US generic pharma producer Akorn has filed for bankruptcy protection under Chapter 11.

The company had said in February that it could potentially use Chapter 11 to address litigation overhangs as it looks to sell the business and emerge as a “more vibrant and better positioned” company.

The Illinois-headquartered group has been beset by problems during the past two years since German healthcare company Fresenius Kabi pulled the plug in April 2018 on plans to merge with Akorn in a deal said to be worth $4.3 billion.

Fresenius cited Akorn’s failure to fulfil several closing conditions, while also alleging the pharma had committed data fraud relating to new drug applications.

Akorn subsequently filed a lawsuit against Fresenius, but the Delaware Supreme Court ruled in favour of the German firm.  The judge is reported to still be considering a claim by Fresenius for $70 million in damages.

As if the failed merger was not enough, Akorn also received warning letters in January and June 2019 from the US Food and Drug Administration (FDA) relating to manufacturing violations at plants in Decatur, Illinois,and Somerset, New Jersey, respectively, following inspections the year before.

In its bankruptcy petition, Akorn listed $10 billion of debt and $10 billion of assets. The company said it has reached an agreement with lenders representing more than 80% of its secured debt, who will provide liquidity to fund operations and serve as a stalking horse bidder for a sale. Akorn added that it also has access to $30 million in debtor-in-possession financing.

Doug Boothe, Akorn’s president and CEO, said the Chapter 11 filing – which includes all Akorn’s US subsidiaries but not its entities in India and Switzerland – was a “decisive, positive step” for the company, made possible by the “underlying strength of our business and potential for growth.”

The company expects to complete the sale process in the third quarter of 2020.