DUBLIN, Oct. 12, 2020 /PRNewswire/ -- Mallinckrodt
plc (NYSE: MNK) ("Mallinckrodt" or the
"Company") today announced that it has voluntarily initiated
Chapter 11 proceedings in the U.S. Bankruptcy Court for the
District of Delaware to modify its capital structure,
including restructuring portions of its debt, and resolve several
billion dollars of otherwise unmanageable potential legal
liabilities. Mallinckrodt and all of
its subsidiaries are continuing to operate and supply customers and
patients with products as normal.
The entities that filed Chapter 11 petitions include
Mallinckrodt plc, substantially all of
its U.S. subsidiaries, including its specialty generics-focused
subsidiaries (collectively, "Specialty Generics") and specialty
brands-related subsidiaries (collectively, "Specialty Brands"), and
certain of its international subsidiaries.
The Company intends to use the Chapter 11 process to provide a
fair, orderly, efficient and legally binding mechanism to implement
a restructuring support agreement ("RSA") that, among other things,
provides for an amended proposed opioid claims settlement and a
financial restructuring that would:
- Reduce the Company's total debt by approximately $1.3 billion, improving the Company's financial
position and better positioning it for long-term growth;
- Resolve opioid-related claims against the Company, its
subsidiaries and related entities; and
- Resolve various Acthar Gel-related matters, including the CMS
Medicaid rebate dispute, an associated False Claims Act ("FCA")
lawsuit and an FCA lawsuit relating to Acthar's previous owner's
interactions with an independent charitable foundation.
Taken together, these actions are intended to enable the Company
to move forward with its vision to become an innovation-driven
biopharmaceutical company meeting the needs of underserved patients
with severe and critical conditions.
Mark Trudeau, President and
Chief Executive Officer of Mallinckrodt, said, "After many months of
deliberation, negotiation and consideration of alternatives,
Mallinckrodt's management and Board of
Directors determined that implementing a Chapter 11 restructuring
provides the best opportunity to maximize the value of the
enterprise and position the Company for the future in light of the
current challenges it faces. The actions we are taking are an
important step forward for Mallinckrodt
and our patients, employees, customers, suppliers and other
partners. We have worked diligently over the last several months to
evaluate all available options to achieve a comprehensive
resolution to the significant litigation and debt issues
overhanging our business. Having entered our restructuring support
agreement and reached agreements in principle with a key group of
opioid plaintiffs, other governmental parties and our guaranteed
unsecured noteholders, we are beginning this process in a highly
organized manner. We are now on a clear path to eliminating legal
uncertainties, maximizing enterprise value, strengthening our
balance sheet and moving ahead with our strategic plans. At
the same time, we remain committed to improving health outcomes and
developing and bringing to market therapies for patients with
severe and critical conditions."
Trudeau continued, "We are grateful to our employees for their
continued commitment to our customers and the patients we serve. We
also thank our suppliers and business partners for their support as
we continue working together to improve the lives of
patients."
Overview of Key RSA Terms
In connection with the Chapter 11 filing, the Company has
entered into an RSA that provides for a financial restructuring
designed to strengthen the Company's balance sheet and reduce its
total debt by approximately $1.3
billion, improving the Company's financial position and
allowing the Company to continue driving its strategic priorities
and investing in the business to develop and commercialize
therapies to improve health outcomes.
Parties to the RSA include:
- Holders of approximately 84% of the Company's guaranteed
unsecured notes;
- 50 states and territories; and
- The court-appointed plaintiffs' executive committee
representing the interests of thousands of plaintiffs in the opioid
multidistrict litigation1 ("Opioid MDL"), which has
agreed to recommend that the more than 1,000 counties,
municipalities (including cities, towns and villages), Native
American tribes and other opioid claimants in the Opioid MDL
support the RSA.
Under the terms of the RSA, at the end of the court-supervised
process:
- All allowed First Lien Credit Agreement Claims, First Lien Note
Claims and Second Lien Note Claims are expected to be reinstated at
existing rates and maturities;
- Holders of allowed Guaranteed Unsecured Note Claims are
expected to receive their pro rata share of $375 million of new secured second lien notes due
seven years after emergence and 100% of New Mallinckrodt Ordinary
Shares, subject to dilution by the warrants described below and
certain other equity;
- Trade creditors and holders of allowed General Unsecured Claims
are expected to share in
- $150 million in cash; and
- Equity holders and non-guaranteed unsecured noteholders are
expected to receive no recovery.
Amended Proposed Opioid Settlement
The Company has reached an agreement in principle on the terms
of an amended proposed settlement that would resolve opioid-related
claims against Mallinckrodt and its
subsidiaries and eliminate billions of dollars in alleged
liabilities. The amended proposed settlement is supported by a
broad array of opioid plaintiffs as detailed above.
Under the terms of the amended proposed settlement, which would
become effective upon Mallinckrodt's
emergence from the Chapter 11 process, subject to court approval
and other conditions:
- Opioid claims would be channeled to one or more trusts, which
would receive $1.6 billion in
structured payments.
-
- $450 million would be received
upon the Company's emergence from Chapter 11;
- $200 million would be received on
each of the first and second anniversaries of emergence; and
- $150 million would be received on
each of the third through seventh anniversaries of emergence with a
one-year prepayment option at a discount for all but the first
payment.
- Opioid claimants would also receive warrants for approximately
19.99% of the Company's fully diluted outstanding shares, including
after giving effect to the exercise of the warrants, exercisable at
a strike price reflecting an aggregate equity value of $1.551 billion.
- Upon commencing the Chapter 11 filing, the Company will comply
with an agreed-upon operating injunction with respect to the
operation of its opioid business.
Copies of term sheets outlining the terms of the RSA and the
amended opioid settlement, as well as materials with additional
information relating to the Company and its Chapter 11 filing, are
available on www.advancingmnk.com. The term sheets and additional
materials are expected be filed as an exhibit to a Current Report
on Form 8-K with the U.S. Securities and Exchange Commission
tomorrow.
Resolution of Certain Acthar Gel-Related Matters
Mallinckrodt has reached an
agreement in principle with certain governmental parties to resolve
certain disputes relating to Acthar Gel. The agreement in principle
is conditioned upon Mallinckrodt
entering the Chapter 11 restructuring process. The Company has
agreed to pay $260 million over seven
years and reset Acthar Gel's Medicaid rebate calculation as of
July 1, 2020, such that state
Medicaid programs will receive 100% rebates on Acthar Gel Medicaid
sales, based on current Acthar Gel pricing. Additionally, upon
execution of the settlement, the Company will dismiss its appeal of
the CMS Medicaid rebate ruling currently pending in the U.S. Court
of Appeals for the D.C. Circuit. The settlement would resolve the
CMS Medicaid rebate dispute, the associated FCA lawsuit in
Boston and an FCA lawsuit in the
Eastern District of Pennsylvania
relating to Acthar's previous owner's interactions with an
independent charitable foundation.
Mallinckrodt expects to complete the
settlement over the next several months, subject to Bankruptcy
Court approval.
Continuing to Serve Patients and Customers as Normal
The current consolidated cash balance of the Chapter 11 filing
entities is more than $650 million.
Together with cash generated from ongoing operations, this is
expected to provide ample liquidity to support continued operations
during the court-supervised process.
The Company has filed a number of customary motions seeking
court authorization to continue to support its business operations
during the court-supervised process, including the continued
payment of employee wages and benefits without interruption. The
Company intends to pay vendors and suppliers in full under normal
terms for goods received and services rendered on or after the
filing date. The Company expects to receive court approval for all
of these routine requests. The Company's foreign non-debtor
affiliates will continue to operate their businesses in the
ordinary course.
Separating the Specialty Generics and Specialty Brands
businesses remains one of Mallinckrodt's goals. The Company will continue to
evaluate strategic options for the Specialty Generics business at
an appropriate time and when market conditions are favorable.
Additional Information
Additional information about the court-supervised process is
available at www.advancingmnk.com. Court filings and other
information related to the court-supervised process are available
on a separate website administered by the Company's claims agent,
Prime Clerk, at http://restructuring.primeclerk.com/Mallinckrodt;
by calling Prime Clerk representatives toll-free in the U.S. and
Canada at 877-467-1570 or
347-817-4093 for international calls; or by emailing Prime Clerk at
MallinckrodtInfo@primeclerk.com.
For supplier-related inquiries, please call the Company
toll-free in the U.S. at +1-833-954-2209 or +1-314-654-3008 for
international calls, or email the Company at
Supplier.Inquiry@mnk.com.
Advisors
Latham & Watkins LLP, Ropes & Gray
LLP and Wachtell, Lipton, Rosen & Katz are serving as counsel,
Guggenheim Securities, LLC is serving as investment banker and
AlixPartners LLP is serving as restructuring advisor to
Mallinckrodt. Hogan Lovells is serving
as counsel with respect to the Acthar Gel matter.
About Mallinckrodt
Mallinckrodt is a global business consisting of
multiple wholly owned subsidiaries that develop, manufacture,
market and distribute specialty pharmaceutical products and
therapies. The company's Specialty Brands reportable segment's
areas of focus include autoimmune and rare diseases in specialty
areas like neurology, rheumatology, nephrology, pulmonology and
ophthalmology; immunotherapy and neonatal respiratory critical care
therapies; analgesics and gastrointestinal products. Its Specialty
Generics reportable segment includes specialty generic drugs and
active pharmaceutical ingredients. To learn more about Mallinckrodt, visit www.mallinckrodt.com.
Mallinckrodt uses its website as a
channel of distribution of important company information, such as
press releases, investor presentations and other financial
information. It also uses its website to expedite public access to
time-critical information regarding the company in advance of or in
lieu of distributing a press release or a filing with the U.S.
Securities and Exchange Commission (SEC) disclosing the same
information. Therefore, investors should look to the Investor
Relations page of the website for important and time-critical
information. Visitors to the website can also register to receive
automatic e-mail and other notifications alerting them when new
information is made available on the Investor Relations page of the
website.
CAUTIONARY STATEMENTS RELATED TO FORWARD-LOOKING
STATEMENTS
Statements in this document that are not strictly
historical, including statements regarding future financial
condition and operating results, legal, economic, business,
competitive and/or regulatory factors affecting Mallinckrodt's businesses, and any other statements
regarding events or developments the company believes or
anticipates will or may occur in the future, may be
"forward-looking" statements within the meaning of the Private
Securities Litigation Reform Act of 1995, and involve a number of
risks and uncertainties.
There are a number of important factors that could cause actual
events to differ materially from those suggested or indicated by
such forward-looking statements and you should not place undue
reliance on any such forward-looking statements. These factors
include risks and uncertainties related to, among other things: the
proposed settlement with governmental parties to resolve certain
disputes relating to Acthar Gel; the possibility that such
settlement will not be consummated and the risks and uncertainties
related thereto, including the time and expense of continuing to
litigate this dispute and the impact of this dispute on
Mallinckrodt's financial condition and
expectations for performance; the impact of the outbreak of the
COVID-19 coronavirus; the bankruptcy process, the ability of
Mallinckrodt and its subsidiaries to
obtain approval from the bankruptcy court with respect to motions
or other requests made to the bankruptcy court throughout the
course of the Chapter 11 cases and to negotiate, develop, obtain
court approval of, confirm and consummate the plan of
reorganization contemplated by the restructuring support agreement
or any other plan that may be proposed, the effects of the Chapter
11 cases, including increased professional costs, on the liquidity,
results of operations and businesses of Mallinckrodt and its subsidiaries; the consummation
of the transactions contemplated by the restructuring support
agreement, including the ability of the parties to negotiate
definitive agreements with respect to the matters covered by the
term sheets included in the restructuring support agreement, the
occurrence of events that may give rise to a right of any of the
parties to terminate the restructuring support agreement and the
ability of the parties to receive the required approval by the
bankruptcy court and to satisfy the other conditions of the
restructuring support agreement; governmental investigations and
inquiries, regulatory actions and lawsuits brought against
Mallinckrodt by government agencies and
private parties with respect to its historical commercialization of
opioids, including the amended non-binding agreement in principle
reached by Mallinckrodt in connection
with the announcement of its filing of the Chapter 11 petitions
regarding the terms and conditions of a global settlement to
resolve all current and future opioid-related claims; Mallinckrodt's ability to comply with the continued
listing criteria of the New York Stock Exchange (the "NYSE") and
risks arising from the potential suspension of trading of
Mallinckrodt's ordinary shares on, or
delisting from, the NYSE and the effects of Chapter 11 on the
interests of various constituents; scrutiny from governments,
legislative bodies and enforcement agencies related to sales,
marketing and pricing practices; pricing pressure on certain of
Mallinckrodt's products due to legal
changes or changes in insurers' reimbursement practices resulting
from recent increased public scrutiny of healthcare and
pharmaceutical costs; the reimbursement practices of governmental
health administration authorities, private health coverage insurers
and other third-party payers; complex reporting and payment
obligations under the Medicare and Medicaid rebate programs and
other governmental purchasing and rebate programs; cost containment
efforts of customers, purchasing groups, third-party payers and
governmental organizations; changes in or failure to comply with
relevant laws and regulations; Mallinckrodt's and its partners' ability to
successfully develop or commercialize new products or expand
commercial opportunities; Mallinckrodt's ability to navigate price
fluctuations; competition; Mallinckrodt's and its partners' ability to protect
intellectual property rights; limited clinical trial data for
Acthar Gel; clinical studies and related regulatory processes;
product liability losses and other litigation liability; material
health, safety and environmental liabilities; potential
indemnification liabilities to Covidien pursuant to the separation
and distribution agreement; business development activities;
retention of key personnel; the effectiveness of information
technology infrastructure including cybersecurity and data leakage
risks; customer concentration; Mallinckrodt's reliance on certain individual
products that are material to its financial performance;
Mallinckrodt's ability to receive
procurement and production quotas granted by the U.S. Drug
Enforcement Administration; complex manufacturing processes;
conducting business internationally; Mallinckrodt's ability to achieve expected benefits
from restructuring activities; Mallinckrodt's significant levels of intangible
assets and related impairment testing; labor and employment laws
and regulations; natural disasters or other catastrophic events;
Mallinckrodt's substantial indebtedness
and its ability to generate sufficient cash to reduce its
indebtedness; future changes to U.S. and foreign tax laws or the
impact of disputes with governmental tax authorities; and the
impact of Irish laws.
These and other factors are identified and described in more
detail in the "Risk Factors" section of Mallinckrodt's Annual Report on Form 10-K for the
fiscal year ended December 27, 2019
and Form 10-Q for the fiscal quarter ended June 26, 2020. The forward-looking statements
made herein speak only as of the date hereof and Mallinckrodt does not assume any obligation to
update or revise any forward-looking statement, whether as a result
of new information, future events and developments or otherwise,
except as required by law.
CONTACTS
Investor Relations
Daniel J.
Speciale
Vice President, Finance and Investor Relations Officer
314-654-3638
daniel.speciale@mnk.com
Media
Michael Freitag / Aaron
Palash / Aura Reinhard
Joele Frank, Wilkinson Brimmer
Katcher
212-355-4449
Government Affairs
Mark Tyndall
Senior Vice President, Government Affairs
& Chief Counsel, Litigation
202-459-4141
mark.tyndall@mnk.com
1Captioned In re National Prescription Opiate
Litigation, Case No. 17-md-2804 (N.D. Ohio).
2Mallinckrodt, the "M"
brand mark and the Mallinckrodt
pharmaceuticals logo are trademarks of a Mallinckrodt company. Other brands are trademarks
of a Mallinckrodt company or their
respective owners. © 2020 10/20.
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SOURCE Mallinckrodt plc