Athenex Pharma Solutions debtor eyes approval of Almirall settlement

By Sarah Lizee

Olympia, Wash., June 14 – Athenex, Inc. debtor Athenex Pharma Solutions, LLC is seeking approval of a global settlement that could bring in about $1.9 million to its estate and waive up to $80 million in claims, according to an emergency motion filed Tuesday with the U.S. Bankruptcy Court for the Southern District of Texas.

Background

Athenex Pharma Solutions manufactures and provides Klysiri, a prescription medicine used on the skin to treat actinic keratosis, to Almirall through a supply agreement dated Dec. 11, 2017.

Almirall, in turn, markets Klysiri under a licensing agreement, through which Almirall is required to pay royalties and make milestone payments to Athenex, Inc.

Before bankruptcy, Athenex sold its royalty income stream and rights to receive milestone payments under the Almirall licensing agreement to non-debtor ATNX SPV, LLC, an 80%-owned subsidiary of Athenex.

Historically, Athenex Pharma Solutions has operated at a net loss under the supply agreement and conveyed to Almirall its desire to reject and terminate the supply agreement.

In order to minimize the impact of the supply chain disruption that a termination/rejection would bring about, the parties recognized that a smooth transition to Almirall is necessary.

The Almirall relationship is further complicated by the fact that Almirall pays royalty income to the SPV, Athenex said.

The company said it can’t reject the supply agreement without triggering significant indemnification claims.

As such, the debtors, Almirall and certain purchasers engaged in a multi-prong negotiation that began prepetition and spanned several months, which has resulted in the settlement agreement.

Settlement terms

Under the settlement Almirall will agree to buy from Athenex Pharma Solutions its existing inventory on hand consisting primarily of the specialized raw material Tirbanibulin, which is the active pharmaceutical ingredient for Klysiri for $1.68 million.

The debtors will continue to manufacture and supply 23 lots of Klysiri to Almirall for a limited period of time, which will be delivered in three batches, for a total purchase price of $2.44 million.

In addition, Almirall agrees to reimburse the debtors for a significant portion of the carry and attendant costs of the production, after which the debtors’ and Almirall’s supply relationship will be terminated.

Athenex said the estates are anticipated to receive about $1.9 million because of the transactions, after taking into account the Almirall operating expense obligation.

The debtors will transfer their 80% equity interest in the SPV to the purchasers in exchange for a waiver by the purchasers of their claims against Athenex and certain security interests, including likely indemnification claims against Athenex that could amount up to $80 million.

Athenex is a clinical-stage biopharmaceutical company with headquarters in Buffalo, N.Y. The company filed bankruptcy on May 14 under Chapter 11 case number 23-90295.

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