Mallinckrodt and Endo said they will merge through a $6.7 billion cash and stock deal creating a combined company that will be intent on bouncing back from their troubled recent histories, stemming from their involvement in marketing opioid drugs.
The combined company will have a presence in branded and generic drugs across a variety of therapeutic areas, a significant controlled substances franchise, and a product portfolio across multiple delivery technologies, formulations, and dosage forms.
The Mallinckrodt-Endo combo will start out with pro forma 2025 revenue of $3.6 billion and pro forma 2025 adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $1.2 billion.
However, the combined company expects to generate at least $150 million of annual pre-tax run-rate operating cost savings or “synergies” by its third-year post-closing of the merger, of which half or approximately $75 million is expected within a year of the merger close. The synergies, according to Mallinckrodt and Endo, will consist of business function integration and R&D savings from economies of scale, “among other areas.”
The Mallinckrodt-Endo combination will have approximately 5,700 employees at closing, as well as 17 manufacturing facilities, 30 distribution centers, and an operating footprint primarily located in the United States, with additional facilities in Europe, India, Australia, and Japan.
“The combination of Mallinckrodt and Endo brings together two essential pharmaceuticals organizations to accelerate value creation for our shareholders, customers, employees, the patients we serve, and our other stakeholders,” Siggi Olafsson, Mallinckrodt’s president and CEO, said in a statement. “This exciting combination will create a larger and more diversified entity with the scale and resources needed to unlock the full potential of both companies.”
Mallinckrodt and Endo aim to move past their separate troubled recent histories.
Mallinckrodt filed for Chapter 11 bankruptcy protection from creditors twice over the past five years—once in 2020, and the second time in 2023. Weeks after its second Chapter 11 filing in October 2023, U.S. Bankruptcy Judge John Dorsey of the District of Delaware approved a restructured settlement with plaintiffs who had filed some 3,000 lawsuits accusing the company of increasing sales of its opioid drugs through deceptive marketing. The restructuring slashed what Mallinckrodt had to pay the plaintiffs from the $1.7 billion agreed to under its first bankruptcy case to $700 million, all of which had already been paid to a settlement trust.
Endo filed for Chapter 11 in 2022, following lawsuits that accused the company of illegally marketing its opioid pain medication Opana ER (oxymorphone hydrochloride), which the company withdrew from the market in 2017. Last year, Endo agreed to pay the U.S. government up to $464.9 million over 10 years to settle claims arising from criminal and civil settlements, as well as from unpaid taxes and costs incurred by federal healthcare agencies to treat people harmed by Endo’s products.
Dublin HQ planned
The combined company will be headquartered in Dublin, Ireland, where Mallinckrodt’s HQ is based, following the close of the merger agreement. Mallinckrodt and Endo said the location of the combined company’s U.S. headquarters and its corporate name will be announced “in due course.”
The boards of both companies have approved the merger deal, which is expected to close in the second half of this year subject to approval by the shareholders of both companies, regulatory approvals, and customary closing conditions.
Mallinckrodt shareholders will own 50.1% of the combined company on a pro forma basis, with the other 49.9% owned by shareholders of Endo. Mallinckrodt will continue as the holding company for the combined business, with Endo becoming a wholly-owned subsidiary of Mallinckrodt.
Olafsson will become president, CEO, and a member of the combined company’s board, which will be chaired by Paul Efron, now a member of Endo’s board. The combined company’s board is expected to have a total of nine directors at close—including three additional directors from Mallinckrodt, three from Endo, and a new director.
As part of the deal, Mallinckrodt and Endo plan to combine Endo’s sterile injectables business with the generic pharmaceuticals businesses of both companies after the close of the transaction, with the intent of separating that business from the combined company at a later date. The separation would require approval by the combined company’s board and other conditions.
“We believe this combination with Mallinckrodt, along with the subsequent separation of the combined sterile injectables and generics business, presents a unique opportunity to deliver significant shareholder value,” stated Scott Hirsch, Endo’s interim CEO, who was appointed last August after Blaise Coleman departed as president and CEO. “The combined company will possess a branded business with the scale, cash flow, and balance sheet strength to invest in both internal and external growth opportunities, including pursuing commercial-stage assets.”
“Additionally, the stable and robust free cash flow generated by the combined sterile injectables and generics business should enable consistent capital returns to shareholders following its separation,” Hirsch said.
Added Olafsson: “With a strong pro forma balance sheet and compelling synergy opportunities, we will have greater flexibility to invest in innovation and pursue growth opportunities. Endo and Mallinckrodt both have talented teams that put patients first, and I look forward to bringing our organizations together to achieve even greater success.”