- Mallinckrodt has agreed to sell its contract manufacturing unit BioVectra to an affiliate of H.I.G. Capital, a private equity firm, for as much as $250 million.
- The seller will receive an upfront payment of $135 million, a long term note for $40 million and contingent payments of as much as $75 million, "enabling Mallinckrodt to capture future BioVectra growth potential," the company said.
- The companies expect the transaction to close in the fourth quarter.
For Mallinckrodt, the deal offers a welcome infusion of cash as it tries to fend off more than 2,000 lawsuits related to the opioid crisis. Shares tumbled to an all-time low this month after reports the company was considering bankruptcy.
In less than five years, Mallinckrodt's market valuation has fallen from about $15 billion to just over $300 million as of today. This August, the company suspended a plan to spin off its specialty generics business, citing the uncertainty it faced over litigation.
And after tapping the last of a $900 million revolving credit line, the company had no remaining borrowing capacity left, according to Bloomberg.
"This transaction continues to advance Mallinckrodt's strategic focus on branded, high-growth biopharmaceuticals by monetizing a non-core business," CEO Mark Trudeau said in the Sept. 9 statement. "While we recognize the longer-term growth potential for BioVectra, we believe that the structure of this deal enables us to participate in the future success of the business."
H.I.G., meanwhile, becomes the latest private equity firm to snap up a contracted manufacturing business. Contract manufacturing and development organizations, or CDMOs, have become attractive investments as drugmakers increasingly rely on outsourcing to handle the production of complex therapies.
BioVectra touts top biopharma companies as clients, according to Mallinckrodt, and fetched net sales of $53 million in 2018.
Under terms of the deal with H.I.G., BioVectra will continue to supply an active pharmaceutical ingredient for Mallinckrodt’s specialty brands business.
Mallinckrodt said the transaction is expected to include BioVectra's sites in Prince Edward Island and Nova Scotia, Canada, as well as its employees.