The Bedminster, N.J.-based specialty pharmaceutical company will fight for its life on Aug. 7, the day Judge Amy Berman Jackson of the U.S. District Court for the District of Columbia will hear arguments as to whether she should force the FDA to grant more strict market exclusivity for K-V's preterm birth drug.
Should Berman rule in K-V's favor, it may get a new lease on life. If she doesn't, however, K-V will likely end up filing a bankruptcy petition in the near future.
"Without a major change in the marketplace for Makena very soon, K-V cannot survive," court papers said.
A representative for the FDA said that the agency doesn't comment on ongoing litigation.
K-V produces Makena, a drug that reduces the risk of premature births in women who have had such births previously. The potential market for the drug consists of more than 130,000 women per year in the U.S.
The FDA approved Makena in February 2011, making it the only treatment on the market sanctioned by regulators.
It was given orphan drug status -- for drugs developed to treat a condition affecting less than 200,000 people in the U.S. -- and along with it, seven years of market exclusivity.
K-V has never reaped the benefits, however, because the FDA hasn't stopped the traditional form of treatment for women -- a compounded injection of hydroxyprogesterone caproate, commonly known as either HPC or 17P -- even though nearly all of the active pharmaceutical ingredients, or APIs, used in the compounds come from factories in China, which are "least likely to be inspected by the FDA," K-V said.
The FDA typically doesn't review or approve compounded drugs, named as such because they are made through a process by which a pharmacist or doctor combines, mixes or alters ingredients to create a customized medication for the needs of an individual patient.
K-V claimed to have hired independent laboratories to test 10 arbitrary samples and that nine failed at least one of the specifications the FDA set for Makena.
While the FDA conducted its own investigation and found that the compounded treatments didn't raise safety concerns, K-V claimed that the tests were "conducted under circumstances less likely to lead to representative results." Namely, those making the compounds were told ahead of time, the company alleged.
K-V believes the FDA is allowing compounded versions to sell on the market due to "political pressure" over Makena's list price.
Orphan drugs are typically among the most expensive sold on the market, since a pharmaceutical company has to make up the costs of development through a smaller patient population.
Makena was originally listed at $1,500 per injection, and $30,000 over the course of treatment, but K-V later reduced the list price to $690 per injection. In addition, K-V noted that the actual net price paid by most patients is $20 or less per injection due to various financial assistance programs. Compounded injections cost between $10 and $20 per shot.
"The press reports about Makena's price led to pressure by members of Congress on the [FDA] to do something to make [compounded injections] available at a price lower than the initial list price of Makena," court papers said.
K-V said the agency's lack of action has threatened its survival, warning that Makena can't generate the cash K-V needs to satisfy its expenses. K-V will run out of cash in three to six months and will have to file for bankruptcy before then if the FDA doesn't take action.
As a result, it sued the agency on July 5, documents show.
K-V relies "almost entirely" on Makena to meet its expenses and cover its debt payments. The drugmaker has about $455.6 million in debt, consisting of $425 million through two classes of notes, one a 12% class due in March 2015 and the other a 2.5% class due in May 2033.
It also owes $30.6 million outstanding on a mortgage loan. By comparison, it posted just $23.2 million in sales in fiscal 2012, and just $11.8 million from sales of Makena, according to regulatory filings.
As a result, K-V is hemorrhaging cash, having posted a $102.3 million net loss in fiscal 2012 following a $271.7 million net loss in fiscal 2011. Independent auditor BDO USA LLP has already raised substantial doubt that the company can continue as a going concern.
K-V's 12% notes are trading at 48.24 for a yield of 48.529% as of Wednesday, according to the Trace system of the Financial Industry Regulatory Authority Inc., an independent regulator of securities firms.
The trading is an improvement from earlier this month, when the note traded as low as 35 on July 2.
The 2.5% notes last traded at 10.3 for a yield of 25.692% on Tuesday, down from earlier this month. The notes traded at 17 on July 2.
K-V bought the rights to Makena from Hologic Inc. in 2008 for up to $199.5 million and has ultimately spent more than $275 million total on the drug's development, documents show.
Richard Cooper, Holly Conley and Michael Pinkel of Williams & Connolly LLP represent K-V in the suit.
K-V has hired Jefferies & Co. as its financial adviser on a possible restructuring.
Gerald Cooper Kell of the U.S. Department of Justice represents the FDA.
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