Mallinckrodt plc MNK announced that it has reached a settlement in principle with Cuyahoga and Summit Counties in Ohio in connection with lawsuits pending in multidistrict opioid litigation (MDL).
The settlement will fully resolve the Track 1 Cases against Mallinckrodt and subsidiaries that are scheduled to go to trial in October 2019 in the MDL. Per the terms, Mallinckrodt will pay a total sum of $24 million in cash and donate $6 million in generic products including addiction treatment products.
Consequently, cases against all entities will be dismissed.
The resolution of the Track 1 Cases will provide Mallinckrodt with adequate time to resolve its pending opioid lawsuits.
Last week, shares of Mallinckrodt plummeted following a Bloomberg report that suggested its restructuring plans. It also stated that the company may file for bankruptcy to limit its liabilities related to the pending opioid litigations.
Per the report, Mallinckrodt hired restructuring advisers to explore options that could help avoid the multi-district litigation scheduled in October. The company is mulling over insolvency if costs become unwieldy. Moreover, its high-debt levels make matters worse as it is a prospective threat in case a settlement is reached or a penalty is slapped by the court. The company may also divest its generic business, which includes opioid drugs.
Mallinckrodt’s shares have tanked 88.4% so far this year compared with the industry’s fall of 6.7% due to pricing pressure in the generic segment and the rising menace of penalties regarding litigations.
Apart from Mallinckrodt, many pharma companies like Endo International ENDP and Teva Pharma TEVA are embroiled in multiple opioid litigations filed by several states, counties and other political subdivisions in the United States in relation to the abuse of opioid-based drugs. These industry players are accused of faulty marketing practices, which downplayed the risk of addiction from these drugs and boosted their consumption instead.
Earlier, Johnson & Johnson JNJ received an unfavorable ruling in the court case filed by the state authorities of Oklahoma pertaining to the abuse of its opioid-based drugs, namely Duragesic, Nucynta and Nucynta ER. The Cleveland County District Court charged JNJ a fine of $572 million.
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