Insys Therapeutics (NASDAQ: INSY), based in Chandler, Ariz., has filed for bankruptcy protection under Chapter 11 of the federal bankruptcy code. The company said it would continue operating while it comes up with a plan to pay its creditors. The move is not a total surprise, as Insys warned investors last May that its legal costs could lead to filing for bankruptcy protection.
The bankruptcy filing comes days after the company settled a federal investigation into claims it illegally marketed its fentanyl painkiller by agreeing to pay $225 million. Subsys, the painkiller that had come under scrutiny, will be divested from the company as part of the settlement agreement. Insys also agreed to plead guilty to five counts of mail fraud and pay a $2 million fine and $28 million in forfeiture.
Subsys, a powerful fentanyl painkiller taken as an under-the-tongue spray, was approved by the Food and Drug Administration (FDA) in 2012. It was approved only for cancer patients who were already taking round-the-clock opioid painkillers. However, its off-label use to treat pain made it a blockbuster drug, earning the company billions.
The top executives at Insys were accused of bribing doctors to prescribe Subsys and misleading insurers about patients’ need for the drug. In May, a federal jury in Boston found those executives guilty. The five convicted former Insys execs, including its founder John Kapoor, each face up to 20 years in jail. Kapoor has become the first head of a drug company to face prison time for his role in the nationwide opioid crisis.
The bankruptcy filing marks the first time an opioid manufacturer has filed for Chapter 11. It is a far fall for the company that was the best performing initial public offering of 2013. While the stock was worth about $7 per share one year ago, it is worth about 60 cents per share today. Insys shares are now scheduled to be delisted from the NASDAQ on June 19.