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.
“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 .
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.
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.