Mallinckrodt Plc
| Jurisdiction | Ireland |
| Judge | Mr. Justice Quinn |
| Judgment Date | 22 March 2022 |
| Neutral Citation | [2022] IEHC 157 |
| Docket Number | Record No. 2022/25 COS |
| Year | 2022 |
| Court | High Court |
[2022] IEHC 157
Record No. 2022/25 COS
THE HIGH COURT
Judgment of Mr. Justice Quinn delivered the 22nd day of March 2022 (Section 509)
On 14 February 2022, the directors of Mallinckrodt plc. (‘the Company’) presented a petition to this court for the appointment of an examiner to that company pursuant to s. 509 of the Companies Act 2014 (“the Act”).
On that same day, an application was made for certain directions regarding service and advertisement of the petition and the court fixed the hearing of the petition for Monday 28 February 2022.
Also on 14 February 2022, the court appointed Michael McAteer of Grant Thornton, Dublin, as interim examiner of the Company pending the hearing of the petition.
On 28 February 2022, the court heard the petition. Counsel and solicitors appeared on behalf of a number of creditors and claimants. Certain representations were made for the most part in support of the petition. A number of creditors indicated that they were neutral or reserving their positions in relation to the proceedings generally. No party opposed the petition. This court made an order appointing Mr. McAteer examiner of the company. This judgment summarises the reasons for the decision to appoint the examiner.
The petition was verified by an affidavit sworn on 9 February 2022 by Mr. Stephen Welch, Chief Transformation Officer of the Company.
The petition was accompanied by the following:-
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(a) As required by s. 511 of the Act, a report of an Independent Expert, in this case Mr. Mark Degnan, partner in Deloitte LLP, Ireland and;
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(b) As required by s. 512 (2) (b) of the Act, proposals for a scheme of arrangement in relation to the company's affairs.
In circumstances described in more detail below, on 12 October 2020 the company and many of its subsidiaries and affiliates (“the Group”) filed a case pursuant to Chapter 11 of the US Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. On 3 February 2022, the court (Judge John T. Dorsey) delivered a ruling finding that the Fourth Amended Plan of Reorganisation (“The Plan”) satisfied the statutory requirements of the US Bankruptcy Code and overruling a number of objections made to the Plan, with one exception which is not directly relevant to this decision. The opinion of the court was delivered after hearings held over the course of 16 days in November 2021 and January 2022 having considered evidence and submissions made in opposition to the Plan.
It was a condition of the confirmation of the Plan and its implementation that a scheme of arrangement under Part 10 of the Act consistent with the Plan be confirmed by this Court and implemented.
The court has been informed that an appeal has been filed from the ruling of Judge Dorsey.
The Company is the parent company of a group which comprises approximately 104 companies directly or indirectly owned or controlled by the Company. These include companies incorporated and trading in Ireland, the UK, Luxembourg, Switzerland, Bermuda, France, the Netherlands, Germany, Canada, Poland, Spain, Sweden, Belgium, Italy, Australia, Japan, and a number of states with the USA including Delaware, Massachusetts, New Jersey, California, and New York.
The Group has its origins in a business established in 1867 in St. Louis, Missouri when two brothers founded G. Mallinckrodt & Company for the purpose of supplying local pharmacists with medications. The group designs, manufactures and sells medical and pharmaceutical products. The subsidiaries of the Company are divided into two principal business segments, namely the “Speciality Brands Division” and the “Speciality Generics Division”.
The Speciality Brands Division focuses on autoimmune and rare diseases in speciality areas such as neurology, rheumatology, nephrology, pulmonology and ophthalmology, as well as immunotherapy and neonatal respiratory critical care therapies and non – opioid analgesics. Speciality brands are promoted directly to physicians, hospitals and surgical centres and the division has its own direct sales team of approximately 300 persons.
Branded products include Acthar, Inomax, Ofirmev, Therakos, and Amitiza. In the year 2020, this division was responsible for generating net sales exceeding $2 billion. The most valuable product in the specialty brands division was Acthar, which is a gel used for a variety of treatments including treatment of infantile spasms in infants and children under two years of age.
The Speciality Generics Division offers a portfolio of over 20 generic product families, most of which are controlled substances, including opioids, regulated by the Drug Enforcement Administration (DEA). This division operates one of the largest controlled substance pharmaceutical businesses in the United States and its products include generic products for pain management, substance abuse disorders and active pharmaceutical ingredients. It is the only producer of Acetaminophen/paracetamol in the North American and European regions. The division manufactures both finished dosage products and ingredients sold to and used by third parties to create finished products.
Unlike the brands division, the generics division does not promote its products and ingredients, including opioid, directly to physicians, hospitals, or others but instead sells finished products primarily to distributors and intra group.
For the year 2020, net revenues generated by the generics division were in excess of $689 million.
The research and development function represents a significant and valuable portion of the Group's resources, consisting of highly qualified individuals holding PhD., Pharm. D. or Medical Doctor degrees.
The group functions in a highly regulated environment under oversight by governmental agencies and entities around the world which regulate the development, testing, manufacturing, distribution, marketing and selling of pharmaceuticals and medical devices. The agencies to which the group are subject include but are not limited to the following:-
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(a) In the United States, the FDA, the Department of Health and Human Services, the Drug Enforcement Administration, the Environmental Protection Agency, the Customs Service and State Boards of Pharmacy;
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(b) Health Canada;
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(c) The Medicines and Health Care Products Regulatory Agency in the United Kingdom;
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(d) The Health Products Regulatory Authority in Ireland;
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(e) The European Medicine Agency, and agencies established in Member States of the EU;
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(f) The Pharmaceuticals and Medical Devices Agency in Japan.
The group has production and research facilities located in Ireland, the United Kingdom, the United States and Japan.
The global enterprise headquarters of the group is situated at Blanchardstown Dublin, in a facility owned by a wholly – owned subsidiary Montjeu Limited. Another Irish incorporated subsidiary, Mallinckrodt Pharmaceuticals Ireland Limited (“MPIL”), owns the equipment, fixtures and fittings at that facility.
The facility at Blanchardstown also operates as a manufacturing and R&D facility for the speciality brands division which manufactures Acthar, and which conducts research and development.
The Company does not have any direct employees. The group as a whole employs approximately 2,795 persons worldwide. Of that number, 2,470 are employed in the United States and 325 outside of the United States, which includes 110 employees resident in Ireland.
MPIL provides day to day services to the Company, including audit, human resources, finance, legal, marketing and IT services. MPIL has a total of 103 employees, all of whom are resident in Ireland.
According to the petition and the affidavit of Mr. Welch, the Company is the “nerve centre” of the Group and is central to its worldwide operations. It is the principal body controlling the governance of the group. Through its board of directors, it is responsible for making or approving strategic decisions and actions taken by the business of the Group. It is the vehicle through which all investor and shareholder relations are conducted. The activities of the company range from operational and administrative matters through to strategic direction, finance and, most importantly in the context of the events of recent years, restructuring discussions and negotiations with key stakeholders. All these activities are undertaken under the supervision of the Company's directors and senior management team.
The board has a number of standing committees through which these matters are dealt with including an audit committee, a governance and compliance committee, human resources and compensation committee, and a science and technology committee. In addition, there was established a strategic review committee, focused on the strategic options in the context of the group's liabilities generally, including direct and indirect financial obligations, and its litigation and other contingent liabilities.
The petition describes the financial indebtedness of the Group in excess of $5.1 billion. Approximately $3.5bn of this debt is secured and $1.695bn is unsecured.
The Company is not the principal borrower or issuer of notes, but has guaranteed all of the financial indebtedness except for sums of circa $15 million due under certain “legacy debentures”, issued by subsidiaries.
Much of the debt is long term debt, with the exception of a revolving credit facility of $900m. However, amounts due in respect of certain senior notes include a sum of $617 million due in August 2022 and $529m due in October 2023. A term loan of $1.4bn is due for repayment in September 2024.
Whilst the Group had been “servicing” its debt in...
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