Bankrupt Valeritas’ $23 Million Sale, Linked Settlement Approved

Medical device company Valeritas Holdings Inc. won court approval of its $23 million sale and a settlement with key stakeholders, drawing a road map for exiting a bankruptcy spurred by the new coronavirus.

The sale, approved Friday by Judge Laurie S. Silverstein of the U.S. Bankruptcy Court for the District of Delaware, will allow the “vast majority” of Valeritas’ employees to keep their jobs, the company said in a statement.

The company filed bankruptcy in February after manufacturing was hampered by shut-downs in China and elsewhere resulting from Covid-19, the disease caused by the virus, Valeritas said. The company had already been suffering shortages of operating capital when the pandemic struck, it said.

Friday’s hearing was conducted with all parties and counsel attending by telephone to avoid social interaction. Had it been necessary for supporting witnesses to be cross-examined, they would have appeared remotely through Skype.

The Delaware bankruptcy court first tested its capacity to hold hearings via telephone and Skype Thursday.

Trustee’s Objections Addressed

Valeritas’ sale is connected to a settlement the company reached with pre-bankruptcy secured lenders and unsecured creditors that lists how the the sale proceeds will be dispersed.

Concerns lodged a day earlier by the U.S. Trustee’s Office, the Justice Department’s bankruptcy watchdog, were resolved prior to the hearing Friday, the debtor and trustee told the court.

The trustee objected because the deal left open a possibility that creditors could be paid outside the bankruptcy codes’ payment priority scheme. But Valeritas agreed not to dismiss its Chapter 11 case and instead said the case will be resolved only through a court-approved reorganization plan or by converting to a Chapter 7 liquidation.

Denmark-based biotechnology company Zealand Pharma A/S will close its purchase of Valeritas’ wearable insulin delivery device business by April 3 at the latest, the parties told the court.

The sale will be free and clear of all liens and claims, including for successor liability. That means anyone suing for an injury sustained from the product before the sale can’t sue the purchaser.

Under the deal, creditors will share in sale proceeds in percentages that depend on the net amount realized after costs and administrative expenses are paid. If the net is less than $6 million, the pre-bankruptcy lenders will get 90% and a trust for unsecured creditors will receive 10%. If the net is equal to or greater than $6 million, the split will be 85%-15%, according to court filings.

Bridgewater, N.J.-based Valeritas has been marketing its V-Go device for almost a year, the court said, finding that the business was adequately marketed.

The case is In re Valeritas Holdings, Inc., Bankr. D. Del., No. 20-10290, Hearing on Sale and Settlement 3/20/20.