In a bold move to regain financial footing, LifeScan Global Corp.—maker of the widely used OneTouch blood glucose monitoring devices—has filed for Chapter 11 bankruptcy protection in Texas federal court, citing $1.7 billion in debt and mounting pressure from rapid advances in continuous glucose monitoring (CGM) technologies.

The company’s restructuring plan, supported by its private equity sponsor Platinum Equity, could reduce its debt load by more than 75%, primarily by converting $1.4 billion in liabilities into equity stakes for second-lien lenders. The plan has already gained approval from 97% of secured creditors, according to CEO Valerie Asbury in a first-day declaration filed Wednesday.

Restructuring or Auction? LifeScan Prepares Dual Path Forward

While LifeScan's preferred path is a reorganization under Chapter 11, attorneys for the Malvern, Pennsylvania-based company revealed in court that it is also open to selling the business should attractive bidders emerge. Any auction would feature a stalking horse bid from existing lenders, ensuring a floor value for the company’s assets.

Falling Behind in a Fast-Moving Market

Founded in 1981 and once acquired by Johnson & Johnson in 1986, LifeScan was later spun off in a $2.1 billion deal to Platinum Equity in 2018. The company built its reputation with fingerstick-based blood sugar monitors—but the rise of CGM systems like Abbott's FreeStyle Libre and Dexcom's G7 has left LifeScan trailing behind.

Asbury cited delays with a development partner on a proprietary CGM product as a key reason for the company’s cash squeeze. Meanwhile, burdensome rebate agreements with pharmacy benefit managers and Medicaid entities have taken a toll on margins.

Inside the Restructuring Plan: Creditors, Equity, and Auctions

Under the proposed restructuring:

• First-lien lenders would receive new debt and an option to acquire up to 20% equity in the reorganized entity.

• Second-lien lenders would receive the majority of ownership.

• Unsecured creditors would split a $10 million cash pool.

• LifeScan would test the market for bids through a court-supervised auction process.

If no superior bids emerge, the company will proceed with its lender-backed plan and hopes to gain confirmation by late September.

Court Approvals Begin Flowing

At a first-day hearing, U.S. Bankruptcy Judge Alfredo R. Perez approved a slate of motions critical to LifeScan’s day-to-day operations. These included:

• Payment of employee wages

• Maintenance of cash management systems

• Use of prepetition cash tied to lender collateral

“I do believe there is a sufficient evidentiary basis to enter this order on the first day,” said Judge Perez, later approving the bidding procedures that will govern the potential sale process.

Legal Teams and Advisors at the Helm

LifeScan is represented by:

• Milbank LLP: Dennis F. Dunne, Samuel Khalil, Jaimie Fedell, Andrew M. Leblanc, Melanie Yanez

• Porter Hedges LLP: John F. Higgins, M. Shane Johnson, Megan Young-John, James A. Keefe, Grecia V. Sarda

PJT Partners LP is spearheading the sales effort as investment banker.

As LifeScan attempts to reboot with less debt and a clearer strategy for CGM adoption, its journey through Chapter 11 may either mark a new chapter of innovation—or a handoff to new ownership looking to re-engineer a legacy player for the digital health era.