Mallinckrodt Updates Separation Plans and Specialty Generics Spin-Off
Mallinckrodt, a specialty pharmaceutical company, has updated its plans to create two independent, publicly traded companies: one focused on innovative specialty branded pharmaceuticals and the other concentrated primarily in specialty generic products and active pharmaceutical ingredient (API) manufacturing. The separation is subject to final Mallinckrodt board approval.
As previously announced, the planned separation is expected to be executed through a pro-rata distribution of common stock of Mallinckrodt Inc., a newly formed company that, at the time of the separation, will consist of the Specialty Generics business. The completed spin-off is projected to occur in the second half of 2019. At separation, the remaining Specialty Brands company will be renamed Sonorant Therapeutics plc.
Following its announcement to separate the Specialty Generics business through a spin-off in December 2018, the company noted the final allocation of assets between the two companies could change. The company now reports that the Specialty Generics business will no longer include Amitiza (lubiprostone), a drug to treat constipation, and the drug will remain with the Specialty Brands company. Without the Amitiza product, for the twelve months ending on March 29, 2019, the collective net sales from the Specialty Generics business were $722.6 million on an as-reported basis. Recast net sales for the Specialty Brands segment for the twelve months ended March 29, 2019, inclusive of the Amitiza product, were $2.528 billion on an as-reported basis
With approximately 1,600 employees, the newly separated company for the Specialty Generics business will include an acetaminophen business, a portfolio of both APIs and generic dose forms of controlled substances and other drugs, a specialty generics development portfolio, and a US manufacturing footprint. As progress is made toward separation completion, the new Board of Directors for Mallinckrodt will be expanded and announced, with a full management team currently in place for the separation.
While a final capital structure has yet to be determined, prior to the spin-off, the new Specialty Generics company anticipates raising debt of up to $300 million. Net proceeds from the debt will be distributed to the parent after deducting for standard transaction costs and operating needs.
Completion of the separation transaction remains subject to certain conditions, including final Mallinckrodt 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 declaring the registration statement on Form 10 effective. A revised Mallinckrodt Inc. registration statement on Form 10 which, among other things, will reflect the removal of the Amitiza product from the assets to be held by the new Specialty Generics company at separation, is expected to be filed in June. Recast historical financials for the consolidated Specialty Generics segment, moving Amitiza to the Specialty Brands segment, are estimated to be provided in June as well.