Shedding non-core units while loading up on cash, Mallinckrodt bags $250M in CDMO sale
Mallinckrodt may not be spinning off its specialty generics business any time soon, but the UK drugmaker is seizing every chance to shed subsidiaries that don’t belong in the branded drug company it’s keen to consolidate into.
In a $250 million deal, Mallinckrodt is selling BioVectra, a contract development and manufacturing organization in Canada, to the private equity firm HIG Capital. Of that, $135 million is paid upfront, $40 million comes in a long-term note, and contingent payments add up to $75 million.
“While we recognize the longer-term growth potential for BioVectra, we believe that the structure of this deal enables us to participate in the future success of the business, and therefore we see this sale as the best option for both Mallinckrodt and BioVectra moving forward,” said president and CEO Mark Trudeau in a statement.
Mallinckrodt has secured an arrangement in which BioVectra will continue to supply an APR ingredient for its specialty brands business, the company added.
HIG, a $34 billion player headquartered in Miami, sees potential for “robust organic growth” in BioVectra, especially as it completes an expansion of capacity spanning microbial fermentation, chemical synthesis, IV/IM formulations and more.
The transaction is expected to close in the fourth quarter of 2019, when Mallinckrodt would have gone to trial with two Ohio counties accusing it of helping fuel the opioid crisis. The company said a few days ago it’s reached a tentative settlement for $24 million in cash and $6 million worth of generic products.
But with hundreds of other lawsuits to fend off — all pinning the blame of producing and distributing vast amounts of opioids on the SpecGx subsidiary it was hoping to separate from — Mallinckrodt has reportedly hired lawyers and restructuring pros to explore a bankruptcy.
The prospect of a potential bankruptcy sent the stock $MNK down 44% last week. But investors seem to be embracing today’s news about the sale of BioVectra, with shares up 12% to $2.10