Please ensure Javascript is enabled for purposes of website accessibility

Mallinckrodt Considers Bankruptcy Over Opioid Lawsuits

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

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

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

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/07/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.