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Mallinckrodt to sell BioVectra to HIG

UK-based biopharmaceuticals producer Mallinckrodt has agreed to sell is CDMO subsidiary BioVectra to HIG Capital, a private equity firm. The price includes a an upfront payment of $135 million, a long-term note for $40 million and contingent payments of up to $75 million, depending on the BioVectra’s future growth. The deal is expected to close in Q4.

BioVectra has two sites in Canada at Charlottetown, Prince Edward Island, and Windsor, Nova Scotia. These offer a mixture of GMP microbial fermentation, complex chemistry for high potency APIs, biologics and drug development to the biopharma sector. It will continue to supply a specific API, thought to be for H.P. Achtar Gel, to Mallinckrodt’s Specialty Brands business under a long-term arrangement.

Mallinkrodt had acquired BioVectra in 2014, as part of its $5.6 billion acquisition of Questcor, which made Achtar. This is widely used to treat inflammatory and autoimmune disorders. Only five months before, in March, it announced plans to invest $107 million to expand the two plants, doubling the workforce to around 300. The Canadian gave it $28 million in support.

CEO and president Mark Trudeau commented that the sale “continues to advance Mallinckrodt's strategic focus on branded, high-growth biopharmaceuticals by monetising a non-core business”. However, some observers believe that the sale was prompted in part by recent events connected to Achtar. 

In 2018, Mallinckrodt became embroiled in several scandals, first coming under criticism and harsh media coverage for raising the already very high price of the drug to $38,000/vial since acquiring Questcor. It also came under investigation from the US Drug Enforcement Agency (DEA) for alleged failure to stop drug pushers getting hold of its oxycodone opioid.

Finally, a former marketing executive started legal action against the firm, claiming that it had used ‘dirty data’ to persuade health insurance companies to cover Acthar. Mallinckrodt had already paid $100 million to the Federal Trade Commission to settle claims that it had bought out a potential competitor in 2013. Another suit is ongoing about unfair competition from Medicare Advantage.

Last December, the firm announced plans to spin off its APIs and speciality generics operations, including BioVectra, plus the constipation drug Amitiza, from the speciality brands. This was supposed to take place in 2H 2019. Much was thought to depend on the success of Achtar in ongoing trials, including for one entirely new indication. This is by far the company’s biggest-selling drug, generating $1.2 billion/year in sales.

Shortly before the sale of BioVectra was announced, Mallinckrodt and two subsidiaries reached an agreement with two counties in Ohio to settle to multi-district opioid litigation. Under this, it will pay $24 million in cash and donate $6 million in generic products, including addiction treatment products, and all named Mallinckrodt entities will be dismissed with prejudice from the lawsuit. However, other such claims continue.

Three days earlier, the company had finalised an agreement with the US Department of Justice to pay $15.4 million to resolve a civil False Claims Act dating back to 2012 related to an investigation into Questcor’s legacy sales and marketing activities, without any admission of wrongdoing. Mallinckrodt also had the disappointment in August when the US Court of Appeals for the Federal Circuit upholding a Federal District Court’s decision rejecting a claim that Praxair’s nitric oxide drug product delivery system infringed its own patent for the INOmax Total Care delivery system.

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