A judge has approved the sale of bankrupt Proteus Digital Health’s assets to Otsuka Pharmaceutical for $15 million in cash.
Redwood City, Calif.-based Proteus filed for Chapter 11 bankruptcy protection in June after running into challenges with its primary income source: royalties from Otsuka, which markets and distributes its products. From the start, Otsuka appeared to be the most likely buyer.
In the order, signed Aug. 20, the judge noted that Otsuka complied with the bidding procedures, did not cause Proteus’ chapter 11 filing and that the negotiation of the sale agreement was done “at arm’s-length, in good faith and without collusion or fraud.” Further, neither Otsuka nor any of its affiliates, partners principals or shareholders is an “insider” of Proteus, the order said.
The judge’s order also said no other qualified bid was received by the bid deadline, and that Proteus gave reasonable opportunity for any entity to make a higher or better offer. It said the purchase agreement constitutes the best offer for Proteus and will provide a greater recovery of its estate than would be provided by any other alternative. The judge’s order stipulates that Otsuka is not a successor to Proteus, nor has it merged with the company.
The purchase agreement stipulates that Otsuka, which did not respond to a request for comment, won’t be responsible for liability Proteus could face, including lawsuits against its executives or pertaining to its employment practices, benefit plans or compliance with environmental laws.
Founded in 2002 by Andrew Thompson, Dr. George Savage and Mark Zdeblick, Proteus specializes in so-called digital medicines, which are oral pharmaceuticals that contain tiny ingestible sensors aimed at tracking patients’ treatment adherence. When the drugs are swallowed, their sensors transmit data to wearable patches that send it to their mobile devices. The data is then sent through the cloud to their healthcare providers.
Proteus had about $9.5 million in cash and cash equivalents and 93 employees as of June 15. A company spokesperson did not respond to a request for comment.
Proteus earlier hinted at Otsuka’s stalking horse bid in court filings, noting that the companies had “fruitful discussions,” and a Proteus spokesperson characterized the company as being in a sale process that’s leveraging the bankruptcy filing.