The stock of a company that is a defendant in an upcoming opioid lawsuit fell more than 40 percent following an after-hours news report that it was considering restructuring ahead of a large opioid trial.
Citing multiple people familiar with the matter, Bloomberg reported Wednesday afternoon after markets closed that Mallinckrodt had hired restructuring advisers and was exploring options that could include a bankruptcy filing if costs associated with the trial become unmanageable. The advisers it has hired include the law firm Latham & Watkins and the turnaround firm AlixPartners, according to the report, which noted that the company is carrying $5 billion in debt.
Shares of the Staines-upon-Thames, U.K.-headquartered company were down nearly 50 percent in pre-market trading on the New York Stock Exchange Thursday and remained down 40 percent when markets opened.
Mallinckrodt is one of several companies facing an Oct. 21 trial in the U.S. District Court for the Northern District of Ohio in Cleveland, comprising about 2,000 lawsuits by states, counties and cities. Plaintiffs allege that opioid manufacturers “grossly misrepresented” risks of long-term use of the drugs for patients with chronic pain, while distributors failed to monitor suspicious orders, thereby contributing to the opioid epidemic. In addition to Mallinckrodt, defendants include Purdue Pharma, Endo, Johnson & Johnson, distributors AmerisourceBergen and Cardinal Health, the retail pharmacy chain Walgreens and others.
On Tuesday and Wednesday, Judge Dan Polster ordered the trial to go forward, denying the defendants’ motions for a summary judgment.
Last week, a judge in Oklahoma ordered Johnson & Johnson to pay $572 million in a lawsuit filed by the state, ruling that the company had created a “public nuisance.” The company has said it will appeal the decision. However, in a note to investors, SVB Leerink analyst Ami Fadia wrote that the ruling has little direct read-through to the outcome of the Ohio case, known as a multidistrict litigation, or MDL.
Also last week, it was reported that the Sackler family, which owns Purdue Pharma, had offered to give up control of the company and pay $3 billion toward a settlement of $10-12 billion.
Photo: Moussa81, Getty Images
