Otsuka America Pharmaceutical Inc., a subsidiary of Tokyo-based Otsuka Holdings Co. Ltd., purchased the assets of Proteus Digital Health Inc. after weeks of back-and-forth in bankruptcy court.

Redwood City, Calif.-based Proteus filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware on June 15.

The sale to Otsuka looked uncertain after some of Proteus' shareholders filed an objection to the sale, questioning the low price of Otsuka's stalking horse bid and the short timeline of the bidding process.

A stalking horse bid is an initial bid on the assets of a bankrupt company that sets the bar for other offers.

According to court documents, a group representing 16% of Proteus' shareholders — including Swiss pharmaceutical giant Novartis AG and two Hong Kong-based investment firms — argued the $15 million offer was low enough to put off other potential bidders, while the 18-day deadline did not allow these companies time to conduct due diligence during the COVID-19 pandemic.

The same shareholders also claimed Proteus did not disclose that the stalking horse bidder, Otsuka, was already its largest shareholder and customer and has a license to Proteus' technology.

Despite their concerns, the court determined Aug. 19 that Otsuka was a good-faith buyer and should be allowed to purchase Proteus' assets for $15 million in cash plus assumed liabilities.

Proteus and Otsuka had a long-standing collaboration with a drug-device combination treatment for patients with mental disorders called Abilify MyCite. The combination of Otsuka's antipsychotic medication Abilify with Proteus' ingestible sensor technology was approved by the U.S. Food and Drug Administration in 2017 — the first digital therapy to be approved by the agency.