Mallinckrodt considering restructuring options, including bankruptcy, as opioid cases loom: report

Shares in Mallinckrodt plunged as much as 45% after Bloomberg reported that the company is exploring options, including a bankruptcy filing, as it faces a wave of lawsuits related to the US opioid crises. Ahead of a federal trial next month in Cleveland, people close to the matter, cited by Bloomberg, said that the drugmaker has hired restructuring advisers to help limit its legal liabilities.

According to the sources, Mallinckrodt is negotiating with lawyers for the plaintiffs as it aims to avoid the trial in Cleveland, after Allergan and Endo reached deals to settle claims they faced in the October 21 hearing. Last month, Mallinckrodt tapped the remaining $95 million on its revolving credit line, which the sources said could be used in the event that it strikes a settlement in Cleveland.

Commenting on the news, Gary Nachman analyst at BMO Capital remarked "while there had been lingering uncertainties with [Mallinckrodt’s] overall opioid exposure and considerable pressures with key franchise Acthar, we had previously thought it would ultimately be able to navigate through those and that the equity was undervalued," adding "however, with the rapidly mounting pressures related to the opioid litigation, we can no longer rule out the possibility of bankruptcy."

Meanwhile, JPMorgan’s Chris Schott said that "with the company’s significant opioid exposure complicating any refinancing discussions, we see few attractive options available to the company.”

Mallinckrodt CEO Mark Trudeau, who said the "rumours and speculation are unfortunate," stated "while we can't really comment specifically on any specific rumours, what we can say is like any company hires advisers for all different kinds of things all the time." The executive added "any company has to consider a broad range of options...we have been focused publicly to say we are not the best owners of the opioid business." 

The news comes shortly after sources suggested that Purdue Pharma and its owners are prepared to offer $10 billion to $12 billion to settle more than 2000 lawsuits accusing the company of at least partially fuelling the US opioid crisis. Purdue is said to have offered a plan to declare bankruptcy and then restructure its operations into a for-profit "public benefit trust."

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