- Mallinckrodt's stock dropped 40% Thursday morning, reaching a new all-time low share price after Bloomberg reported the pharma has hired restructuring advisers and is considering bankruptcy among its options if its opioid liabilities become unmanageable.
- Mallinckrodt has hired the law firm Latham & Watkins and turnaround firm AlixPartners while multi-district opioid litigation involving the company nears trial, set to begin Oct. 21 in Cleveland. Speaking Thursday at a Wells Fargo investor event, Mallinckrodt CEO Mark Trudeau called the report "unfortunate" but did not contest its accuracy. "We hire advisers for different types of things all the time," he added.
- Shares opened Thursday at $1.61 apiece, down more than 90% from the beginning of 2019. In less than five years, the St. Louis-based pharma has seen its business collapse from a market value of about $15 billion to about $130 million as of Thursday.
The legal liabilities from opioid litigation has wreaked havoc on Mallinckrodt in 2019.
Last month, the company suspended its plan to spin off its specialty generics unit into a separate company, citing increasing uncertainties from opioid litigation. Trudeau said Thursday separating the generics business remains a priority for 2019, and the pharma is looking at options to do so.
With roughly $5 billion in debt, Mallinckrodt tapped the final $95 million of a $900 million revolving credit line, Bloomberg reported, citing an Aug. 29 disclosure. That leaves the business with no remaining borrowing capacity, while major opioid litigation is expected to further develop.
At the investment bank conference, Mallinckrodt's chief executive said the company is open to the idea of a global settlement if done "in a reasonable way," but cautioned there is no single place to find such a solution as of now, given the thousands of lawsuits against the pharma.
As of Aug. 6, the company disclosed it was aware of 2,153 cases filed by a government entities, such as counties and cities, as well as 140 lawsuits filed by hospitals and health systems, 103 suits filed by individuals and 10 suits filed by state attorneys general, according to its most recent quarterly Securities and Exchange Commission filing.
Credit analysis firm CreditRiskMonitor sees Mallinckrodt's business carrying a high risk of bankruptcy, according to its FRISK score, a metric used to measure the likelihood of bankruptcy on a 10-point scale.
While the typical drug company has a score of 7, Mallinckrodt has a FRISK score of 2, which translates to a probability between 4% and 10% of declaring bankruptcy in the next 12 months.
"The market abhors uncertainty, and that's where we find ourselves," Trudeau said.
Other pharmas involved in the opioid litigation have also faced financial pressure in 2019.
Privately-held Purdue Pharma has reportedly offered more than $10 billion to settle in a global deal that would include the company declaring Chapter 11 bankruptcy.
Israeli drugmaking giant Teva has seen it stock fall more than 50% in 2019 resulting from a confluence of investor concerns, including opioid and price fixing lawsuits as well as significant debt levels and flatlining cash flow.
And an Oklahoma judge recently ordered Johnson & Johnson to pay $572 million for its opioid marketing practices in a case that the big pharma plans to appeal.
Teva and Endo International, another pharma named in the multi-district litigation set to start next month, both saw stock drops Thursday morning. Teva fell about 5% and Endo was down 15%.