Shares of troubled drugmaker Mallinckrodt  (MNK) - Get Report   surged on Tuesday after the company announced a deal to sell its contract development and manufacturing subsidiary BioVectra for $250 million to an affiliate of private-equity firm H.I.G. Capital.

Under terms of the deal, Mallinckrodt will receive an upfront payment of $135 million and a long-term note of $40 million, as well as contingent payments of up to $75 million which will enable Mallinckrodt to "capture future BioVectra growth potential," the company said.

"This transaction continues to advance Mallinckrodt's strategic focus on branded, high-growth biopharmaceuticals by monetizing a non-core business," CEO Mark Trudeau said in a statement. The deal is expected to close in the fourth quarter.

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Shares of Mallinckrodt plunged last week on reports the company was considering bankruptcy as a way of dealing with $15 million in opioid-related claims against its Questcor unit.

However, they turned around on Friday after the company said it agreed in principle on a $30 million deal to settle an opioid lawsuit filed by Ohio counties hit hard by the epidemic.

Mallinckrodt stock was up more than 60%, or $1.27, at $3.37 in morning trading on Tuesday, after gaining 12.3%, or 23 cents, in regular trading on Monday.