Shares in Mallinckrodt (NYSE:MNK) have plunged premarket, wiping out earlier gains after the biopharmaceutical company reported an adjusted profit beating expectations, but also stated that it is in talks with creditors regarding a possible Chapter 11 bankruptcy filing.
In its second-quarter earnings, the company reported a net loss of $933.1 million, with a net income of $6.8 million, and a diluted loss per share of $11.04, however, its adjusted diluted earnings per share was $1.89 which represented a 25.3% decline YoY.
The main point of note from the report was in its business and litigation update where Mallinckrodt said: “The Company has identified several negative conditions and events impacting the business as of June 26, 2020.”
The continued by saying: “The ongoing opioid litigation and the Company's existing debts and the related risk of non-compliance with its financial debt covenant over the next twelve months, the Company has been working with external advisors to explore a range of options and engage in dialogue with financial creditors and litigation claimants and their advisors, including the possibility of a filing for reorganization in bankruptcy under Chapter 11 by Mallinckrodt plc and most of its subsidiaries in the near-term.”
As a result, shares in the company have plummeted premarket, by 14.60% at $1.93 per share after closing Monday trading at $2.26. It also means that Mallinckrodt shares are now down 35.24% for the year to date.
“Our reported GAAP net sales were impacted by the retrospective one-time Acthar Gel Medicaid liability, and our normalized operating results also displayed a contraction this quarter due to the COVID-19 health crisis along with increased competitive and payer pressures on certain products. Amidst these challenges, we continued to operate well, which is a testament to our employees' hard work and commitment to our business, patients and customers,” said Mark Trudeau, President and Chief Executive Officer of Mallinckrodt.