In a significant development within the pharmaceutical industry, Mallinckrodt and Endo have announced a $6.7 billion merger that aims to create a stronger, more nimble organization capable of thriving in an increasingly competitive market. This partnership, set to close in the second quarter of this year, will see Endo transform into a wholly owned subsidiary of Mallinckrodt, with both companies bringing a complementary portfolio of products and operational capabilities to the table.

Upon completion of the merger, the newly formed entity will adopt a name yet to be determined and will list on the New York Stock Exchange, with its headquarters based in Dublin, aligning with Mallinckrodt’s current location. The operational infrastructure of the combined company will boast 17 manufacturing facilities, 30 distribution centers, and a workforce of approximately 5,700 employees, enhancing its ability to serve a diverse global market.

Both Mallinckrodt and Endo have histories of marketing both branded and generic pharmaceuticals, with key products in their portfolios such as Mallinckrodt’s Acthar Gel, used to treat various autoimmune and inflammatory disorders, and Endo’s Xiaflex, approved for Dupuytren’s contracture and Peyronie’s disease. However, the companies also share a troubled past regarding opioid litigation, which has significantly impacted their financial standings. Mallinckrodt has undergone two rounds of bankruptcy protection in recent years, while Endo filed for bankruptcy in 2022. This merger certainly marks a pivotal turn for both organizations as they seek to stabilize and grow.

Financially, the merger is poised to yield substantial synergies, with an expected $75 million in pre-tax savings from operational integrations and research and development efficiencies within the first year. Moreover, on a pro forma basis, the combined entity is projected to generate $3.6 billion in revenue by 2025, indicating a promising growth trajectory as both companies align their business strategies.

The deal is being financed through available cash and a significant commitment of $900 million from Goldman Sachs to Endo, ensuring a robust financial foundation for the new enterprise. Under the merger agreement’s terms, Endo shareholders will receive cash compensation while owning 49.9% of the combined company, while Mallinckrodt shareholders will maintain a slight majority stake at 50.1%.

Leadership transitions are also a focal point of this merger. With both boards of directors having approved the transaction, Paul Efron, an Endo board member, will take on the chair role for the new entity, while Siggi Olafsson, Mallinckrodt’s current president and CEO, will lead as CEO while being a member of the board. In a prepared statement, Olafsson expressed confidence in the merger’s potential, stating, “Our businesses are highly complementary… This exciting combination will create a larger and more diversified entity with the scale and resources needed to unlock the full potential of both companies.”