Leiner Health Products' shutdown of its U.S. OTC operations a year ago forced the firm to seek Chapter 11 bankruptcy protection and explore selling its U.S. business.

The firm's "steps to address the challenges that arose following our March 2007 decision to voluntarily suspend OTC operations ... were not enough to offset the cost of our substantial debt obligations," Leiner President and CEO Rob Reynolds says in a March 10 release.

The Carson, Calif.-based private label manufacturer received $74 million in debtor-in-possession financing from a group of lenders prior to filing a Chapter 11 petition in U.S. Bankruptcy Court in Delaware.

Leiner also sought Chapter 11 protection in 2002, but continued operating after restructuring its debt (¹ Also see "Leiner $30 Mil. Vitamin Price-Fixing Settlement Applied To Outstanding Debt" - Pink Sheet, 25 February, 2002., p. 4).

Leading U.S. private labeler Perrigo linked $20 million in sales during its fiscal 2008 second quarter directly to former Leiner customers (² Also see "Perrigo Fuels “Growth Engine” With Spending On New Product Pipeline" - Pink Sheet, 11 February, 2008., p. 9).

India-based Dr. Reddy's in April 2007 terminated its ingredient supply contract with Leiner and announced plans to bring a line of OTC products to the U.S. (³ Also see "Leiner Plans Suit Against Dr. Reddy’s, Expects Delay Restarting OTC Business" - Pink Sheet, 2 July, 2007., p. 8).

Supplement firm NBTY Chief Financial Officer Harvey Kamil said "there may be some opportunities" in Leiner's sale, and the possibility of bankruptcy due to the company's problems was known in the industry.

"They were losing market share and losing their way some time ago," Kamil said March 11 during a presentation to market analysts.

Leiner initiated a nationwide recall of its OTC products in April 2007 after FDA found discrepancies in good manufacturing practices at its Fort Mill, S.C., plant (⁴ Also see "Leiner Suspends U.S. OTC Operations, Expects Perrigo To Meet Demand" - Pink Sheet, 9 April, 2007., p. 5).

The firm continued to manufacture dietary supplements and vitamins at its facilities in Garden Grove and Valencia, Calif., and OTC and supplement products at its Winnipeg, Manitoba, facility. Leiner says its bankruptcy filing does not include its Canadian subsidiary, Vita Health Products.

- Katie Stevenson (k.stevenson@elsevier.com)

Leiner Files For Chapter 11 Protection, Explores Selling Business

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