When Vyera Pharmaceuticals, LLC and five affiliated entities filed for Chapter 11 bankruptcy on May 10, 2023, the case marked the end of a company associated with pharmaceutical pricing controversy. The filing in the District of Delaware under Subchapter V followed years of antitrust litigation, reputational damage, and scrutiny tied to Martin Shkreli's Daraprim price hike.
Within five months, the court confirmed a Third Amended Plan on October 3, 2023, establishing a liquidating trust structure that tied creditor recoveries to potential FDA Priority Review Voucher proceeds.
Vyera's predecessor, Turing Pharmaceuticals, acquired Daraprim from Impax Laboratories in August 2015 for $55 million. Daraprim (pyrimethamine) is the standard treatment for toxoplasmosis, a parasitic infection particularly dangerous for immunocompromised patients including those with HIV/AIDS. The drug had been on the market since 1953. On August 11, 2015, the company implemented a price increase from $17.50 to $750 per tablet—an over 4,000% increase. The price hike sparked significant controversy and became emblematic of broader pharmaceutical pricing debates, prompting a Senate investigation into drug pricing practices.
Despite the controversy, Daraprim generated substantial revenue initially—between $55 million and $74 million annually from 2016 through 2019. However, the FDA approved the first generic Daraprim in February 2020, and generic competition reduced sales. By 2022, annual net sales had fallen to $9.5 million. By the petition date in May 2023, year-to-date sales totaled only approximately $1.35 million.
Period
Daraprim Net Sales
2016-2019
$55-74 million annually
2021
$21.2 million
2022
$9.5 million
YTD May 2023
~$1.35 million
Martin Shkreli and Corporate Governance
Martin Shkreli founded Turing Pharmaceuticals in October 2014 with a focused strategy: acquire sole-source drugs for life-threatening diseases with small patient populations, then implement price increases. As Vyera's largest shareholder with approximately 34.31% of outstanding shares (2,251,923 shares), Shkreli directed the Daraprim price hike. He served as Chairman of the Phoenixus Board until January 20, 2016, resigning on February 10, 2016. The FTC complaint detailed Shkreli's anticompetitive tactics: implementing a closed distribution system that prevented generic manufacturers from obtaining samples for bioequivalence testing, paying overseas API manufacturers to withhold pyrimethamine from competitors, and using data-blocking agreements with distributors to obstruct generic entry.
In January 2020, the FTC and New York Attorney General filed suit against Shkreli, Vyera, Phoenixus AG, and then-CEO Kevin Mulleady, alleging an "elaborate anticompetitive scheme to preserve a monopoly" for Daraprim. A bipartisan coalition of state attorneys general including California, Ohio, Pennsylvania, Illinois, North Carolina, and Virginia joined the litigation.
In December 2021, Vyera and Phoenixus settled with the FTC and state attorneys general. The settlement terms required $10 million upfront payment into a settlement fund, up to $30 million in contingent payments based on future asset monetization, Daraprim made available to generic competitors at manufacturing cost, and Kevin Mulleady banned from the pharmaceutical industry for seven years.
Shkreli refused to settle. Following a bench trial, U.S. District Judge Denise Cote found Shkreli personally liable for the anticompetitive scheme. In January 2022, the court issued a $64.6 million disgorgement order and a lifetime ban from the pharmaceutical industry. The Second Circuit affirmed both the disgorgement and lifetime ban in January 2024.
The Subchapter V Strategy
Vyera filed under Subchapter V, created by the Small Business Reorganization Act of 2019. Subchapter V provides several advantages: a streamlined 90-day plan deadline, presumptive non-appointment of creditors' committees, and the ability for shareholders to retain equity without providing new value under certain conditions. The filing continued an emerging trend of using Subchapter V to address complex contingent liabilities while preserving potential upside for equity—part of a higher volume of pharmaceutical restructurings that made 2023 the highest year for biopharma bankruptcies in more than a decade, with 14 pharmaceutical companies filing for Chapter 11 protection. With less than $7.5 million in noncontingent liquidated unsecured claims, Vyera qualified for the expedited process despite its complex litigation history.
Chief Restructuring Officer Lawrence R. Perkins of SierraConstellation Partners submitted a First Day Declaration detailing Vyera's financial position: approximately $10.5 million cash on hand, no secured debt, less than $7.5 million in unsecured claims (excluding contingent litigation), a $6.3 million consolidated net loss as of the petition date, and $68.4 million in preferred stock liquidation preference. The Daraprim Class Action plaintiffs held a secured claim of $19.27 million, backed by a UCC-1 filing from February 2023 that granted a security interest in the debtors' corporate assets.
CEO Averill Powers' employment agreement was addressed during the case. Prior to the petition date, Powers received a $270,000 non-discretionary bonus deemed necessary to retain his institutional knowledge. An Amended Agreement entered August 10, 2023 resolved his remaining claims: $230,208.33 in prepetition compensation cure (for up to 200 hours of service), $261,291.64 in accrued postpetition compensation (administrative priority), $1,300,000 allowed unsecured nonpriority claim for termination payments (reduced from three years to one year), and health benefits continued through October 31, 2023. The Amended Agreement provided either party could terminate without cause upon 30 days' notice, giving the Liquidating Trustee flexibility in post-confirmation administration. A separate Key Employee Retention Plan totaling $112,000 covered four non-executive employees supporting operations through emergence.
Orpha Labs and the Priority Review Voucher
The plan structure centered on Orpha Labs AG, a Swiss subsidiary focused on ultra-rare diseases. Orpha Labs had developed ORL-101, a pharmaceutical-grade L-fucose therapy for Leukocyte Adhesion Deficiency Type II (LAD-II). LAD-II is an ultra-rare congenital immunodeficiency disorder affecting an estimated 10-20 patients worldwide. The condition results from defective fucose metabolism and causes recurrent bacterial infections, severe growth delay, and intellectual deficit. The FDA granted ORL-101 both Rare Pediatric Disease Designation and Orphan Drug Designation.
Upon FDA approval, ORL-101 would qualify for a Priority Review Voucher under the Rare Pediatric Disease PRV Program. PRVs entitle the holder to expedited FDA review (six months versus ten months) for any future drug application and are freely transferable. According to the GAO's analysis and Duke University's PRV database, PRVs have sold for between $67 million and $350 million, with recent transactions averaging $95-120 million. The plan tied creditor recoveries to potential PRV proceeds.
Plan Confirmation and the Liquidating Trust
The court confirmed Vyera's Third Amended Plan on October 3, 2023, under Section 1191(a) as a consensual plan. The structure created two parallel tracks. The liquidating debtors (Vyera, Oakrum, SevenScore, Dermelix) ceased operations, with their assets transferred to a Liquidating Trust administered by David W. Carickhoff as Liquidating Trustee. The reorganized debtor (Orpha Labs AG) continued operations focused exclusively on advancing ORL-101 toward FDA approval and PRV eligibility.
Class
Description
Treatment
Recovery
Unclassified
Administrative/Priority Tax
Paid in full in cash
100%
Class 1
Priority Claims
Paid in full from Trust
100%
Class 2
Convenience Claims (≤$6,000)
20% of Allowed Claim from Trust
20%
Class 3(a)
General Unsecured - Trade/Litigation
Pro rata GUC Reserve + Trust Certificates
Contingent on PRV
Class 3(b)
General Unsecured - Antitrust Claims
20% of Net Proceeds per settlements
Capped
Class 4
Equity Interests
Reinstated; PRV upside participation
Contingent
Class 5
Intercompany Claims
Cancelled
0%
Class 3(a) creditors voted to accept: 85.71% by number (12 of 14 votes) and 99.31% by dollar amount ($40.68 million accepting). The Plan established a $4 million GUC Reserve for initial distributions, paid by December 15, 2023.
The Plan established a seven-step distribution waterfall for PRV Sale Proceeds: Liquidating Trust Assets (including right to PRV proceeds) transferred to the Liquidating Trust on the Effective Date; Liquidating Trust Certificates issued to holders of Allowed Claims; the Liquidating Trustee monetizes the FDA-issued PRV under Oversight Committee guidance; upon receipt of PRV Sale Proceeds, pro rata distributions to Certificate holders in satisfaction of Allowed Claims; remainder distributed to Phoenixus AG as 100% equity holder of Orpha Labs; and finally Phoenixus distributes the remainder to Allowed Equity Interest holders. The plan directed PRV sale proceeds first to Allowed Claims, with any remainder distributed to Phoenixus AG and then equity holders.
In a ruling, the court sustained an objection to Martin Shkreli's claims filed by Cerovene, Inc. and Dr. Reddy's Laboratories, Inc.—the generic manufacturers referenced in the antitrust litigation. The September 11, 2023 order disallowed Shkreli's Claims (Claim Numbers 10045 and 11) in their entirety and estimated them at $0.00 for all purposes in the bankruptcy cases. The order prohibited Shkreli from voting on the Plan or taking any actions to influence or participate in the debtors' affairs. Both Shkreli and Kevin Mulleady were explicitly excluded from the Plan's release provisions and "Released Parties" definition.
Final professional fee awards totaled approximately $3.2 million:
Professional
Role
Total Awarded
DLA Piper LLP (US)
Debtors' Counsel
$2,328,550
Alvarez & Marsal Securities
Investment Banker
$838,572
David M. Klauder
Subchapter V Trustee
$23,255
Epiq Corporate Restructuring
Claims/Noticing Agent
$18,223
Alvarez & Marsal's compensation included transaction fees of $65,000 each for the Daraprim/Vecamyl and Nitisinone sales, plus a $370,000 restructuring transaction fee. The Subchapter V Trustee billed at $400 per hour for the period from May 10, 2023 through October 31, 2023, when his service terminated upon substantial consummation of the Plan.
Post-Confirmation Developments
Date
Milestone
September 8, 2022
Lawrence R. Perkins appointed CRO
May 10, 2023
Chapter 11 Subchapter V petitions filed
May 18, 2023
First Day Hearing; joint administration approved
June 6, 2023
341 Meeting held and concluded
August 10, 2023
Bidding Procedures Order entered
September 11, 2023
Shkreli claims disallowed by court order
September 14, 2023
Tilde Sciences sale approved
October 3, 2023
Third Amended Plan confirmed under § 1191(a)
October 11, 2023
Effective Date; Liquidating Trust created
October 31, 2023
Subchapter V Trustee service terminated
December 2023
$4 million GUC Reserve distributed
January 2024
RL Fine Chem adversary proceeding filed
January 2024
ANI Pharmaceuticals claim settled ($435K)
May 22, 2025
Claims objection deadline extended to May 8, 2026
May 27, 2025
Orpha Labs sale to Baar Therapeutics approved
The Tilde Sciences sale closed in September 2023, disposing of substantially all assets excluding Orpha Labs. The sale was approved under Section 363 free and clear of liens. In May 2025, unable to fund ORL-101's remaining clinical development (estimated at $7.8 million over 2-3 years), the Liquidating Trust sold Orpha Labs to Baar Therapeutics AG, a Swiss pharmaceutical company. The court approved the sale on May 27, 2025, following shortened notice and objection periods. The transaction structure provided no upfront payment but entitled the Liquidating Trust to 12.5% of net proceeds from any future PRV sale or asset monetization.
The sale included assumption and assignment of key executory contracts with cure costs of: STA Pharmaceuticals Hong Kong Limited ($6,886), Laboratorium Ofichem B.V. ($0), and two Losan Pharma GmbH agreements ($0 each). The buyer also agreed to reimburse the Liquidating Trust up to $300,000 in legal fees if a competing bid emerged.
As of late 2025, the Vyera bankruptcy remains in post-confirmation administration. The Liquidating Trust distributed the initial $4 million GUC Reserve to creditors in December 2023. Future distributions are tied to Baar Therapeutics advancing ORL-101 through clinical trials, obtaining FDA approval, and monetizing any resulting PRV.
In January 2024, Liquidating Trustee David Carickhoff filed an adversary proceeding seeking to recover approximately $9.6 million in fraudulent transfers paid to RL Fine Chem Pvt. Ltd., an overseas API manufacturer. The complaint alleges RL Fine entered into sham Supply and Collaboration Agreements in December 2017, agreeing to shut off pyrimethamine supply to generic competitors in exchange for payments that included $1 million upfront under each agreement, 7.5% royalties with a $3 million minimum guarantee, and a $750,000 termination fee. The Liquidating Trustee alleges RL Fine received 19 times more than Fukuzyu Pharmaceutical Company, the actual supplier who delivered all pyrimethamine for only $500,000 total.
The Liquidating Trustee resolved numerous claims through settlements:
Counterparty
Date
Resolution
Integrated Commercialization Services (ICS)
June 2023
ICS released Debtors' Inventory in exchange for prepetition claim payment
Original $621,731 reduced to $435,000 allowed secured; ANI paid $365,000 to Trust from $800,000 holdback
Aucta Pharmaceuticals
June 2024
Stipulated resolution of Proof of Claim No. 10007
The first Omnibus Claims Objection was filed November 15, 2023, with the sustaining order entered December 21, 2023. The claims objection deadline has been extended to May 2026, with approximately 126 proofs of claim filed and multiple omnibus objections resolved.
Frequently Asked Questions
What led to Vyera Pharmaceuticals' bankruptcy filing?
Vyera's bankruptcy resulted from the convergence of generic competition reducing Daraprim revenue (from $55-74 million annually to $1.35 million YTD by filing), the $40 million FTC settlement creating ongoing payment obligations, reputational damage from Martin Shkreli's conduct hampering business operations, and the need to preserve potential value in the Orpha Labs ORL-101 orphan drug program.
Why did Vyera file under Subchapter V rather than regular Chapter 11?
Vyera qualified for Subchapter V because its noncontingent liquidated unsecured debt was less than $7.5 million, excluding contingent litigation claims. Subchapter V offered streamlined procedures including a 90-day plan deadline, presumptive non-appointment of creditors' committees, and the ability for shareholders to retain equity without providing new value.
What was the Daraprim price hike controversy?
In August 2015, Vyera's predecessor Turing Pharmaceuticals raised the price of Daraprim from $17.50 to $750 per tablet—an over 4,000% increase—after acquiring the drug for $55 million. The price hike for this toxoplasmosis treatment sparked a Senate investigation and FTC antitrust litigation, while becoming emblematic of pharmaceutical pricing debates.
What happened to Martin Shkreli in the bankruptcy?
The court sustained objections to Shkreli's claims (filed by generic manufacturers in the antitrust litigation), disallowing them in their entirety and estimating them at $0.00. Shkreli was prohibited from voting on the Plan or participating in the debtors' affairs. He was explicitly excluded from Plan releases and the "Released Parties" definition.
What is a Priority Review Voucher and why was it important to this case?
A Priority Review Voucher (PRV) entitles the holder to expedited FDA review (six months versus ten months) for any future drug application and is freely transferable. PRVs have sold for between $67 million and $350 million. Vyera's Orpha Labs subsidiary had ORL-101 in development for an ultra-rare disease that would qualify for a Rare Pediatric Disease PRV upon FDA approval, and the plan tied recoveries to potential PRV proceeds.
What was the treatment of general unsecured creditors?
Class 3(a) general unsecured creditors received pro rata distributions from a $4 million GUC Reserve (paid December 2023) plus Liquidating Trust Certificates entitling them to future distributions if PRV proceeds materialize. Class 3(a) creditors voted 85.71% by number and 99.31% by dollar amount to accept the Plan. Class 3(b) antitrust claimants receive 20% of net proceeds per their settlements.
What was the outcome of the Orpha Labs asset?
Unable to fund ORL-101's remaining clinical development (estimated at $7.8 million), the Liquidating Trust sold Orpha Labs to Baar Therapeutics AG in May 2025. The transaction provided no upfront payment but entitled the Liquidating Trust to 12.5% of net proceeds from any future PRV sale or asset monetization. Creditor recoveries are tied to Baar advancing ORL-101 to FDA approval.
What adversary proceedings were filed?
In January 2024, the Liquidating Trustee filed an adversary proceeding seeking to recover approximately $9.6 million in alleged fraudulent transfers paid to RL Fine Chem Pvt. Ltd. The complaint alleges RL Fine entered sham agreements to shut off pyrimethamine supply to generic competitors, receiving 19 times more compensation than the actual API supplier (Fukuzyu Pharmaceutical).
What professional fees were incurred in the case?
Total professional fee awards were approximately $3.2 million: DLA Piper LLP (Debtors' Counsel) received $2,328,550; Alvarez & Marsal Securities (Investment Banker) received $838,572 including transaction and restructuring fees; the Subchapter V Trustee received $23,255; and Epiq Corporate Restructuring received $18,223 for claims/noticing services.
What is the current status of the Vyera bankruptcy?
As of late 2025, the case remains in post-confirmation administration. The $4 million GUC Reserve was distributed in December 2023. The claims objection deadline has been extended to May 2026, with approximately 126 proofs of claim filed. Future distributions are tied to Baar Therapeutics obtaining FDA approval for ORL-101 and monetizing any resulting PRV.
For comprehensive analysis of pharmaceutical and healthcare bankruptcies, visit the ElevenFlo bankruptcy blog.
particularly dangerous for immunocompromised patients https://clinicalinfo.hiv.gov/en/guidelines/hiv-clinical-guidelines-adult-and-adolescent-opportunistic-infections/toxoplasmosis
over 4,000% increase https://www.ftc.gov/news-events/news/press-releases/2020/01/ftc-ny-attorney-general-charge-vyera-pharmaceuticals-martin-shkreli-other-defendants-anticompetitive
FDA approved the first generic Daraprim https://www.biospace.com/fda-approves-first-generic-of-daraprim
founded Turing Pharmaceuticals https://en.wikipedia.org/wiki/Martin_Shkreli
arrested by the FBI in December 2015 https://www.scientificamerican.com/article/martin-shkreli-who-raised-drug-prices-from-13-50-to-750-arrested-in-securities-fraud-probe/
convicted in August 2017 https://www.washingtonpost.com/news/business/wp/2017/08/04/martin-shkreli-jury-enters-fifth-day-of-deliberations/
sentenced in March 2018 to seven years imprisonment https://www.justice.gov/usao-edny/pr/martin-shkreli-sentenced-seven-years-imprisonment-multi-million-dollar-fraud-scheme
released from federal prison https://www.cnbc.com/2022/05/18/martin-shkreli-released-from-federal-prison-into-halfway-house-.html
hindered Vyera's ability to maintain normal business relationships https://www.mmm-online.com/home/channel/vyera-pharmaceuticals-a-company-once-run-by-pharma-bro-martin-shkreli-files-for-bankruptcy/
FTC and New York Attorney General https://ag.ny.gov/press-release/2020/attorney-general-james-sues-pharma-bro-martin-shkreli-and-vyera-pharmaceuticals
bipartisan coalition of state attorneys general https://www.naag.org/multistate-case/ftc-et-al-v-vyera-pharmaceuticals/
settled with the FTC https://www.ftc.gov/news-events/news/press-releases/2021/12/ftc-states-recoup-millions-relief-victims-fleeced-pharma-bro-scheme-illegally-monopolize-life-saving
$64.6 million disgorgement order https://www.cnn.com/2022/01/14/business/martin-shkreli-banned-pharma-bro/index.html
Second Circuit affirmed https://www.cnbc.com/2024/01/23/appeals-court-upholds-pharma-bro-martin-shkreli-lifetime-ban-from-drug-industry.html
Small Business Reorganization Act of 2019 https://www.justice.gov/ust/subchapter-v
Subchapter V https://bankruptcyroundtable.law.harvard.edu/2020/06/02/a-guide-to-the-small-business-reorganization-act-of-2019/
continued an emerging trend https://ashuraeylaw.com/publications/vyera-filing-continues-trend-of-subchapter-v-as-option-to-address-large-contingent-or-unliquidated-liabilities-while-preserving-potential-upside-for-equity/
focused on ultra-rare diseases https://www.prnewswire.com/news-releases/orpha-labs-ag-announces-the-initiation-of-a-phase-iii-trial-evaluating-orl-101-for-treatment-of-leukocyte-adhesion-deficiency-type-ii-301488530.html
sale was approved under Section 363 https://www.biospace.com/vyera-pharmaceuticals-llc-and-phoenixus-ag-sign-asset-purchase-agreement-to-sell-rights-to-daraprim-and-vecamyl
This article was researched and written with AI assistance, using court filings, public records, and news sources. AI-generated content can contain errors. Verify all information against primary sources before relying on it. This is not legal or financial advice. See the disclaimer.