OPIOID CRISIS THREATENS TO DRIVE MALLINCKRODT COMPANY TO BANKRUPTCY

The Irish pharmaceutical company Mallinckrodt, founded in 1867, is under threat of bankruptcy. The hearing of Delaware County court is scheduled for April 27. The bankruptcy itself was initiated by the company last year, on October 12, by applying to court in accordance with Chapter 11 of the US Bankruptcy Code. Now the court will have to decide whether the company will actually be able to go through the debt restructuring procedure.

One of the main issues is the approval of the terms of restructuring (RSA), which the company signed with its creditors on October 11. The creditors own 84% of the guaranteed unliquidated obligations. In addition, the company is plagued by government plaintiffs who are seeking compensation in an opioid scandal.

The approximate amount of the organization's debt by the beginning of 2021 was $ 4.2 billion.

We should remind our readers that Mallinckrodt is the main developer and manufacturer of broad spectrum drugs. Among the drugs produced by the company there are drugs for the treatment of autoimmune and many other diseases in the field of nephrology, pulmonology, ophthalmology, and rheumatology. However, Acthar Gel, one of the sales leaders, which brought the company more than 30% of the income, can destroy the successful company. The medicine has been used to relieve spasms and exacerbations in the treatment of multiple sclerosis.

The US authorities began the war against pharmacists in the fall of 2019. A number of companies (Teva, Johnson & Johnson, Amneal, Mallinckrodt) have been accused of aggressively advertising opioid drugs that have caused massive addiction in patients - this has led to 450,000 deaths from overdose since the late 1990s. As 38% of the market for prescription opioids from 2006 to 2012 was taken by Mallinckrodt, the company suffered a serious reputational blow.

Against this background, the value of the company's securities fell from $ 132 to less than $ 1 per share.

The company received significant fines and was delisted from the NYSE. Moreover, the company was accused of fraud and an unjustified increase in the price of the drug, the standard of which cost $ 50 in 2001, and by 2018 its price reached $ 39 thousand.

A company participating in Medicaid (a public health program) is required by law to set discounts when the price of a drug outstrips inflation. However, Mallinckrodt calculated them not at the price of the drug at the very beginning of sales, but at the price of 2013. For this, the company was punished with the obligation to pay compensation in the amount of $ 640 million.

The financial state of Mallinckrodt is very precarious, say the experts. In the past three years, the company has been unprofitable ($ 3.6 billion in 2018, $ 1 billion in 2019, $ 0.9 billion in 2020). The company’s assets have depreciated, and the sales of Acthar Gel (the drug continues to be sold in US pharmacies) fell markedly against the backdrop of the scandal.

Although the company has a significant list of drugs that can increase revenue and make the company profitable again, reputational risks significantly limit the ability to increase sales. If all the claims are satisfied, the Mallinckrodt company will be simply liquidated, say the experts.