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In reversal, Mallinckrodt puts split plans on hold

(Credit: Flickr; Health Gauge )
  • Generic drugmaker Mallinckrodt will put on hold plans to split the company into two separate businesses, reversing course due to “increasing uncertainties” stemming from litigation over the company’s role in the opioid overdose epidemic. 
  • Mallinckrodt, which shipped nearly 29 billion opioid pills across the U.S. between 2006 and 2012, is named in nearly 1,800 lawsuits regarding its marketing of prescription painkillers, many of which were consolidated in the federal litigation now being argued in Ohio district court. 
  • The company said separating out the specialty generics business remained its intention and noted it would “actively consider” a range of options to achieve that goal. 

Mallinckrodt first announced plans to spin off its specialty generics business last December, a decision made after two years of reviewing potential options. 

Six months later and $1.5 billion poorer in market value, Mallinckrodt is back where it started and again weighing options on how best to separate out the specialty generics unit. 

The decision to suspend its split plans will cause “questions on strategic direction and elimination of legacy generic issues” to re-emerge, wrote Raymond James analyst Elliot Wilbur in a Aug. 6 note to clients. 

In particular, Mallinckrodt’s full business will remain shadowed by potential liabilities stemming from the ongoing opioid litigation. New data published by The Washington Post show Mallinckrodt sold 28.8 billion opioid pills between 2006 and 2012, accounting for more than 37% of the total market.

Investor reaction to Mallinckrodt’s announcement is already bearing out Wilbur’s prediction. Shares fell by as much as 10% Tuesday, hitting a new low. 

(Credit: Ned Pagliarulo / BioPharma Dive, market data) 

Under Mallinckrodt’s original plan, its specialty generics business would retain the company’s name and stock ticker, while the remaining branded pharmaceutical unit would assume the name Sonorant Therapeutics. 

The company had targeted the second half of this year to complete the transaction, advancing as far as naming corporate officers and firming up plans for structuring debts between the two units. 

As Mallinckrodt reconsiders, it will face further headwinds from slowing sales of its top branded drug, Acthar Gel (repository corticotropin). 

The multi-use drug, enmeshed in legal problems of its own, earned Mallinckrodt 9% less during the second quarter than in the same period a year ago. The company now expects net Acthar sales of less than $1 billion in 2019, which will weigh on special brands sales overall.