(Bloomberg) -- Mallinckrodt Pharmaceuticals and Endo Inc. are exploring a potential merger that could be valued at about $7 billion, people with knowledge of the matter said.
The drugmakers, which both emerged from bankruptcies and faced litigation tied to the US opioid crisis in recent years, are discussing the terms of a transaction that would give each company’s investors roughly 50% ownership of the combined entity, the people said.
A deal could be struck as soon as this week, according to the people. The combined entity is expected to be listed on the New York Stock Exchange, they said, asking not to be identified discussing confidential information.
Shares in Endo rose as much as 12% on Wednesday before giving up most of those gains. The stock was broadly flat at 2:28 p.m. in New York, giving the company a market value of about $2.2 billion.
Deliberations are ongoing and there’s no certainty they’ll lead to a transaction, the people said. Representatives for Mallinckrodt and Endo didn’t provide comment.
A combination would position the once high-flying specialty pharmaceutical companies to cut costs and take advantage of scale to sell their products and invest in growth opportunities. Both were previously active acquirers in the heyday of large specialty pharmaceutical deals.
Mallinckrodt can trace its history back to the 19th century. The company manufactures specialty branded drugs like Acthar Gel, which treats some autoimmune disorders. It also makes generics including oxycodone tablets, a painkiller, as well as acetaminophen and drugs to treat attention deficit/hyperactivity disorder.
Malvern, Pennsylvania-based Endo generates about half of its revenue from branded pharmaceuticals, including the painkiller Percocet, and Testopel, a testosterone replacement therapy. It also has a large specialty pharmaceutical business, according to its third-quarter report.
Both companies are among drug manufacturers that settled lawsuits tied to the opioid crisis in the US. Dublin-headquartered Mallinckrodt went bankrupt twice in less than three years, most recently filing for Chapter 11 in 2023 in an attempt to cut its debt load and reduce liabilities from an opioid settlement. Endo filed for bankruptcy in 2022 for similar reasons.
This week, Endo reached an agreement to divest its international pharmaceuticals business to Knight Therapeutics Inc. for a total consideration of as much as $99 million.
(Updates shares in fourth paragraph.)
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