Mallinckrodt shares fall on plans to file for bankruptcy again
23 Aug 2023
AcquisitionPatent Infringement
Mallinckrodt is set to file for bankruptcy for the second time in less than three years due to declining business performance and difficulties in meeting payments related to a $1.7-billion settlement to resolve US opioid lawsuits. The company said Wednesday that it is planning to file for Chapter 11 protection in US Bankruptcy Court "in the coming days." The news drove down its shares by 22% in premarket trading.
The company stated that it has reached a tentative agreement with creditors, including a trust set up to help victims of the opioid crisis, and that it aims to expedite its emergence from this latest bankruptcy proceeding. The proposed restructuring arrangement would involve a final payment of $250 million to opioid victims, on top of $450 million already paid – falling short of the initial amount pledged last year by about $1 billion. Further, Mallinckrodt said it would also reduce its funded debt by $1.9 billion through the proposal.
Previously, the company had filed for bankruptcy in 2020, joining other pharmaceutical manufacturers such as Purdue Pharma and Insys Therapeutics, all seeking bankruptcy protection to address legal claims surrounding their respective roles in the US opioid crisis.
However, despite making an initial payment of $450 million in June last year after emerging from its first bankruptcy, Mallinckrodt faced more business setbacks, particularly due to disappointing sales of its flagship product Acthar Gel. Faced with a looming $200-million opioid settlement payment this past June, the company began exploring options to manage the financial strain.
"After several months of constructive discussions, we are pleased to have reached this agreement with our key stakeholders, which will enable Mallinckrodt to better align our balance sheet with our current business plan," said CEO Siggi Olafsson in a statement Wednesday. He added that the company acknowledges "the important role of the trust in helping to address the US opioid crisis and have remained committed to ensuring that we achieved a meaningful resolution for the trust through this process."
As part of the restructuring plan, the company's existing ordinary shares will be eliminated.
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