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Mallinckrodt Hints At Filing For Bankruptcy Protection

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Shares of Mallinckrodt plc (MNK) are losing more than 22 percent in pre-market activity on Tuesday after the biopharmaceutical company said it is likely to file for bankruptcy protection in the near-term.

Mallinckrodt made the announcement while reporting its financial results for the second quarter, saying it is exploring a range of options due to the several negative conditions and events impacting its business.

These include pressures from the Acthar Gel Medicaid matter, the ongoing opioid litigation, existing debts and the related risk of non-compliance with its financial debt covenant over the next twelve months.

Mallinckrodt is in discussion with external advisors about options available and engaged in talks with financial creditors as well as litigation claimants. The company is yet to finalize any plans.

In February, Mallinckrodt had agreed to pay $1.6 billion to settle thousands of opioid-related claims. The announcement came as the opioid crisis in the U.S. was growing at an alarming rate. It has been estimated that more than 130 people are dying from opioid-related drug overdoses every day in the U.S.

Under the deal, Mallinckrodt said its Specialty Generics business, which manufactures generic opioid products, will file for Chapter 11 bankruptcy in the coming months. The settlement would become effective upon Specialty Generics' emergence from the bankruptcy.

The drug industry is facing more than 2,000 actions by state and local governments accusing drug manufacturers of aggressively marketing painkillers despite knowing the risk of addiction. These companies have been accused of fueling the nation's opioid crisis.

Last year, drug makers Johnson & Johnson and Teva Pharmaceutical Industries offered to pay $4 billion and $15 billion, respectively, to settle all claims related to opioid epidemic in the U.S.

Also on Tuesday, Mallinckrodt reported loss for the second quarter of $933.1 million or $11.04 per share, compared to net income of $6.8 million or $0.08 per share in the year-ago period.

The latest quarter's results include a $639.7 million impact from the retrospective Acthar Gel Medicaid rebate liability and a $63.5 million non-restructuring impairment of the Ofirmev (acetaminophen) injection intangible asset.

Adjusted earnings were $1.89 per share.

Net sales fell to $166.5 million from $823.3 million last year.

On average, analysts polled by Thomson Reuters expected the company to report earnings of $1.34 per share on revenues of $633.99 million. Analysts' estimates typically exclude special items.

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