K-V Pharmaceutical (KV-A) Files for Ch. 11 Bankruptcy Protection

August 6, 2012 6:34 AM EDT
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K-V Pharmaceutical Company (NYSE: KV-A)(NYSE: KV-B) and certain of its domestic subsidiaries today filed voluntary Chapter 11 petitions under the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York, seeking the protection of Chapter 11 while it seeks to restructure its financial obligations.

The Company intends to continue to operate during the reorganization, subject to the supervision and orders of the Bankruptcy Court and in accordance with applicable provisions of the Bankruptcy Code, paying employees and vendors in the normal course of business for goods and services provided postfiling, and providing its women's health care products without interruption to meet the needs of the healthcare providers and patients it serves.

The Company reported in its filing papers that restrictions on reimbursement imposed by a number of State Medicaid agencies, as well as significant restrictions on manufacturing and marketing of other K-V products imposed by a previous FDA Consent Decree agreed to by the Company in March 2009 have also had a major negative impact on its revenues and ability to meet short and long-term obligations.

These obligations include a milestone payment under the terms of the Company's agreement with Hologic Inc. pursuant to which the Company purchased all rights to Makena®. The Company was unsuccessful prior to the filing in obtaining a renegotiation of the milestone payments owed to Hologic on terms that were acceptable to the Company. As a result, the Company was forced to file these Chapter 11 cases. The Company has enough cash on hand to operate its business in the near term and intends to seek new financing and use of cash collateral to provide additional time to enable the Company to continue operations, as it takes additional steps to restructure its financial obligations.

The Company has also been actively managing a number of legacy liabilities, most notably the impact of the consent decree formed with the FDA in March 2009, the penalties associated with its settlement with the U.S. Department of Justice in December 2011 related to the Company's former ETHEX generic pharmaceutical subsidiary, and other ongoing securities and other litigation matters.

Subject to the approval of the Bankruptcy Court, K-V has retained the services of Willkie Farr & Gallagher LLP as bankruptcy counsel, Williams & Connolly LLP as special litigation counsel, and SNR Denton as special litigation counsel. In addition, K-V has retained Jefferies & Co., Inc. as financial advisor and investment banker.

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