Pharmaceutical shake-up: Mallinckrodt and Endo to merge in blockbuster $6.7bn deal

Mallinckrodt plc and Endo, Inc. have announced a definitive agreement to merge in a stock and cash transaction that will create a global pharmaceutical powerhouse. The strategic combination is expected to expand patient access to essential therapies, strengthen financial flexibility, and position the new entity for long-term growth. The deal, valued at $6.7 billion, will bring together two complementary businesses with robust branded portfolios, generics, and sterile injectables, reinforcing their leadership in key therapeutic areas.

The merger will provide immediate scale and operational synergies, with projected annual cost savings of at least $150 million by the third year and approximately $75 million in the first year. The newly combined company is expected to have a net leverage ratio of approximately 2.3x at closing, enabling financial flexibility to invest in research, development, and strategic acquisitions. The transaction is projected to close in the second half of 2025, subject to regulatory and shareholder approvals.

What Does The Combined Pharmaceutical Portfolio Include?

The merger will unite two well-established pharmaceutical companies, bringing together branded specialty drugs, generics, and sterile injectables under one entity. The combined portfolio will include XIAFLEX, Acthar Gel, Terlivaz, SUPPRELIN LA, and AVEED, reinforcing the company’s focus on rare diseases, neurology, rheumatology, hepatology, nephrology, pulmonology, and ophthalmology.

The generics business will be integrated alongside Endo’s sterile injectables segment, creating a stronger manufacturing and commercial footprint. However, the companies plan to separate the combined generics and sterile injectables business at a later stage, a move that is expected to maximize shareholder value and improve operational focus. The separation will be subject to board approval and other regulatory conditions.

How Will The Merger Strengthen Financial Performance?

The newly formed company is expected to generate pro forma revenue of $3.6 billion in 2025 and an adjusted EBITDA of $1.2 billion. The merger will also create a strong free cash flow profile, allowing the company to reinvest in its branded portfolio, pursue near-term business development, and explore potential expansion into new therapeutic areas.

The transaction will be financed through a combination of cash on hand and $900 million in committed financing provided by Goldman Sachs & Co. LLC. Mallinckrodt will act as the holding company for the combined business, while Endo will become a wholly owned subsidiary. The merger will result in Endo shareholders owning 49.9% of the combined company and Mallinckrodt shareholders holding 50.1%, ensuring a balanced ownership structure.

The combined entity will be listed on the New York Stock Exchange (NYSE), providing increased visibility and access to capital markets. Additionally, Mallinckrodt’s existing senior secured term loans and notes will be refinanced, while Endo’s debt is expected to remain outstanding, ensuring a structured financial approach.

Who Will Lead The Newly Combined Company?

Following the completion of the transaction, Siggi Olafsson will serve as President and CEO, while Paul Efron, a member of Endo’s board, will assume the role of Board Chair. The new entity will have a nine-member board, comprising three additional directors from each company, along with an independent director.

The global headquarters will remain in Dublin, Ireland, where Mallinckrodt is currently based. The location of the U.S. headquarters and the company’s new corporate name will be announced before the deal closes.

What Are The Market Implications Of This Merger?

The merger between Mallinckrodt and Endo is seen as a strategic response to the evolving pharmaceutical landscape, particularly as both companies navigate financial restructuring and competitive market pressures. The consolidation is expected to strengthen manufacturing capabilities, regulatory expertise, and commercial reach, making the combined entity a major player in the industry.

With 17 manufacturing facilities and 30 distribution centers across the U.S., Europe, India, Australia, and Japan, the new company will have a strong global footprint, ensuring the efficient production and distribution of essential medicines. The expanded infrastructure will allow for greater supply chain resilience and enhanced compliance standards, positioning the company for long-term stability.

Investor sentiment surrounding the deal is expected to be cautiously optimistic, with a focus on the successful execution of cost synergies and the planned separation of the generics and sterile injectables business. The merger is anticipated to create a financially sustainable model, ensuring steady returns for shareholders while improving patient access to high-quality treatments.

What Is Endo’s Strategic Divestiture Plan?

In a separate move, Endo has announced a definitive agreement to divest its International Pharmaceuticals business, primarily operated through Paladin Pharma Inc., to Knight Therapeutics Inc. for up to $99 million. The deal includes an $84 million upfront cash payment, with an additional $15 million tied to milestone-based payments.

This divestiture aligns with Endo’s strategy to focus on core-growth assets, allowing it to reinvest in high-margin pharmaceutical segments. Knight Therapeutics, a specialty pharmaceutical firm with a strong presence in Canada and Latin America, is expected to leverage Paladin’s existing portfolio and commercial network to expand its regional market share. This transaction is expected to close in mid-2025, subject to regulatory approvals, including antitrust clearance in Canada.

What Comes Next For The Combined Company?

The Mallinckrodt-Endo merger marks a pivotal transformation in the specialty pharmaceutical sector, creating an entity with the financial strength, operational scale, and diversified portfolio needed to compete in an increasingly complex market. The immediate focus will be on integrating operations, realizing synergies, and ensuring regulatory approvals.

Industry analysts will be closely monitoring the execution of cost synergies, shareholder returns, and the long-term strategy for the combined generics and sterile injectables division. If successfully implemented, the merger has the potential to deliver sustained growth, enhance drug accessibility, and drive innovation in specialty pharmaceuticals.

The transaction remains subject to regulatory approvals and customary closing conditions, with completion anticipated in the second half of 2025.