Mallinckrodt plans to spin off specialty generics business

(Reuters) – Mallinckrodt Plc (MNK.N) said on Thursday it planned to spin off its specialty generics business to shareholders by the second half of 2019, capping a two-year long effort to look for options for the unit.

The new company will also include constipation drug Amitiza, which Mallinckrodt added through its acquisition of Sucampo Pharmaceuticals last year.

Mallinckrodt was in talks with at least two India-based pharmaceutical firms, Aurobindo Pharma Ltd (ARBN.NS) and Intas Pharmaceuticals Ltd INTA.NS, to sell the unit but both deals fell through, according to media reports.

“Separating out the generics business would reduce some of the noise with regards to the company’s focus,” Leerink analyst Ami Fadia said.

This is the first time the company has mentioned Amitiza as part of its strategy for the generics unit, Fadia said.

The specialty generics business accounted for 26.5 percent of net sales in fiscal 2017 and markets drugs that include a variety of opioid-based products.

The other publicly traded company will hold the remaining business of specialty branded products such as infantile spasms and multiple sclerosis treatment Acthar.

The generics business, which would compete with companies such as Mylan NV (MYL.O) and Pfizer Inc (PFE.N), is expected to launch as many as five new products in 2019 and will be headquartered in St. Louis, Missouri, the company said.

But Amitiza is expected to bring in about 14 percent of net sales for the generics company, while Acthar, Mallinckrodt’s lead drug which is facing heavy competition, will be relied upon to bring in nearly half of the new specialty branded company’s revenue.

The planned separation is expected through a pro-rata distribution of common stock to shareholders and will be tax-free, Mallinckrodt said.

The spun-off company will assume the Mallinckrodt name and will be led by current Chief Financial Officer Matthew Harbaugh, while the specialty branded business will be renamed later and will be headed by Chief Executive Officer Mark Trudeau.

Goldman is the financial advisor on the spin-off and Wachtell, Lipton, Rosen & Katz is the legal advisor.

Reporting by Tamara Mathias and Saumya Sibi Joseph in Bengaluru; Editing by Sriraj Kalluvila

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