Mallinckrodt proposes $1.6 billion opioid deal, Chapter 11 for generics unit: WSJ

FILE PHOTO: Bottles of prescription painkillers Hydrocodine Bitartrate and Acetaminopohen, 5mg/325mg pills, made by Mallinckrodt sit on a shelf at a local pharmacy, in Provo, Utah, U.S., April 25, 2017. REUTERS/George Frey

(Reuters) - Mallinckrodt Plc MNK.N is finalizing a settlement proposal of at least $1.6 billion that would place its U.S. generic drug business into bankruptcy to address the debt maturities and liabilities arising out of the opioid crisis, the Wall Street Journal reported on Monday.

The proposed deal includes a Chapter 11 filing covering the generics unit and a resolution of claims from state and local governments, the newspaper said, citing people familiar with the matter.

The settlement would offer $1.6 billion to state and local governments over eight years and warrants to buy an equity stake in the company, according to the report.

Mallinckrodt did not immediately respond to a Reuters request for comment.

Shares of the company closed down about 19% at $4.17 after falling as much as 43% following the WSJ report.

A number of U.S. states and local governments have filed lawsuits against opioid drugmakers and wholesale distributors holding them accountable for a national drug addiction epidemic.

The company had said last year it was focusing on separating its generics unit, which sells opioid drugs, from its specialty business.

OxyContin maker Purdue Pharma LP in September 2019 filed for bankruptcy to halt about 2,000 lawsuits and allow Purdue to negotiate legal claims with plaintiffs under the supervision of a U.S. bankruptcy judge.

Mallinckrodt is among several opioid manufacturers and distributors set to go to trial next month over allegations brought by New York Attorney General Letitia James related to the marketing and distributing of opioids.

Reporting by Trisha Roy in Bengaluru; additional reporting by Bhargav Acharya; Editing by Shailesh Kuber and Maju Samuel