Mallinckrodt will sell BioVectra to the investment firm H.I.G.

Five years after getting BioVectra as part of its acquisition of the drug maker Questcor, Mallinckrodt says it is selling the Canadian pharmaceutical services company to the investment firm H.I.G. Capital for $250 million.

The deal was announced the day after Mallinckrodt reached a settlement in an Ohio opioid addiction case, but others are scheduled to go to trial next month.

BioVectra, headquartered in Charlottetown, Prince Edward Island, began as a manufacturer of clinical reagents in 1970. It was acquired by Questcor for $50 million, and Mallinckrodt acquired Questcor the following year. BioVectra supplies the active pharmaceutical ingredient in Questcor’s H.P. Acthar Gel, a topical hormone treatment for autoimmune disease.

In recent years, BioVectra has expanded a fledgling microbial fermentation business with the acquisition of a factory in Windsor, Nova Scotia. BioVectra has invested over $60 million at the Windsor site and hopes to grow biologics to at least 25% of its business. The firm reported sales of $56 million in 2017.

H.I.G. is a diversified investment firm with several healthcare-related holdings but no drug services firm in its portfolio. It acquired Ampac Fine Chemicals in 2014 and sold it in 2018 to SK Holdings of South Korea.

Heather Delage, BioVectra’s vice president of business development, notes that since Mallinckrodt operated BioVectra as an “arms length” subsidiary, a sale has “always been an option.” Indeed, the drug services consultant James Bruno says Mallinckrodt has been looking to sell BioVectra for a while and that the timing with the Ohio case settlement is coincidental.

BioVectra president Oliver Technow says Mallinckrodt has been supportive of growth plans and the investments in Charlottetown and Windsor. “But Mallinckrodt is on a different journey,” he says. “They are looking to continue their path to a pure biopharmaceutical company. The change of ownership comes at a great time. H.I.G. Capital is very committed to growth.” BioVectra will continue to supply active pharmaceutical ingredients to Mallinckrodt.

In the Ohio settlement, Mallinckrodt agreed to pay $24 million in cash and donate $6 million in generic drugs, including addiction treatment products. The agreement followed a Bloomberg report that Mallinckrodt was mulling restructuring and a bankruptcy filing in the face of pending litigation.

The Ohio agreement gives Mallinckrodt “the necessary time to continue to work towards a global resolution of the opioid lawsuits,” Mark Casey, general counsel of Mallinckrodt, says in a statement.