Mallinckrodt unloads its CDMO for $250M as potential liabilities mount

Mallinckrodt is selling its Canada-based contract manufacturing unit BioVectra to a private equity firm for up to $250 million. (Mallinckrodt)

Mallinckrodt is selling its CDMO unit for up to $250 million to a private equity firm, but that is a drop in the bucket of what it may need as it faces growing exposure to opioid and other litigation and as reports of bankruptcy circulate. 

The financially battered drugmaker today said it has a deal to sell BioVectra, its Canada-based contract manufacturer, to H.I.G. Capital for $250 million. The deal includes $135 million down, a long-term note for $40 million, and contingent payments of up to $75 million. It also comes just months after the U.K.-based drugmaker said it would expand BioVectra’s manufacturing with support from Canada. 

RELATED: Mallinckrodt invests $100M in its BioVectra CDMO\

Free Daily Newsletter

Like this story? Subscribe to FiercePharma!

Biopharma is a fast-growing world where big ideas come along daily. Our subscribers rely on FiercePharma as their must-read source for the latest news, analysis and data on drugs and the companies that make them. Sign up today to get pharma news and updates delivered to your inbox and read on the go.

“This transaction continues to advance Mallinckrodt's strategic focus on branded, high-growth biopharmaceuticals by monetizing a non-core business," Mallinckrodt CEO Mark Trudeau, said in a 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, and therefore we see this sale as the best option for both Mallinckrodt and BioVectra moving forward."

The U.K. drugmaker said the sale, which it expects to close in Q4, is “anticipated” to include BioVectra’s four sites in Nova Scotia and Prince Edward Island, Canada and all its 350 employees, It also has a long-term agreement for BioVectra to supply Mallinckrodt with an active pharmaceutical ingredient for its specialty brands business . 

RELATED: Humana calls Mallinckrodt's Acthar a 'billion-dollar golden goose' in $700M fraud lawsuit

That would be the API for controversial H.P. Acthar Gel, the multiple sclerosis drug it picked up in its $5.6 billion buyout of Questcor in 2014. Questcor became infamous for having bought the drug cheap and then raising the price 85,000% over several years. 

Acthar has landed the Mallinckrodt in a thicket of legal problems from federal investigations into pricing and marketing, to a federal civil suit last month from Humana. 

RELATED: Mallinckrodt investors stream for the exits as opioid-tied bankruptcy talk mounts

Its Acthar troubles are just a piece of the black cloud hanging over Mallinckrodt. It also is among the drugmakers facing huge and growing liabilities from opioid sales. One analyst has speculated that Mallinckrodt’s potential exposure at $4.4 billion. 

These troubles have bodyslammed its stock. Last week, Mallinckrodt saw its share price collapse to $1.44 in late trading after a Bloomberg report that it has brought on two firms to counsel it on bankruptcy options ahead of a federal opioid lawsuit. It was trading at about $2 a share today but that is down from a 52-week high of $32.75. 

Suggested Articles

A suspected cancer-causing impurity that has been found in some blood pressure medicines has now shown up in Zantac and some OTC antacids.

Roche is steamrolling with Ocrevus, and to maintain that lead, its touting long-term data that show the earlier it’s given, the better patients do.

New data shows a significant reduction in relapse rates in patients taking Novartis' repurposed cancer drug ofatumumab.