After Mallinckrodt Pharmaceuticals’ emergence from Chapter 11 reorganization and a $1.7 billion settlement for opioid claims, the company now faces significant challenges. Regulatory filings indicate that Mallinckrodt has failed to make its annual $200 million opioid settlement payment and has hinted at the possibility of another bankruptcy. In response, investors have filed a class-action lawsuit against the company, accusing it of making false and misleading statements about its financial health.
The lawsuit, filed in federal court in New Jersey, alleges that Mallinckrodt’s CEO Siggi Olafsson, CFO Bryan Reasons, and Chairman Paul Bisaro misled investors about the company’s financial status. The plaintiffs cite various sources such as conference calls, press releases, quarterly earnings reports, and regulatory filings to support their claims.
When The Wall Street Journal reported Mallinckrodt’s struggles to make the opioid settlement payment and potential bankruptcy, the company’s shares plummeted by 40%. This prompted the filing of the class-action lawsuit.
Mallinckrodt, a 156-year-old company headquartered in Ireland for tax purposes but conducting most of its business in the U.S., has experienced declining revenues. While its revenues exceeded $3 billion from 2016 to 2019, projections indicate a decline to between $1.7 billion and $1.82 billion this year. The company has faced multiple challenges, including a $260 million settlement with the U.S. government for underpaying Medicaid rebates and engaging in illegal copay subsidies related to its anti-seizure drug Acthar Gel.
However, amidst the difficulties, Mallinckrodt did receive positive news with the FDA’s approval of its hepatorenal syndrome drug, Terlivaz, after previously receiving two complete response letters. Analysts estimate its peak sales potential to reach $300 million. Mallinckrodt has not provided a comment on the lawsuit.
