To no­body’s sur­prise, con­tro­ver­sial opi­oid drug­mak­er In­sys is fil­ing for bank­rupt­cy.

John Kapoor In­sys

Last week, the com­pa­ny $IN­SY agreed to pay $225 mil­lion to set­tle the US gov­ern­ment’s sep­a­rate crim­i­nal and civ­il in­ves­ti­ga­tions re­lat­ed to its fen­tanyl spray Sub­sys, about a month af­ter its founder and for­mer se­nior ex­ec­u­tive team were found guilty by a fed­er­al ju­ry of rack­e­teer­ing. Founder John Kapoor and his four com­pa­tri­ots’ an­tics in­clud­ed brib­ing doc­tors to pre­scribe the po­tent, ad­dic­tive painkiller and dup­ing in­sur­ers in­to pay­ing for the dead­ly opi­oid drug.

The US De­part­ment of Jus­tice set­tle­ment com­pound­ed the stress on a fi­nan­cial­ly strained In­sys. Last month, the com­pa­ny in­di­cat­ed it was fac­ing a liq­uid­i­ty cri­sis trig­gered by the litany of law­suits it was sub­ject to, and in April, In­sys’ au­di­tor raised doubts on the drug­mak­er’s abil­i­ty to con­tin­ue as a go­ing con­cern.

“Af­ter con­duct­ing a thor­ough re­view of avail­able strate­gic al­ter­na­tives, we de­ter­mined that a court-su­per­vised sale process is the best course of ac­tion to max­i­mize the val­ue of our as­sets and ad­dress our lega­cy le­gal chal­lenges…” In­sys CEO An­drew Long said in a state­ment on Mon­day. The com­pa­ny’s shares $IN­SY sank about 46% in­to pen­ny stock ter­ri­to­ry at 71 cents in ear­ly morn­ing trad­ing.

The chap­ter 11 fil­ing will al­low for the pletho­ra of lit­i­ga­tion against In­sys to be pre­sent­ed be­fore a soli­tary judge who will de­ter­mine what each plain­tiff will re­ceive.

The firm will con­tin­ue to sell Sub­sys, while it looks for buy­ers for the spray and its oth­er as­sets. If In­sys is un­able to woo a Sub­sys suit­or in 90 days, the com­pa­ny will be com­pelled to stop mar­ket­ing it, ac­cord­ing to a June 5 agree­ment with the HHS. Sub­sys ac­count­ed for a bulk of $82 mil­lion in 2018 In­sys sales (to­tal loss for that year was about $124 mil­lion), down from $141 mil­lion in 2017 and a far cry from $242 mil­lion in 2016.

Af­ter re­view­ing In­sys’ court doc­u­ments, Er­ic Sny­der of NYC-based law firm Wilk Aus­lan­der found that the In­sys has 92 patents and 62 patent ap­pli­ca­tions pend­ing, mak­ing it dif­fi­cult to val­ue the com­pa­ny’s as­sets. “They say that they are seek­ing to con­duct an auc­tion sale of all of their as­sets on an ex­pe­dit­ed ba­sis, but they have yet to file a mo­tion seek­ing this au­thor­i­ty,” he said in an emailed state­ment.

“This case is very un­usu­al, be­cause they (In­sys) do not have a se­cured cred­i­tor/lender.  So, they are self-fund­ing the bank­rupt­cy. This is very ex­pen­sive and that is prob­a­bly the rea­son they mov­ing for an im­me­di­ate auc­tion, even though they have no “stalk­ing horse” (par­ties in con­tract) bid­ders,” added Sny­der, who serves as chair­man of his firm’s bank­rupt­cy de­part­ment.

In­sys is hard­ly the on­ly opi­oid drug mak­er in fi­nan­cial trou­ble. Pur­due Phar­ma — the mak­er of one of the most wide­ly abused pre­scrip­tion opi­oid painkiller Oxy­con­tin — is re­port­ed­ly con­sid­er­ing bank­rupt­cy. Mean­while, oth­er drug man­u­fac­tur­ers, dis­trib­u­tors and phar­ma­cies are al­so fac­ing hun­dreds of civ­il law­suits for their role in prop­a­gat­ing the opi­oid cri­sis.

“(T)here is lit­tle doubt that Pur­due, the mak­er of Oxy­con­tin, will be next. The po­ten­tial li­a­bil­i­ty and the stig­ma of its as­so­ci­a­tion with the drug over­comes any val­ue of the as­sets,” Sny­der said.

In­sys’ Sub­sys — which is made of fen­tanyl, the man-made opi­oid 50 times more po­tent than hero­in and 100 times more po­tent than mor­phine — was ap­proved in 2012 by the FDA for break­through can­cer pain. Pros­e­cu­tors charged the for­mer In­sys ex­ec­u­tives with in­flat­ing Sub­sys sales by brib­ing doc­tors to pre­scribe the drug to pa­tients with­out can­cer — in an elab­o­rate scheme that in­clud­ed win­ing and din­ing physi­cians, pay­ing them to speak at “ed­u­ca­tion­al events” — there­by fu­el­ing the rag­ing opi­oid cri­sis that kills 130 Amer­i­cans every day. Ju­rors at the tri­al were giv­en a front-row seat to the video en­gi­neered to train the com­pa­ny’s sales reps, in which two im­pec­ca­bly suit­ed men — os­ten­si­bly In­sys em­ploy­ees — rapped about com­pa­ny busi­ness strat­e­gy: “I love titra­tions. Yeah, that’s not a prob­lem. I got new pa­tients, and I got a lot of ‘em…If you want to be great, lis­ten to my voice. You can be great — but it’s your choice.”

Founder John Kapoor — and four mem­bers of the for­mer se­nior ex­ec­u­tive team — face up to 20 years in prison and will be sen­tenced in Sep­tem­ber.

Bat­tered by scan­dal, In­sys in re­cent years sharp­ened its fo­cus on cannabis-de­rived drug de­vel­op­ment, but even in that are­na its track record is trou­bling. In 2016, the Ari­zona-based com­pa­ny re­port­ed­ly do­nat­ed $500,000 to a cam­paign against the le­gal­iza­tion of cannabis in the state, out­rag­ing mar­i­jua­na ac­tivists who ac­cused the com­pa­ny of try­ing to sti­fle com­pe­ti­tion. That skep­ti­cism was war­rant­ed when the fol­low­ing March In­sys’ cannabi­noid oral so­lu­tion Syn­dros was resched­uled by the DEA — at the fed­er­al lev­el cannabis is strict­ly con­trolled in the same sched­ule LSD and hero­in is, and any de­rived prod­uct must be rel­e­gat­ed to low­er cat­e­go­ry be­fore it can be sold — and thus primed for launch.

Im­age: In­sys (Glass­door)

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