Mallinckrodt, once the nation’s largest oxycodone producer, announces tentative $1.6B settlement
Three years after it first paid out fines for its role in the US opioid abuse epidemic, Mallinckrodt has announced an agreement-in-principle that will see the company pay out $1.6 billion and place its generics unit in bankruptcy.
The tentative deal would settle hundreds of lawsuits from state and local governments over Mallinckrodt’s role in the epidemic, while also helping address the company’s increasingly mountainous debt. Although Purdue Pharma has drawn the bulk of both public and legal acrimony for opioid sales, documents made public earlier this year showed that Mallinckrodt subsidiary SpecGx, along with the generic subsidiaries of Teva and Endo Pharmaceuticals, accounted for the vast majority of the 76 billion opioid pills distributed from 2006 to 2012. Mallinckrodt was at the top of that list.
Over that period, the Ireland-based company began to draw scrutiny from the US Drug Enforcement Administration for failing to flag and halt suspicious orders, eventually paying a $35 million fine in 2017.
As the lawsuits against them and other drugmakers swelled, Mallinckrodt announced plans to restructure the company: They would spin off the generics unit as “Mallinckrodt Inc.” and make it responsible for all opioid liabilities. The parent company would become Sonorant Therapeutics.
That plan lasted less than a month before Mallinckrodt scrapped it, citing “market conditions” and uncertainty around the pending litigation. Staring at a cloud of lawsuits and debt obligations nearing $6 billion, executives contemplated putting the entire business into bankruptcy — a move that, like Purdue Pharma and Insys’ bankruptcy filings, could help shelter the company from legal claims by channeling them through a bankruptcy court.
The deal announced today would, if finalized, see Mallinckrodt’s generics subsidiary pay $1.6 billion in 4 installments into a trust, beginning when they emerge from bankruptcy. The trust would also receive warrants for 19.99% of the company’s outstanding shares, exercisable for $3.15 per share. The bulk of Mallinckrodt’s business would remain solvent.
In November, Mallinckrodt paid $24 million in cash and $6 million worth of generics to resolve lawsuits from Cuyahoga and Summit counties in Ohio.
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