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Combined firm expected to post $3.6 billion in 2025

revenue

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Mallinckrodt CEO Siggi Olafsson to lead combined company

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New company to list on NYSE, focus on branded drugs

(Adds context, CEO comment on tariffs, competition; adds file

photos)

By Sabrina Valle

March 13 (Reuters) -

Mallinckrodt and Endo ( NDOI ), drugmakers which

recently emerged from bankruptcy after a wave of U.S. opioid

lawsuits, announced plans Thursday to join forces in a deal

valued at $6.7 billion.

Mallinckrodt Chief Executive Siggi Olafsson said the

companies' operations and products complement each other. With

large manufacturing facilities in the U.S., he said the combined

company could actually see some benefit from U.S. President

Donald Trump's tariffs on imported goods.

"We saw (tariffs), in a way, as an opportunity,"

Olafsson told Reuters, adding that the companies have a

manufacturing base in the U.S. for many key products. "That

helps us."

Endo ( NDOI ) shareholders will get $80 million in cash and own

49.9% of the combined company, while Mallinckrodt shareholders

will own the rest for an enterprise value of $6.7 billion, the

companies said on Thursday.

The merger transforms two companies, previously at risk

of closure due to declining revenue and lawsuits on their highly

addictive opioid drugs, into a U.S.-focused entity specializing

in generic drugs, urology, and various autoimmune and rare

diseases, set to be listed on the New York Stock Exchange.

TRUMP EFFECT

Deals between companies with strong U.S. bases have some

protection from the whipsaw policy announcements coming out of

Trump administration that have been roiling markets and

disrupting M&A activity, four top healthcare bankers told

Reuters this week.

Those announcements include

Food and Drug Administration firings

potentially slowing drug approvals as well as a promised

crackdown on drug prices that could reduce revenue projections

and company valuations, they say. The uncertainty is making CEOs

more hesitant to pursue big deals, the bankers added.

Olafsson, the future CEO of the merged company, said

that a robust U.S. manufacturing base will help the business to

grow amid fierce competition from more than 200 generic drug

makers. U.S. production also gives the combined company an

advantage in an era in which disruptions like COVID-19 pandemic

caused Asian product shortages.

"It's a very crowded market," he said, adding he

considers many of the generic products sold in pharmacies

already "extremely low cost."

The deal is expected close in the second half of 2025.

The merged company will primarily operate in the U.S., with

support in Europe, India, Australia, and Japan, and around 5,700

employees.

OPIOIDS

Both the companies sell generic treatments including

highly-regulated drugs such as opioids which once played a

bigger role on their sales.

The overall market for opioids has gone down, Olafsson

said, with the bankruptcy and lawsuits forcing the companies to

increase standards and move quality control to the U.S., despite

its higher costs.

"It's a very different environment than you saw 10 years

ago," he said. "We are very proud of the U.S.-based

manufacturing, even though we pay our laborers a fair amount

more than maybe we would do in Asia."

The two firms plan to combine their generic drug

businesses and Endo's ( NDOI ) sterile injectables unit into another

company that executives plan to sell or spin off after the deal

closes, a person close to the transaction said.

Dublin-based Mallinckrodt went bankrupt twice - once in 2020

due to its high debt load and litigation over allegedly

deceptive marketing of highly addictive generic opioids, and

again in 2023 due to declining sales of its key branded drugs,

including Acthar Gel.

As part of its second restructuring, Mallinckrodt was able

to trim $1 billion from its previously agreed upon opioid

settlement that resolved about 3,000 lawsuits.

Endo ( NDOI ) filed for bankruptcy in 2022 and completed its

financial restructuring last year.

Endo ( NDOI ) will become a wholly-owned unit of Mallinckrodt.

Lazard served as Mallinckrodt's financial adviser, while

Goldman Sachs & Co. LLC served as Endo's ( NDOI ) financial adviser.