K-V Pharmaceutical seeks approval of $60 million Hologic settlement

By Caroline Salls

Pittsburgh, Dec. 5 - K-V Pharmaceutical Co. requested court approval of a settlement with Hologic, Inc. and Cytyc Prenatal Products Corp., according to a Wednesday filing with the U.S. Bankruptcy Court for the Southern District of New York.

K-V said it purchased the right, title and interest to pharmaceutical product Makena from the Hologic entities.

Amid Food and Drug Administration exclusivity enforcement issues and state Medicaid agency restrictions on reimbursement, K-V said it tried to negotiate an amendment to the purchase agreement to extend a milestone payment due on Aug. 4.

The extension was not obtained, and the company said it was forced to file for bankruptcy on the date the milestone payment was due.

Since the bankruptcy filing date, K-V said it has spent significant time and effort responding to continued objections from Hologic, including objections to the use of cash collateral, continued use of its cash management system, continued pre-bankruptcy practices related to intercompany transfers and the company's exclusivity extension request.

In addition, the K-V debtors and Hologic have engaged in extensive discovery and litigation tied to Hologic's motion to lift the automatic stay in these cases in an attempt to foreclose on Makena and related assets.

The parties also dispute the total amount owed to Hologic by K-V, the motion said.

K-V said Hologic has filed a claim for $95 million, plus royalties.

Settlement terms

Under the proposed settlement:

• Hologic will be paid $60 million simultaneously with the funding of debtor-in-possession facility loans using the proceeds of those loans;

• The payment must be made by Dec. 31, or the settlement will be terminated;

• All pending litigation or other disputes will be stayed through the earlier of Dec. 31 and the termination of the agreement;

• The parties have agreed to a mutual release of claims; and

• If K-V has not filed a motion seeking for approval of the DIP facility by Dec. 14, the parties will enter into an amended scheduling order by Jan. 3 under which all specified proceedings will be rescheduled.

A hearing is scheduled for Dec. 26.

K-V Pharmaceutical, a St. Louis specialty pharmaceutical company, filed for bankruptcy on Aug. 4. Its Chapter 11 case number is 12-13346.

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