Mallinckrodt to sell contract development and manufacturing unit BioVectra for up to $250 million

Mallinckrodt said Tuesday that it agreed to sell its wholly owned subsidiary BioVectra to an affiliate of private equity investment firm H.I.G. Capital for around $250 million. The deal for the contract development and manufacturing organisation (CDMO) includes an upfront payment of $135 million and a long-term note for $40 million, as well as contingent payments of up to $75 million.  

Mark Trudeau, CEO of Mallinckrodt, remarked "this transaction continues to advance Mallinckrodt's strategic focus on branded, high-growth biopharmaceuticals by monetising a non-core business." The sale, which the company said will also enable it to "capture future BioVectra growth potential," is expected to close in the fourth quarter.  

Mallinckrodt initially gained ownership of BioVectra as part of its $5.6-billion takeover of Questcor Pharmaceuticals in 2014. The company noted that the sale to H.I.G. Capital is expected to include all of BioVectra's sites in Prince Edward Island and Nova Scotia, Canada, as well as its employee base. Meanwhile, BioVectra will continue to supply active pharmaceutical ingredients supporting Mallinckrodt's specialty brands business under a long-term arrangement.

Last month, Mallinckrodt, whose shares jumped more than 60% on the latest news, suspended plans to spin off its specialty generics business because of market conditions and opioid litigation in the US. The drugmaker, along with a number of other companies, is facing a wave of lawsuits in the US over allegations related to the opioid epidemic.

Sources recently revealed that Mallinckrodt is considering strategic options, including bankruptcy, as it attempts to manage its legal issues. Last week, Mallinckrodt agreed to pay $30 million to settle two opioid lawsuits filed by Ohio's Cuyahoga and Summit counties, with general counsel Mark Casey indicating that the accord will give the drugmaker time to pursue a global settlement of the outstanding cases.

For related analysis, see ViewPoints: Ray of sunlight pokes through Mallinckrodt's clouds.

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