Mallinckrodt Files for Bankruptcy Amid Opioid Crisis

by Warren Seah

Dublin-based drugmaker, Mallinckrodt PLC, has officially filed for bankruptcy for the second time in three years due to struggles with settlement payments in connection with the opioid crisis.

Disclosure of Grand Jury Subpoena

In addition, the company revealed that it received a grand jury subpoena from the U.S. Attorney’s Office for the Western District of Virginia last week.

Trading Halt and Record Low Stock Price

Trading in Mallinckrodt’s stock (MNK, -14.97%) has been halted pending this news. The stock closed at an all-time low of 34 cents on Friday.

Details of the Subpoena

The subpoena requests information from July 17, 2017, to the present regarding Mallinckrodt’s reporting of “suspicious orders” for controlled substances, chargebacks, and other transactions. It also seeks communications between the company and the U.S. Drug Enforcement Administration.

Cooperation and Compliance

Mallinckrodt has expressed its intention to cooperate with the U.S. attorney’s office investigation and share information about its specialty generics business, which has been operating under an operating injunction since October 2020.

The company asserts that its Specialty Generics division is in compliance with its obligations thanks to its industry-leading compliance program for controlled substances. However, it acknowledges that the ultimate scope, duration, and outcome of the investigation are uncertain at this time.

Mallinckrodt Files for Bankruptcy to Restructure Financial Foundation

Mallinckrodt, a pharmaceutical company, has officially filed for bankruptcy. The filing encompasses the company, most of its U.S. subsidiaries, and select international subsidiaries.

Despite the bankruptcy declaration, both Mallinckrodt and its subsidiaries will continue their operations as “debtors in possession.” This move is part of the company’s ongoing efforts to implement a financial restructuring plan and strengthen its long-term prospects.

Chief Executive Siggi Olafsson expressed gratitude for the support received from key stakeholders during this process. He stated, “Implementing this agreement will meaningfully enhance Mallinckrodt’s financial foundation and better position the business for the future.”

Mallinckrodt’s Opioid Settlement and Debt Reduction

In addition to the bankruptcy announcement, Mallinckrodt recently finalized a restructuring support agreement with debtholders and the Opioid Master Disbursement Trust II. This agreement aims to reduce the company’s debt by an impressive $1.9 billion.

One of the settlement’s key provisions is a $250 million final payment to the trust, which follows an initial payment of $450 million. Comparatively, the company’s payment to the trust amounts to $700 million, while it had entered into a $1.7 billion settlement agreement to address opioid-related lawsuits.

Mallinckrodt had previously filed for bankruptcy in 2020 and successfully emerged from it last year.

Financial Impact and Growth Prospects

The news of the bankruptcy filing has heavily impacted Mallinckrodt’s stock market performance. Year to date, its stock has experienced a significant decline of 95.6%, in stark contrast to the S&P 500 Index, which has gained 15.5%.

This recent bankruptcy filing represents an essential step towards securing a stronger financial foundation for Mallinckrodt, ensuring its ability to thrive in the future.

Also read: Mallinckrodt to file for chapter 11 bankruptcy again and leave $1 billion of $1.7 billion opioid settlement unpaid.

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