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Mallinckrodt Considers Bankruptcy Over Opioid Lawsuits

By Mark Prvulovic - Feb 24, 2020 at 5:19PM

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Shares fell by as much as 45% in light of the news.

The small-cap drugmaker Mallinckrodt (MNK) is reportedly considering a Chapter 11 bankruptcy according to the Wall Street Journal. Due to extensive liabilities surrounding its many opioid lawsuits, the company is now in confidential talks with creditors regarding its generic drug business..

Although Mallinckrodt refused to comment to the WSJ, it's been widely known that the company has considered either selling off or separating its generic drug business -- which is involved in selling opioids -- from its specialty drug business.

A chapter 11 bankruptcy paper and a pen.

Image source: Getty Images.

In September, Mallinckrodt hired restructuring firms to consider whether bankruptcy would be necessary to protect itself from its legal liabilities. While it was still uncertain then whether the drugmaker would truly resort to Chapter 11 bankruptcy, today's report seems to confirm that is indeed the case.

The ongoing opioid crisis

Mallinckrodt has been one of the more prominent opioid manufacturers in the U.S., alongside other companies such as Johnson & Johnson (JNJ -0.40%). If Mallinckrodt goes bankrupt, it wouldn't be the first time an opioid producer has gone under. Purdue Pharma went out of business after the company faced a $12 billion settlement for over 2,000 opioid-related lawsuits.

A couple of weeks ago, 21 states rejected an $18 billion proposal from AmerisourceBergen, McKesson, and Cardinal Health to settle all their opioid-related lawsuits. Around 400,000 U.S. deaths between 1997 and 2017 have been associated with opioid use.

Mark Prvulovic has no position in any of the stocks mentioned. The Motley Fool recommends Johnson & Johnson and McKesson. The Motley Fool has a disclosure policy.

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Stocks Mentioned

McKesson Corporation Stock Quote
McKesson Corporation
MCK
$346.69 (2.63%) $8.88
Mallinckrodt Public Limited Company Stock Quote
Mallinckrodt Public Limited Company
MNK
Johnson & Johnson Stock Quote
Johnson & Johnson
JNJ
$171.11 (-0.40%) $0.68
Cardinal Health, Inc. Stock Quote
Cardinal Health, Inc.
CAH
$61.51 (2.11%) $1.27
AmerisourceBergen Corporation Stock Quote
AmerisourceBergen Corporation
ABC
$141.31 (1.47%) $2.04

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