Pandemic Fallout Drives 30% Surge in US Business Bankruptcies by 2023
The US has seen a surge in business bankruptcies, with prominent companies like First Brands and Westward Whiskey filing for Chapter 11 protection in 2023. The coronavirus pandemic has been a significant factor in these filings, as seen in the case of Valeritas, which cited the pandemic as a contributing cause in its bankruptcy petition.
The pandemic's impact on businesses has been profound. In 2020, Chapter 11 petitions increased by 20% compared to the previous year, with many companies struggling due to coronavirus challenges. This trend continued, with business bankruptcies rising almost 30% in the 12 months ending September 30, 2023, partly due to the expiration of pandemic-related government programs.
Valeritas, a diabetes technology company, was one of the first to file for bankruptcy citing the coronavirus as a factor. Despite its commercially successful insulin delivery patch, V-Go, Valeritas was not profitable. The pandemic exacerbated its financial struggles, with widespread closures and disruptions affecting both production and inventory. In late 2019, Valeritas had to write off up to $8 million in inventory due to a significant crunch. However, Valeritas found a strategic solution, filing for Chapter 11 with a stalking horse agreement for a $23 million purchase by Zealand Pharma A/S, ensuring the continued production of its life-saving technology.
The Delaware bankruptcy courts adapted swiftly to virtual operations during the pandemic, maintaining a functional system. Despite the challenges, the bankruptcy process has proven to be a useful tool for businesses like Valeritas, allowing them to protect their assets and workforce while navigating financial difficulties.
