Mallinckrodt Plans To Spin Off Specialty Generics Business
Mallinckrodt, a specialty pharmaceutical company, plans to spin off a new company consisting of its specialty generics/active pharmaceutical ingredients (API) businesses and Amitiza (lubiprostone), a constipation drug to Mallinckrodt shareholders, subject to final board approval. The separation is expected to create two independent, publicly traded companies: one focused on specialty pharmaceutical brands, the other concentrated primarily in niche specialty generic products and API manufacturing. The company made the announcement on December 6, 2018.
For the year ended September 28, 2018, net sales from what Mallinckrodt will label its new Specialty Generics company exceeded $850 million, inclusive of sales of Amitiza product as of February 14, 2018. With net sales in excess of $2.3 billion (inclusive of a $1-billion hospital portfolio and an innovative pipeline), the Specialty Pharmaceutical Brands company is expected to gain additional liquidity and financial flexibility from the transaction, Mallinckrodt reports.
“With the pursuit of strategic alternatives for the Specialty Generics business actively underway for more than two years, progress has already been made in key areas that the company believes will simplify and support a relatively short separation process,” Mallinckrodt said in a December 6, 2018 company statement.
With approximately 1,600 employees, the newly spun specialty generics company will include an acetaminophen business, a portfolio of both API and generic finished-dose forms of controlled substances and other drugs, as well as a niche specialty generics development portfolio. The inclusion of the Amitiza product in the non-promoted assets to be spun off brings added manufacturing facilities and employees in Japan. Mallinckrodt says the new Specialty Generics company will be positioned financially to grow its abbreviated new drug application pipeline and expects to launch as many as five new products in 2019. The company will be headquartered in the St. Louis, Missouri area.
The spin-off is projected to be completed in the second half of 2019 or sooner. It is anticipated that the spun-off company will be listed on the New York Stock Exchange and will assume the Mallinckrodt name and ticker symbol. The remaining independent Specialty Pharmaceutical Brands company, will continue to focus on its portfolio of marketed and development products and will be renamed at a later date. Mark Trudeau, current President and Chief Executive Officer (CEO), Mallinckrodt Pharmaceuticals will lead the Specialty Pharmaceutical Brands business.
Matthew Harbaugh, currently Mallinckrodt’s Executive Vice President and Chief Financial Officer (CFO) and President of the Specialty Generics business, is expected to become President and CEO of the new specialty generics company upon completion of the spin-off.
Harbaugh stepped down as Mallinckrodt’s CFO, effective with the December 6, 2018 announcement of the spin-off, to focus exclusively on preparing for separation, but will continue to serve as President of the Specialty Generics business and report to Trudeau. A search for Harbaugh’s successor is underway. During this process, George Kegler, Mallinckrodt’s Vice President of Finance, will serve as interim CFO. The company says announcements of the Board of Directors for the Specialty Generics business are expected at a later date.
The company will maintain its global headquarters in Staines-upon-Thames, UK, and its principal US office in Bedminster, New Jersey. The company also plans to maintain other facilities throughout the US and in Australia, Canada, Ireland, Japan, Luxembourg, and Switzerland.
Completion of the separation transaction will be subject to certain conditions, including final board approval, an opinion from tax counsel regarding the treatment of the spin-off as generally tax-free for US federal income tax purposes to Mallinckrodt shareholders, and the US Securities and Exchange Commission (SEC) declaring the Form 10 registration statement effective.