Mallinckrodt’s commitment to pay a hefty $1.7 billion opioid settlement has taken a significant hit due to the company’s second bankruptcy within a span of just two years. On Tuesday, a US bankruptcy judge greenlit Mallinckrodt’s revised plan, allowing the company to slash $1 billion from its financial obligations to both governments and individuals affected by the opioid crisis.
This bankruptcy maneuver is set to erase a substantial $1.9 billion debt from Mallinckrodt’s books once it emerges from Chapter 11, expected by year-end. It’s worth noting that the restructuring process is also facing legal proceedings in Ireland, as Mallinckrodt is incorporated in Dublin.
“With substantially reduced debt and improved financial flexibility, we will be better positioned to advance our mission of delivering therapies that enhance the well-being of patients facing severe and critical conditions while focusing on our strategic priorities.”
– Siggi Olaffson, Mallinckrodt’s CEO
In its initial bankruptcy filed in 2020, Mallinckrodt had agreed to disburse $1.7 billion over eight years to settle allegations of employing unlawful tactics to boost opioid sales. This settlement also prevented opioid victims from pursuing further legal action against Mallinckrodt.
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While the first bankruptcy did alleviate a significant portion of Mallinckrodt’s debt burden, the company continued to face financial challenges, leading to the latest bankruptcy filing in August. Notably, despite the reduced obligation to the opioid fund, most of Mallinckrodt’s creditors supported the debt restructuring plan. As part of the bankruptcy process, Mallinckrodt made a final payment of $250 million to the trust.
The bankruptcy judge, in approving the arrangement, deemed it “a reasonable exercise” of business judgment.
Simultaneously, Mallinckrodt’s overall business has displayed signs of recovery, showing revenue growth in the second quarter.
In conjunction with the bankruptcy proceedings, Mallinckrodt engaged in discussions with investors about potentially divesting some of its assets, including its opioid business, as reported by The Wall Street Journal last month.
Also Read: Following $1.7B Opioid Settlement, Mallinckrodt Prepares For Second Round Of Bankruptcy Proceedings
Mallinckrodt’s specialty generics segment, which includes painkillers, generated $195 million in sales in the second quarter. On the branded drugs front, Mallinckrodt secured FDA approval for Terlivaz in September to enhance kidney function in patients with hepatorenal syndrome. The drug accrued $3.4 million in sales in the second quarter, with expectations of reaching peak annual sales between $200 million and $300 million, as disclosed by Mallinckrodt in August.
However, Mallinckrodt’s top-selling drug, Acthar, used to treat certain inflammatory disorders, faces challenges due to “continued scrutiny on overall specialty pharmaceutical spending and competition,” as mentioned by the company in August. Mallinckrodt anticipates a decline of 15% to 20% in Acthar’s sales for 2023, even though the drug generated $593 million in revenue last year.
