(Reuters) - Contract research firm Cetero filed for bankruptcy protection early on Monday, court documents show, months after the U.S. drug regulator put the company on notice for faking documents and manipulating drug samples.
In July last year, the U.S. Food and Drug Administration (FDA) said two 2010 inspections, an internal company investigation and a third-party audit uncovered “significant instances of misconduct and violations” at a Cetero facility in Houston.
The Cary, North Carolina-based firm does early-phase clinical research and bioanalytics for a number of drugmakers. The pharmaceutical companies can then use those studies as supporting evidence in drug approval applications to the FDA.
The FDA had warned the drugmakers that they might have to repeat or confirm any studies Cetero did in support of their applications between April 2005 and June 2010.
In a filing with bankruptcy court in Delaware on Monday, Cetero said the FDA’s July 2011 letter caused the company’s “liquidity position to become severely constrained.”
Also, following the regulatory warning, Cetero said some lenders declared an event of default due to the “apparent violation of applicable health laws and regulations.”
However, Cetero said in the court filing that the FDA has not made any allegations of fraud against the company.
The primary goal of Chapter 11 process is to maximize the recovery for its creditors, Cetero said. To this end, the company has reached a deal with certain lenders for the sale of substantially all of the company’s assets through a so-called stalking horse sale and credit bid.
A “stalking horse” bid is used as a starting bid or minimally accepted offer that other interested bidders must surpass if they want to buy the company.
The company has also secured a Debtor-in-Possession (DIP) financing of $15 million to provide working capital during the restructuring process.
For the two months ending February 29, 2012, Cetero had revenue of about $11 million on a consolidated basis. The company’s liabilities totaled about $248 million, court filings showed.
Also, the company has listed estimated assets in the range of $1 million to $10 million.
The case is: Contract Research Solutions Inc, Case No. 12-11004, U.S. Bankruptcy Court, District of Delaware.
Reporting by Sakthi Prasad; Editing by Erica Billingham