Angiotech bankruptcy moves forward

The Supreme Court of British Columbia accepted a “plan of compromise” between bankrupt Angiotech Pharmaceuticals Inc. (OTC:ANPI) and its creditors.

The plan will wipe out the company’s existing shareholders, apart from a group connected with its 2006 acquisition of Quill Medical Inc., and eliminate $250 million in debt under Canada’s Companies’ Creditors Arrangement Act.

The deal also calls for holders of some of Angiotech’s debt to receive stock in exchange for their notes. The company also lined up a $25 million line of credit with Wells Fargo Capital Finance LLC to continue operations during the bankruptcy period.

At a meeting slated for April 4, creditors will be able to vote on the bankruptcy plan, and if approved, Angiotech and its subsidiaries intend to seek court sanctioning of the plan, according to the company.

The company hitched its wagon to Boston Scientific Corp. (NYSE:BSX) and its Taxus drug-eluting stent, but Taxus sales have plunged in recent years as competitors’ more-recent DES models, such as Abbott Laboratories’ (NYSE:ABT) Xience V, have gained market share. Angiotech’s royalties from sales of the Taxus stent (for which Angiotech makes the paclitaxel coating) were down 56 percent during the third quarter, the company said.

That, in turn, has led to serious problems for Angiotech, which was de-listed from the NASDAQ stock exchange earlier this month and was forced into delaying debt payments several times.

The bankruptcy plan also contains $6 million to settle a lawsuit filed by a group representing former shareholders of Angiotech acquisition Quill Medical Inc., filed last October.

QSR Holdings Inc. alleged that Angiotech concealed damaging information about the sales performance of a Quill product prior to Angiotech’s acquisition of the company and acted to deliberately reduce future milestone-related payments to QSR. QSR contended that Quill would not have inked the 2006 merger agreement if it had known about $2.4 million worth of returned Quill wound closure products, according to court documents. At the time of the merger, Angiotech subsidiary Surgical Specialties Corp. had a distribution agreement with Quill, and allegedly hid the returned product in a warehouse.