Mallinckrodt will file for Chapter 11 bankruptcy for its generic drug business as part of a settlement with 47 U.S. states and U.S. territories reached Feb. 25, The Wall Street Journal reported.
The settlement resolves a dispute accusing the drugmaker of misleading marketing of opioids and lax oversight of drug distribution and is worth more than $1.6 billion. It must still be approved in bankruptcy court.
If approved, state and local governments will receive $1.6 billion over eight years, and government creditors will receive the right to purchase just under 20 percent of Mallinckrodt's stock at $3.15 per share after the bankruptcy process is completed, according to the Journal.
Mallinckrodt's main business will avoid bankruptcy, and the settlement would end the U.K.-based drugmaker's opioid litigation.
Mallinckrodt's shares jumped 37 percent in premarket trading Feb. 25, after they had fallen more than 80 percent in the past year, according to the Journal.
"When finalized, we believe the proposed settlement and capital restructuring activities will provide us with a clear path forward to achieving our long term strategy, preserving value for our financial stakeholders and providing us with the flexibility to operate effectively," Mark Trudeau, CEO of Mallinckrodt, said in a news release. "Looking ahead, we remain focused on our vision to develop and bring to market innovative therapies for underserved patients with severe and critical conditions."
Read the full article here.