Mallinckrodt to Go Bankrupt for Second Time in Three Years (1)

Mallinckrodt Plc plans to file bankruptcy for the second time in less than three years after battling business declines and struggling to keep up with payments on a $1.7 billion settlement resolving a wave of lawsuits accusing the drugmaker of fueling the US opioid epidemic.

The 156-year-old company plans to file for Chapter 11 protection in Delaware in the coming days, it said in a filing. Mallinckrodt has struck a tentative restructuring deal with creditors including its opioid victim trust and intends to exit this second bankruptcy quickly, according to the filing.

Under the proposed restructuring deal, Mallinckrodt would give opioid victims a final $250 million one-time payment — a move that would leave them with $1 billion less than they were promised just last year. The proposal would also slash Mallinckrodt’s funded debt by $1.9 billion, according to a statement.

Mallinckrodt previously filed for bankruptcy in October 2020, joining other opioid manufacturers including OxyContin maker Purdue Pharma LP and Insys Therapeutics Inc. that turned to Chapter 11 to resolve costly litigation about their roles in the drug crisis.

Second Trip

Mallinckrodt won wide support for the opioid settlement intended to compensate hospitals, states, tribes and individuals hurt by its products. The company made an initial $450 million payment in June 2022, when it left its first bankruptcy, but its business has sputtered as sales of its blockbuster drug, Acthar Gel, disappoint.

At the request of its lenders, Mallinckrodt began weighing its options ahead of a $200 million opioid settlement payment due June 16, concerned the payment could stress its finances.

The company has said it understands the settlement is important in helping combat the nation’s opioid crisis and fund addiction treatment services amid criticism from individual victims.

Mallinckrodt recognizes “the important role of the Trust in helping to address the U.S. opioid crisis and have remained committed to ensuring that we achieved a meaningful resolution for the Trust through this process,” Chief Executive Officer Siggi Olafsson said in a statement.

The company’s existing, ordinary shares will be wiped out when the restructuring plan is implemented, according to the statement.

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--With assistance from Jeremy Hill.

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Jonathan Randles in New York at jrandles5@bloomberg.net

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Claire Boston at cboston6@bloomberg.net

William Selway

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