Despite a return to revenue growth in 2023’s second quarter, troubled Mallinckrodt continues to weigh its financial options, according to CEO Siggi Olafsson. Among them is a new bankruptcy bid that could get the company off the hook for more than $1 billion in opioid settlement payments.
Wednesday, Mallinckrodt reported second-quarter sales of $475 million, delivering a modest growth rate of 1.3% versus the same period last year. At the same time, the company reported a net loss of $747.8 million, and it only had about $480.6 million in cash on hand as of June 30.
The growth marked an “important step forward in our goal to stabilize the business in the near term and return to sustainable growth in the long term,” Olafsson said in a statement.
At the same time, the company continues to “actively evaluate our financial situation and consider our options,” he said.
“We have been engaged in advanced discussions with representatives of the opioid disbursement trust and our funded debt creditors and analyzing various proposals with respect to our opioid settlement and debt obligations,” Olafsson added.
The executive’s statements come just a few months after Mallinckrodt admitted its failure to make an annual $200 million opioid settlement payment and suggested bankruptcy was again in the offing. In June 2022, Mallinckrodt emerged from a separate Chapter 11 reorganization and agreed to a $1.7 billion settlement to resolve opioid claims, trumpeting the moves as part of a “new beginning” for the company.
To complicate things further, investors in June filed a class-action lawsuit that accused Mallinckrodt of making false and misleading statements about the financial health of the company.
Now, Mallinckrodt is again floating a potential bankruptcy reorganization. In its earnings release, the company said it’s contemplating a "restructuring support agreement" that would include new Chapter 11 proceedings.
Taking a closer look at Mallinckrodt’s potential bankruptcy play, a group of hedge funds that lent billions to the company—including Silver Point Capital, Bracebridge Capital and Alta Fundamental Advisers—has backed a plan for Mallinckrodt to get out of its settlement deal with about $1.3 billion still unpaid, The Wall Street Journal reported late last month. The scheme would see Mallinckrodt’s board give the hedge funds control of the business through a bankruptcy filing.
As for Mallinckrodt’s second-quarter earnings, the company’s specialty generics segment continued to grow, while the launch of the company’s new hepatorenal syndrome (HRS) drug Terlivaz has thus far “exceeded our expectations,” Olafsson said.
Specialty brands brought home sales of $280.1 million, increasing by 8.5% at constant currencies, Mallinckrodt said. Specialty generics, for their part, generated $194.9 million, good for 19.7% growth during the quarter.
Terlivaz, meanwhile, is heating up thanks to “positive momentum and significant enthusiasm from the medical community,” Mallinckrodt added. The drug scored its long-awaited HRS nod back in September, becoming the first medicine approved for the life-threatening liver condition, which affects between 30,000 and 40,000 people annually in the U.S.
After its second-quarter performance, Mallinckrodt is sticking by its financial guidance for the year. For all of 2023, the company expects to generate net sales between $1.7 billion and $1.82 billion.