(Bloomberg) — Mallinckrodt Plc became the third major opioid maker to go bankrupt after being swamped by claims it profited by fueling the U.S. opioid epidemic.
The drug company said Monday it filed for Chapter 11 protection in Delaware after getting creditors and claimants to agree on a restructuring plan that hands ownership to bondholders, wipes out shareholders and sets aside $1.6 billion to resolve all opioid litigation. The filing also will help resolve a U.S. government probe into whether the company defrauded Medicaid by overcharging for Acthar Gel, its top-selling mutiple sclerosis drug.
The move comes as Mallinckrodt was readying for two trials over accusations it illegally marketed opioids and failed to properly oversee large shipments of the highly addictive pills, which have been tied to an epidemic of abuse that killed thousands of Americans. A judge is likely to halt all litigation while the bankruptcy plan makes its way through the court process.
The agreement includes certain debt holders, state attorneys general and lawyers for municipalities that sued to recoup billions in tax dollars spent on battling opioid addictions. Mallinckrodt will set up a trust to oversee payments from the $1.6 billion fund to claimants, and give them warrants to buy a stake in the reorganized company that could total nearly 20%, according to a statement.
Current shareholders are likely to get nothing, filings show. The stock, which ended last week at 75 cents a share, has hovered at penny-stock levels for most of this year as the talks progressed, and trading was suspended on Monday after the bankruptcy was filed.
Chief Executive Officer Mark Trudeau, who has been in charge for seven years, said the plan puts Mallinckrodt “on a clear