Under a cloud of opioid lawsuits, Mallinckrodt suspends specialty generics spinoff
Mallinckrodt $MNK is halting plans to spin off its specialty generics business, citing “current market conditions and developments, including increasing uncertainties created by the opioid litigation.”
The UK drugmaker had intended to establish a new, publicly-traded company bearing the Mallinckrodt name while renaming the specialty brands unit Sonorant Therapeutics and adopting the new symbol $SRTX. It first announced the spinoff last December at the end of a 2-year review.
While numerous lawsuits and media reports have pinned the blame for the opioid crisis on Purdue Pharma for its aggressive, and allegedly deceptive, marketing of Oxycontin, generic manufacturers of oxycodone are also surfacing as culprits. In recent days the Washington Post shone a spotlight on the role its SpecGx subsidiary played in fueling the crisis, identifying it as one of three companies accounting for the vast majority of 76 billion opioid pills produced and shipped from 2006 to 2012.
The company paid $35 million in 2017 to settle DEA complaints accusing it of inadequate detection of suspicious opioid orders.
Meanwhile, Mallinckrodt is also battling continued payer scrutiny and resistance toward Acthar, the old gel it acquired in the Questcor buyout in 2014. The list price of Acthar — which would remain in the specialty branded business following the split — had been hiked from $40 per vial in 2001 to a whopping $38,892 in July.
Jefferies analyst Anthony Petrone noted that the debt markets might be taking a wait and see approach, as a lawsuit brought by Oklahoma against J&J is expected to conclude late August and the size of the payout there might be indicative of the outcome of Mallinckrodt’s case with Oklahoma, to commence in October.
“The news to suspend the SpecGx spin-off is indicative of both funding concerns in the debt markets (confirmed with JEF high-yield desk) which itself is associated with unknowns around future damage/ settlement liabilities related to the various opioid lawsuits,” he wrote in a note.
Mallinckrodt is nonetheless still committed to separating the generics and branded operations, the company said, with a range of options being considered.