Mallinckrodt filed for bankruptcy protection on Monday, saddled with lawsuits alleging it helped fuel the U.S. opioid epidemic. They are the third major durgmaker to seek bankruptcy protection.
The company had said in February it planned to have its generic drug business file for bankruptcy as part of a tentative $1.6 billion opioid settlement to resolve claims by state attorneys general and U.S. cities and counties.
Last March, the company also lost a court battle to avoid paying higher rebates to state Medicaid programs for its top-selling drug.
In September, Mallinckrodt hired restructuring advisers to help limit its liabilities regarding the opioid settlement and a potential restructuring. The opioid litigation had caused some concern at the company, including a suspension of its plans to spin off its generics business into a standalone entity due to the opioid litigation, as well as “market conditions.”
Mallinckrodt said on Monday it had agreed to pay $1.6 billion over several years to settle opioid-related litigation. About $450 million would be paid as part of its settlement once the company emerged from chapter 11 bankruptcy.
The company would then pay $200 million in the first and second year after its emergence from the bankruptcy, and $150 million subsequently through the seventh year.
Mallinckrodt had agreed to pay $260 million over seven years to resolve disputes related to its multiple-sclerosis drug H.P. Acthar gel and pay out rebates to state Medicaid programs.
Mallinckrodt also plans to dismiss its appeal to a March ruling related to Acthar gel, whose price per-vial has risen from about $50 in 2001 to $38,892 in 2019.
During the bankruptcy protection, the company said it aims to resolve opioid-related claims and reduce its debt by about $1.3 billion, while surviving on cash on hand and cash generated from operations.
The company listed both assets and liabilities in the range of $1 billion to $10 billion in a filing with the U.S. Bankruptcy Court for the District Of Delaware.
Under terms of the settlement announced this morning, the court-supervised process will lead to the creation of a trust, which, as the company said, will “establish an abatement fund to offset the expense of helping to combat opioid addiction and providing support to communities impacted by opioid abuse.” The court-supervised process is also expected to resolve all opioid-related claims against Mallinckrodt and its subsidiaries, the company said.
Mark Trudeau, president and chief executive officer of Mallinckrodt, said reaching the agreement and undergoing debt refinancing are important steps moving the company forward.
“Importantly, when finalized, we believe the proposed settlement and capital restructuring activities will provide us with a clear path forward to achieving our long term strategy, preserving value for our financial stakeholders and providing us with the flexibility to operate effectively,” Trudeau said in a statement.
Trudeau continued but adding that, while the company has had some uncertainties, it has delivered strong earnings and has a strong pipeline that continues to “build momentum.” Trudeau said the company anticipates seeking regulatory approval of terlipressin and StratGraft in the coming months, as well as the completion of key clinical study results and data readouts across the portfolio.