Mallinckrodt’s (MNK) top product, Acthar, began to crack in Q3 2017. Revenue from Acthar fell 6% Y/Y, while the company’s total revenue was off 11%. Acthar had served as an anchor for the company while management hived off assets in order to pare debt, and dealt with the government’s tamp down on opioid prescriptions. MNK also hit a 52-week low on the disappointing earnings report.
I assumed Q4 would be equally disastrous. After all, insurers were balking at reimbursing Acthar prescriptions for indications other than infantile spasms and multiple sclerosis, and Express Scripts (ESRX) appeared to distancing itself from the company. It didn’t happen though. Though Acthar’s revenue fell 9% Y/Y the company’s total revenue was only off 6%. One of the biggest changes was that revenue for the Specialty Generics/Other was off only 8%. In Q3 it fell by over 20%.
Shocking The Street, an exclusive investment service the Shock Exchange runs in conjunction with Seeking Alpha, estimated Mallinckrodt’s Q3 2017 assets were overstated by $4 billion. Oddly enough while management engaged in “happy talk” on the its Q4 earnings call, it still never addressed its inflated balance sheet. The $4 billion pink elephant in the room could eventually crush the stock.
