(Reuters) – Mallinckrodt Plc (MNK.N) has hired restructuring firms and may choose to seek bankruptcy protection, Bloomberg reported on Wednesday, sending the drugmaker’s shares down 40% in after-hours trading.
The company has hired law firm Latham & Watkins LLP and consulting firm AlixPartners LLP to advise on the matter, Bloomberg reported, citing people with knowledge of the situation.
Mallinckrodt, which has a market value of about $218 million, declined to comment on the report.
The development comes as opioid makers in the United States, including Mallinckrodt, face pressure from a crackdown on the addictive drug in the wake of the opioid crisis and as state attorneys general file lawsuits against manufacturers.
If the legal liabilities aren’t manageable, Mallinckrodt may choose to seek bankruptcy protection, the Bloomberg report said.
Mallinckrodt last month suspended plans to spin-off its specialty generics unit, citing opioid litigation uncertainties.
Up to Wednesday’s close, the stock had fallen 84%.
The slump in the stock means big gains for short sellers, who have bet heavily against the drugmaker in recent months.
As of Tuesday, short bets against Mallinckrodt stood at about $113 million, equivalent to 54% of its float, up from 43% in early June, according to S3 Partners, a financial analytics firm.
Reporting by Soundarya J in Bengaluru; Editing by Maju Samuel