Its restructuring advisers now include AlixPartners LLP, a New York-based consulting firm known for its restructuring work, according to a person familiar with the hiring. The company last year hired law firm Davis Polk & Wardwell LLP as restructuring counsel and added longtime restructuring specialist Steve Miller to chair its board.
Purdue has been targeted in lawsuits by some 1,600 cities, counties and states seeking to recoup costs incurred by widespread opioid abuse. The municipalities claim Purdue and other drugmakers’ aggressive marketing of prescription painkillers helped hook the nation on opioids, leading to a proliferation of overdoses from both legal and illegal opioids.
Purdue has denied the allegations in the lawsuits and said it is committed to being part of the solution to the opioid epidemic. The privately held company said Monday it doesn’t comment on financial or legal strategy but that, “We have ample liquidity and remain committed to meeting our obligations to the patients who benefit from our medicines, our suppliers and other business partners.”
The Stamford, Conn.-based company has no significant debt, the people familiar with the matter said, but is considering using a chapter 11 filing to resolve the mounting litigation.
A bankruptcy filing would immediately halt the lawsuits and provide an avenue to settle the claims on a global basis overseen by the bankruptcy court. The process could provide a quicker and more orderly resolution of the lawsuits than through the state and federal courts where they were filed. But the exact nature of how the cases would be dispensed with in bankruptcy is unclear.
The timing of a potential bankruptcy is in flux, the people said, and may not happen at all. Reuters earlier reported Purdue’s potential bankruptcy plans.
Companies have for decades turned to U.S. bankruptcy courts as a tool to manage litigation liabilities. USA Gymnastics sought bankruptcy protection in December in the face of a scandal over sexual abuse by the national team’s former doctor. California’s largest utility, PG&E Corp. , filed for chapter 11 in January to help contend with more than $30 billion in potential liability costs related to its role in sparking deadly wildfires.
Purdue and other companies are engaged in settlement talks under the direction of a U.S. District Judge in Ohio who is overseeing hundreds of opioid lawsuits filed in federal court, a process known as multidistrict litigation. The judge, Dan Polster, has pushed the parties to settle while scheduling a few so-called bellwether trials in October to help test the claims.
An earlier trial is scheduled in Oklahoma state court in May against Purdue and other drugmakers. Oklahoma is one of 36 states that have sued Purdue outside of the multidistrict litigation.
In late 2018, information shared with parties in the multidistrict litigation revealed that Purdue’s assets may not be enough to resolve the company’s potential liability, in part because most of its profits had been regularly transferred to members of the company’s controlling family, the Sacklers, according to people familiar with the matter. Sackler family members still own the company through trusts and for years controlled its board of directors and held senior management positions.
OxyContin was approved by U.S. regulators in 1995. The company faced a federal investigation in 2007 that led it and three of its executives to plead guilty to criminal charges of misleading the public about the addiction risk related to the drug. Purdue and the executives paid $634.5 million in government penalties and costs to settle civil litigation.
Purdue continues to make OxyContin and other drugs but has been pared down to around 550 employees. The company last year said it was laying off the remainder of its sales force and would no longer actively promote OxyContin to U.S. doctors. Purdue’s sales representatives for years numbered above 600, court documents show. The company is trying to expand its nonopioid products: A Purdue subsidiary recently received U.S. Food and Drug Administration approval for a drug to treat attention-deficit hyperactivity disorder.
The Sacklers have been the subject of renewed scrutiny since January, when a judge unsealed new information in a lawsuit filed by the Massachusetts attorney general against Purdue and several former executives and board members, shedding light on family members’ alleged hands-on role in running the company.
Purdue sent a motion to dismiss the Massachusetts complaint to the state on Friday, calling the lawsuit a hyperbole-filled attempt to vilify the company. Purdue argues it “neither created nor caused the opioid epidemic in Massachusetts,” as the state alleges, and points to past statements Massachusetts officials made calling the crisis a complex issue with many contributing factors.