HQ Team
August 28, 2023: American-Irish pharmaceutical company, Mallinckrodt Pharmaceuticals, and its “certain” subsidiaries have filed for a second bankruptcy in the US after reaching a pact with their creditors to cut the opioid-related settlement payments by about $1 billion.
The Ireland-headquartered company initiated Chapter 11 proceedings in the U.S. Bankruptcy Court for the District of Delaware. It exited its first bankruptcy in 2020 after winning the court’s approval for a $1.7 billion reorganization plan toward settling the litigation over eight years.
The new Restructuring Support Agreement “will reduce the company’s total funded debt by approximately $1.9 billion, increase free cash flow generation, extend maturity runway, and better position the business for long-term success,” according to a company statement.
The new plan may nullify a majority of the $1.25 billion that the company still owes to the plaintiffs under the earlier pact. A final payment of $250 million was made before its second bankruptcy proceedings.
Major share of opioid market
Mallinckrodt Pharmaceuticals led the manufacturer of opioid painkillers in the US. Its subsidiary, SpecGx, dominated the US for generic opioids as addiction and overdose rates spiked across the nation.
According to Drug Enforcement Administration (DEA) records, the company provided nearly 40% of all opioid pills sold in US pharmacies between 2006-2012.
In 2011, Mallinckrodt came under investigation by the DEA for failing to meet its requirements to track and report suspicious orders of controlled substances.
The company was a defendant in more than 3,000 lawsuits filed by state and local governments, American Indian tribes, and individuals against the opioid industry.
The plaintiffs accused the company of contributing to the deadly opioid crisis by trivializing addiction and failing to identify and report suspicious drug orders.
Pending court approval
As a “next step to implement the comprehensive financial restructuring plan,” the company had previously entered into with more than 85% of each of the company’s first and second lien debtholders, and the Opioid Master Disbursement Trust II (the “Trust”), was announced on August 23, 2023.
“With the overwhelming support of its key stakeholders, the company expects to complete the court-supervised process in the fourth quarter of 2023,” according to the statement.
The restructuring plan, pending court approval, provides for, among other considerations, a final, one-time payment of $250 million that was made to the Trust on August 24, 2023.
“This payment, in addition to the $450 million the company previously paid, is intended to support the Trust’s mission to address the US opioid crisis and fund addiction treatment.” The company is late on paying the next tranche of dues owed to the plaintiffs.
Expedite process
According to the statement, together with cash generated from ongoing operations, “this liquidity is expected to be sufficient to support the company’s continued operations during the court-supervised process.”
“Implementing this agreement will meaningfully enhance Mallinckrodt’s financial foundation and better position the business for the future,” Siggi Olafsson, President and Chief Executive Officer of Mallinckrodt, said.
“We expect to complete this process on an expedited basis and emerge as a stronger organization that will continue to help improve outcomes for patients with severe and critical conditions.”
