Faced with billions of dollars in legal costs related to the opioid crisis, Mallinckrodt Pharmaceuticals on Monday announced that it has filed for bankruptcy.
In February, Mallinckrodt, the largest generic opioid manufacturer reached an agreement in principle on a $1.6 billion settlement with attorneys general for 47 states and U.S. territories for its role in the nation's opioid crisis.
The entities that filed Chapter 11 petitions include Mallinckrodt and its U.S. subsidiaries, including its specialty generics-focused and specialty brands-related subsidiaries, and certain of its international subsidiaries.
Mallinckrodt and all of its subsidiaries are continuing to operate and supply customers and patients with products as normal, the company said.
The company said it intends to use the Chapter 11 process to provide a fair, orderly, efficient and legally binding mechanism to implement a restructuring support agreement, or RSA that, among other things, provides for an amended proposed opioid claims settlement and a financial restructuring that would:
- Reduce the company's total debt by approximately $1.3 billion, improving the company's financial position and better positioning it for long-term growth;
- Resolve opioid-related claims against the company, its subsidiaries and related entities; and
- Resolve various Acthar Gel-related matters, including the CMS Medicaid rebate dispute, an associated False Claims Act lawsuit and an FCA lawsuit relating to Acthar's previous owner's interactions with an independent charitable foundation.
Mark Trudeau, Mallinckrodt president and CEO, said, "After many months of deliberation, negotiation and consideration of alternatives, Mallinckrodt's management and board of directors determined that implementing a Chapter 11 restructuring provides the best opportunity to maximize the value of the enterprise and position the company for the future in light of the current challenges it faces. The actions we are taking are an important step forward for Mallinckrodt and our patients, employees, customers, suppliers and other partners.”
Trudeau continued, “We have worked diligently over the last several months to evaluate all available options to achieve a comprehensive resolution to the significant litigation and debt issues overhanging our business. Having entered our restructuring support agreement and reached agreements in principle with a key group of opioid plaintiffs, other governmental parties and our guaranteed unsecured noteholders, we are beginning this process in a highly organized manner. We are now on a clear path to eliminating legal uncertainties, maximizing enterprise value, strengthening our balance sheet and moving ahead with our strategic plans. At the same time, we remain committed to improving health outcomes and developing and bringing to market therapies for patients with severe and critical conditions."
In connection with the Chapter 11 filing, the company has entered into an RSA that provides for a financial restructuring designed to strengthen the company's balance sheet and reduce its total debt by approximately $1.3 billion, improving the company's financial position and allowing the company to continue driving its strategic priorities and investing in the business to develop and commercialize therapies to improve health outcomes.
Under the terms of the amended proposed settlement, which would become effective upon Mallinckrodt's emergence from the Chapter 11 process, subject to court approval and other conditions:
- Opioid claims would be channeled to one or more trusts, which would receive $1.6 billion in structured payments.
- $450 million would be received upon the company's emergence from Chapter 11;
- $200 million would be received on each of the first and second anniversaries of emergence; and
- $150 million would be received on each of the third through seventh anniversaries of emergence with a one-year prepayment option at a discount for all but the first payment.