Bankrupt Aceto files case against Aurobindo, accusing it of sabotage

By PharmaCompass

2019-06-13

Impressions: 517

Back in February, Aceto Corporation had filed for bankruptcy, and we had reported on how Aceto Corporation had entered into a “stalking-horse” asset purchase agreement (an attempt by a bankrupt company to test the market for its assets) with an affiliate of New Mountain Capital to sell its chemicals business assets, under the US Bankruptcy Code.

Now, the bankrupt company has filed a case against Indian drugmaker Aurobindo Pharma, accusing the company and its founder PV Ramprasad Reddy of sabotaging and systemically destroying the company’s business.

In a case filed in a New Jersey district court, Aceto sought damages from Aurobindo on charges of fraud, negligent misrepresentation, breach of contract, breach of duty of good faith and fair dealing.

“This action arises out of Aurobindo’s calculated and systematic scheme to destroy Aceto’s generic pharmaceutical business operated through Rising Pharmaceuticals, which ultimately worked,” Aceto wrote in its petition. Aurobindo has denied these allegations.

Aceto had signed a definitive product purchase agreement to acquire generic products and related assets of Citron Pharma and Lucid Pharma for approximately US$ 412 million in 2016. Citron and Lucid were two companies for which Aurobindo was manufacturing drugs.

The acquisitions were made through Rising Pharmaceuticals, an Aceto subsidiary.

Subsequently, the company suffered losses. According to Aceto, the losses were triggered by Aurobindo’s deliberate attempts to sabotage its business.

Aceto also alleged that Reddy’s wife in the US had a large stake in Citron. Once its assets had been sold, she sold her shares in the company. Post that, Aurobindo had no further interest in seeing Aceto succeed.

Aurobindo dismissed the allegations saying they were “devoid of merits and consists of baseless allegations of fraud, negligent misrepresentation and the failure to fulfil its obligations”.

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