.

According to a New York State Department of Labor notice, all 97 Acorda Therapeutics employees that are located in the Pearl River-based location will be let go. This location will then be shut down completely. It is expected to close its doors in June of 2024.

Acorda’s Debt

In its filing, Acorda detailed a difficult financial landscape: $266.2 million in debt versus $108.5 million in assets.

This announcement caused Acorda’s shares to drop nearly 40%.

Working Until The Final Sale

In a statement issued by NASDAQ by A Business Wire insight is given on these layoffs. According to this statement, employees will work and run Acorda all the way up until its sale in June.

This is occurring as both companies work to ensure access to medication is continual for all patients during this time.

Ongoing Layoffs

Unfortunately this wouldn’t be the first time that Acorda had to lay off a significant portion of its staff. Even prior to filing for bankruptcy, the company has dealt with massive issues in attempting to save money.

This resulted in Acorda laying off 25% of its entire workforce in 2019 alone. In 2021, they laid off 16% at the beginning of the year, only to follow that up with another 15% being laid off later that year.

Patients

Acorda’s president and CEO Dr. Ron Cohen made a statement explaining they were taking  into consideration how patients who need these medications may be affected.

“One of our top priorities is to ensure an uninterrupted supply of our medications to people with multiple sclerosis and Parkinson’s disease,” Dr. Cohen stated. “We are confident that Merz Therapeutics, if they are the ultimate acquirer, will be able to seamlessly continue serving these patients’ needs, given Merz’s longstanding dedication to improving the lives of people who suffer from movement disorders and other neurological conditions.”

The History

Since being founded in 1995, Acorda has held a crucial role in the advancements of treatment for neurological conditions.

Their primary medication, Ampyra, has revolutionized the lives for patients with multiple sclerosis, enhancing their mobility and quality of life, managed through a partnership with Pantheon Inc.

Effects Of COVID-19 On The Business

In addition to all of this the Covid-19 pandemic only exacerbated issues with operations, slowing down sales and complicating prescription processes for their Inbrija drug.

These factors hampered the company’s ability to provide more funding for drug development and exploration.

Difficulties Leading to Bankruptcy

The journey to bankruptcy comes amid multiple setbacks for Acorda. In 2016, the company dealt with a failed $363 million acquisition of Biotie Therapies, which never generated revenue.

In 2018 Acorda encountered a significant setback when a court ruling nullified crucial patents for their medication Ampyra, leading to generic competitors drastically cutting their revenue streams.

Low Sales For Years

This bankruptcy also follows years on lower than anticipated sales. Many expected that their company would do exceptionally well in the market. Despite this, the company as a whole failed to bring in high sales.

This transpired for multiple reasons. Typical competition in the pharmaceutical industry played a significant role.

Disappointment In Sales

When Inbrija, one of the Parkinson’s drugs that Acorda was approved to make, first came on the market in 2018, it was expected that the company would hit $800 million in sales.

Unfortunately, adjustments had to be made when it became obvious that the treatment wouldn’t be bringing in this much money. It was then estimated that the company would make between $350 million to $500 million, instead of what was originally anticipated.

Drop In Estimations

However, optimistic sales projections for Acorda, the anticipated amount would end up being too high. In 2022, the company’s global sales only hit $30.9 million.

This meant that the gigantic sales estimation basically set the company up for failure, as Acorda didn’t bring in nearly as much as they anticipated they would.

Ampyra’s Sales

Ampyra, another medication that is manufactured by the company, was also expected to bring in high sales. Initially it did, in fact the drug brought in $455 million in sales in 2018.

However, when the company lost its four patents, the sales of the medication dropped drastically to $163 million the next year.

Auction Deadline

As the deadline of May 16th for auction approaches, Acorda is on a short timeline to figure out its financial crisis and find a new owner for its assets.

This is all part of the company’s efforts to find a path forward that gets them through their difficult financial situation.

Earnings In 2023

Ampyra sales In 2023 fell even further as the medication was faced with a generic medication giant as their competition.

The drug only brought in $15.7 million in 2023, adding to the list of medications that revenue was a huge flop for the company.

Hearing Scheduled

A critical sale hearing is scheduled for May 31, which will most likely determine the future of this business..

The hearing is an important part of the bankruptcy process, as it will decide the future of the company’s assets.

The End Of An Era

Acorda Therapeutics’ path through bankruptcy and liquidation marks a crucial moment in the  pharmaceutical industry.

Despite its significant contributions to neurological disease treatment, the company’s financial difficulties showcase the bigger pressures weighing on the healthcare industry today.