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Opioid Drugs

Mallinckrodt’s CEO Announces Tentative Opioid Settlement

— March 3, 2020

Mallinckrodt has reached a proposed settlement in court that would resolve all opioid claims against the company.

Mallinckrodt’s CEO has announced the company and its specialty generics-focused subsidiaries, Mallinckrodt LLC, SpecGx LLC and certain other affiliates, have reached an agreement on the terms of a global settlement that would resolve all opioid-related claims against it. The agreement is supported by 47 state and U.S. Territory Attorneys General.  The terms of the proposal, which would become effective upon Specialty Generics’ emergence from a Chapter 11 process, would need final approval from the court.

Plaintiffs would be set to receive $1.6 billion in structured payments – $300 million would be received upon Specialty Generics’ emergence from the completed Chapter 11 case, $200 million would be paid out upon each of the first and second anniversaries of emergence, and $150 million would be received on the third through eighth anniversaries.  Most of the payments would be distributed by way of trust, which would also establish an abatement fund for addiction treatment and related efforts.  A copy of the sheet outlining the terms of the proposed settlement, including the conditions to the effectiveness of the settlement, has been filed as an exhibit to a Form 8-K filed by Mallinckrodt this month with the U.S. Securities and Exchange Commission.

Mallinckrodt's CEO Announces Tentative Opioid Settlement
Photo by Bill Oxford on Unsplash

Mallinckrodt and all of its subsidiaries, including Specialty Generics, are abiding by ‘business as usual’ practices and are expected to continue operating normally throughout the process.  Mallinckrodt also announced an agreement with its lenders to provide a $800 million, four-year term loan. The company has $791 million in cash on its balance sheet and net debt of $4.6 billion.

Mark Trudeau, Mallinckrodt’s President and Chief Executive Officer, said, “Reaching this agreement in principle for a global opioid resolution and the associated debt refinancing activities announced today are important steps toward resolving the uncertainties in our business related to the opioid litigation.  Importantly, when finalized, we believe the proposed settlement and capital restructuring activities will provide us with a clear path forward to achieving our long term strategy, preserving value for our financial stakeholders and providing us with the flexibility to operate effectively.”

Trudeau continued, “In spite of the uncertainties impacting the business, we have continued to deliver strong earnings and cash flow as evidenced by our fourth quarter and 2019 results issued today.  These results reflect the strength of both Specialty Brands and Specialty Generics and underscore our vision for the future of these businesses.  Our pipeline continues to build momentum, with the expected filings of terlipressin and StratGraft® in the coming months, as well as the completion of key clinical study results and data readouts across the portfolio.  Looking ahead, we remain focused on our vision to develop and bring to market innovative therapies for underserved patients with severe and critical conditions.”

Mallinckrodt’s announcement comes at the same time OxyContin manufacturer Purdue Pharma has officially launch a nationwide information campaign to notify potential claimants.  Mallinckrodt is the first company to reach a tentative global agreement with parties involved in the federal case.

Elizabeth Chamblee Burch, a University of Georgia law professor, said of the consolidated litigation, “Bankruptcy as an option, I think, is one alternative to negotiating a global settlement or a holistic closure” to the case…It’s like, all right, if you’re not going to play ball with us, this is our last move because we can always say well, we’ll just declare bankruptcy.”


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