Please ensure Javascript is enabled for purposes of website accessibility

Mallinckrodt Becomes The Third Major Opioid Producer To File For Bankruptcy

By The Daily Upside – Oct 13, 2020 at 8:49AM

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

Here's what you should know

For more crisp and insightful business and economic news, subscribe to The Daily Upside newsletter.  It's completely free and we guarantee you'll learn something new every day.

COVID-19 has been extremely trying for so many families and businesses, but it's not the only ongoing public health crisis.

The opioid epidemic, which has claimed 450,000 lives over the last two decades, has only gotten worse during coronavirus.

Yesterday, publicly traded Mallinckrodt Pharmaceuticals became the third major opioid manufacturer to file for bankruptcy protection over the last 18 months.

The Story
Mallinckrodt, which manufactures more opioids than any other company in the U.S., has been hit with more than 3,000 individual lawsuits accusing the company of deceptive marketing practices and illegally promoting the use of addictive pain killers.

Monday's bankruptcy announcement comes after the company reached an agreement with 50 states and a steering committee of local governments and Native American tribes.  As part of the proposed settlement:

  • Mallinckrodt will fund a $1.6 billion trust to pay claimants during the bankruptcy process.
  • Victims will also receive warrants to buy a 20% stake in the company after it reemerges from bankruptcy. 
  • Equity shareholders, who have seen the company's share price fall from over $130 in 2015 to just 75 cents at the end of last week, are likely to get nothing.

Other Trouble: Mallinckrodt will also set aside $260 million to settle a government probe over the pricing of its multiple-sclerosis drug, Acthar Gel.  The company was accused of "meteoric" price hikes which sent the per-vial price from $50 in 2001 to $38,892 in 2019.

What Else: Opioid manufacturers Purdue Pharma (controlled by the billionaire Sackler Family) and Insys Therapeutics, both filed for bankruptcy protection last year.  Purdue is reportedly nearing a deal to pay $3 billion in restitution with the caveat that it is released from "all potential federal liability arising from or related to opioid-related activities."

The Takeaway: Last month, Mallinckrodt made cash payments totaling $5 million to top executives including CEO Mark Trudeau. 

The Motley Fool has a disclosure policy.  The Motley Fool has partnered with The Daily Upside to bring you news and highlights from the financial world. 

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

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 10/04/2022.

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.