PRACS Institute, the contract research organization that emerged from bankrupt Cary CRO Cetero Research last year only to suddenly shutter its operations last week, is now in Chapter 7 bankruptcy and the CRO’s creditors includes several drug companies with North Carolina ties.
The 36-page filing lists 195 creditors, though some are multiple units of the same company. For example, British company GlaxoSmithKline (NYSE:GSK), which maintains its U.S. headquarters in Research Triangle Park, is listed three times. The creditor list shows GSK sites in Texas, New Jersey and Pennsylvania.
Other North Carolina companies or companies with North Carolina operations on the list are Banner Pharmacaps, a High Point company that last year was acquired by Durham contract pharmaceutical manufacturer Patheon (TSX:PTI) and Osmotica, a Wilmington pharmaceutical company. PhaseBio Pharmaceuticals, which was founded in Morrisville and relocated to Pennsylvania in 2010, is listed as a creditor under a Morrisville address. PRACS ceased to have a North Carolina presence following Cetero’s Chapter 11 bankruptcy last year.
Pharma companies that were conducting studies with PRACS must now determine if they can salvage the work that has already been done or if they must start over. It’s a similar scenario that pharmas faced in 2011, when the Food and Drug Administration raised questions about allegedly falsified clinical trial records at a Cetero’s Houston site. The FDA raised the possibility that pharma sponsors who did work with Cetero might need to redo some of their tests.
PRACS made the Chapter 7 bankruptcy filing on March 22 in U.S. Bankruptcy Court for the Western District of Texas. According to the filing, PRACS estimated its assets were between between $10 million and $50 million. Liabilities were estimated to be between $100 million and $500 million.
CenterWatch, the publisher of clinical trials information, was first to report the coming Chapter 7 filing. PRACS Chief Restructuring Officer Michael Gries told CenterWatch that the CRO had between 20 and 30 studies ongoing in the United States and another 10 in Canada at the time the company closed. Gries, who is the founder of the restructuring consultancy CDG Group, was called in by PRACS’ investors about six weeks ago.
Gries said PRACS will try to transfer study materials back to the pharmaceutical companies sponsoring the studies. The company will have a receiver assigned for its Canadian holdings, which would be sold and possibly reopened.
Following the U.S. bankruptcy filing, PRACS will have a new trustee appointed to determine what happens to its U.S. holdings, which include the Fargo facility, an empty building in San Antonio, a Miami lab and a St. Louis facility, Gries told CenterWatch. Gries added that none of the employees laid off on March 20 received severance and participants in the clinical studies will not be paid.
PRACS was initially founded in Fargo, N.D. in 1983 by James Carlson, a former pharmacy professor at North Dakota State University. Acquisitions weaved PRACS and other CROs into a company that became Cetero Research, headquartered in Cary. Cetero, which focused on early-stage clinical research, filed for Chapter 11 bankruptcy protection last March, a move the company said in its filings was prompted by financial challenges facing the company following the FDA’s inquiry into the company’s Houston lab.
The company that rose from bankrupt Cetero took the PRACS name under the ownership and management of Carlson. The company was headquartered in Fargo. But even under a new name and new management, PRACS could not overcome the financial challenges facing the company. In the days leading up to PRACS’ March 20 closure, the CRO’s investors and the CDG Group were debating whether to close, Gries said.
“We were looking for alternatives and we exhausted the alternatives,” he said. “That was the problem.”
