Earlier this year, the Tennessee-based company Graceway Pharmaceuticals LLC filed for bankruptcy. According to court papers filed in the business bankruptcy, the company owed as much as $1 billion to creditors. However, the company will be able to stay open following a successful bid by Medicis Pharmaceutical Corp.
Graceway’s troubles began when it lost the patent protection for its top-selling product, a skin cream called Aldara. The cream was responsible for 85 percent for the company’s sales as recently as 2009. However, that share plummeted to just 16 percent during the first two quarters of this year.
In a bid to recover its lost revenue, Graceway recently began marketing another skin cream called Zyclara that remedies the same skin conditions as Aldara. It also markets an inhaler used in the treatment of asthma. Yet these products proved insufficient to rescue the company from bankruptcy, and it filed the necessary court documents on Sep. 29.
As part of the bankruptcy process, the company was put up for auction and the Arizona-based pharmaceutical company Medicis won the auction with a bid of $455 million. The acquisition will take place after approval from the Graceway board and bankruptcy court.
As the case illustrates, bankruptcy is an opportunity rather than the end of the road. Graceway will now be able to settle its debts, remain open for business and eventually emerge from the business bankruptcy process as a leaner and more efficient entity.
While the companies involved in this specific case are quite large, other Tennessee small business owners struggling with their financial obligations may want to speak with an experienced bankruptcy attorney to determine what options may be available to them.
Source: Bloomberg Businessweek, “Medicis Wins Graceway Bankruptcy Auction for $455 Million,” Michael Bathon, Nov. 20, 2011