Cetero Research, the early-phase contract research organisation (CRO) hit last year by FDA claims of “significant instances of misconduct and violations” at the company’s facility in Houston, Texas, has filed for Chapter 11 bankruptcy protection amid mounting financial problems.
According to a Chapter 11 filing by Cetero – listed under the name of Contract Research Solutions – in the United States Bankruptcy Court for the District of Delaware, the FDA’s requirement that certain studies conducted at the CRO’s Houston bioanalytical laboratory should be re-run has caused the company’s “liquidity position to become severely restrained” and would “result in considerable costs” to the business.
As of 29 February 2012, Cetero reported assets with a book value of around US$205 million and liabilities totalling about US$248 million. The company had already set in motion a restructuring plan during 2010 that involved exiting one leased facility and cutting its workforce.
Moreover, following the FDA’s action last July, certain of the CRO’s creditors “declared an event of [loan] default due to the apparent violation of applicable health laws and violations”.
Maximise recovery
The main aim of the Chapter 11 filing, Cetero explained, is to “maximise the recovery of all creditor constituencies” by selling off substantially all of the company’s assets to lenders through a so-called ‘stalking horse’ procedure (i.e., subject to higher or otherwise better offers in a market-tested auction) and credit bid.
The CRO has secured from lenders a US$15 million post-petition credit facility to help it through the restructuring.
Integrity concerns
In a letter sent to Cetero last July, the FDA said the problems at Houston raised concerns about the integrity of the bioequivalence and bioavailability data generated by the facility between April 2005 and June 2010.
According to the agency, the irregularities included “widespread falsification of dates and times in laboratory records for subject sample extractions, and the apparent manipulation of equilibration samples to meet pre-determined acceptance criteria”.
