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Orexigen Therapeutics – McKesson Seeks Court Ruling on Disputed Funds

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July 30, 2018 – McKesson Corporation (together with its subsidiary McKesson Patient Relationship Solutions (“MPRS”), “McKesson”) has asked the U.S. Bankruptcy Court hearing the Orexigen Therapeutics case to determine that McKesson is entitled to certain disputed funds [Docket No. 654]. The motion explains, “Orexigen Therapeutics was a pharmaceutical drug manufacturer with a single product, Contrave® (the ‘Product’). Ninety percent or more of the Product was sold to three wholesalers and product distributors: AmerisourceBergen, Cardinal Healthcare, and McKesson. In fact, McKesson alone was responsible for the distribution of approximately 40% of the Product to pharmacies in the United States and elsewhere….In the April Stipulation, the Debtor agreed to make a “Catch-up Payment” in the form of an ‘initial payment’ of approximately $6.027 million to MPRS for the actual and projected amounts remitted or to be remitted by MPRS under the LoyaltyScript® Program. The Debtor also agreed to make weekly payments of $1.675 million ($25,000 to be applied to an ‘Administrative Fee’ due under the Master Services Agreement, with the balance to replenish the ‘Reimbursement Funds’ due under that agreement)….Under the May Stipulation, McKesson acknowledged that as of the Petition Date, its outstanding payable owed to the Debtor was approximately $6.9 million. [D.I. 319-1, page 3 of 9]. The Debtor acknowledged that after the Petition Date, McKesson paid approximately $3.266 million on account of that payable. McKesson contended that the entire amount of approximately $6.9 million is subject to McKesson’s claim of contractual setoff, recoupment, application, and withhold rights. Under the May Stipulation, subject to a reservation of offset and other rights, McKesson paid the Debtor on account of any prepetition amounts owed under the Distribution Agreement, approximately $3.666 million….Under the terms of an amendment to the asset purchase agreement, the cash amount of the consideration for substantially all of the Debtor’s assets is $73.5 million….In order to protect McKesson’s property interest in the Disputed Funds, i.e., McKesson’s Application Rights, the parties entered into a stipulation approved by a court order [D.I. 592]. Under that stipulation, the Debtor segregated $6,932,816.40, the amount of the Disputed Funds, and is holding those funds for the parties’ benefit pending resolution of McKesson’s Disputed Rights under the Motion…. As of the Petition Date, McKesson owed the Debtor $6,932,816.40. Also as of the Petition Date, the Debtor owed MPRS approximately $8.5 million under the Master Services Agreement…. McKesson respectfully requests the Court grant the Motion and enter an order substantially in the form attached hereto as Exhibit B: (i) authorizing McKesson to apply the obligations the Debtor owes MPRS under the Master Services Agreement against the obligations McKesson owes to the Debtor under the Distribution Agreement; (ii) directing the Debtor to make payment in accordance with paragraph 5 of the May Stipulation… The Lenders are not entitled to a windfall at the expense of McKesson, particularly when that windfall would not be available to the Lenders outside of bankruptcy.”

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