Mallinckrodt Attempts To Buy A New Narrative
Mallinckrodt has been hiving off assets to pare debt. The problem is that top-selling Acthar has started to show cracks. Mallinckrodt’s Q4 revenue fell by 5% Y/Y, while Acthar declined by 9%. Acthar represents 38% of total revenue and is one of the company’s highest margin businesses. The fear is that [i] key distributor Express Scripts (ESRX) might trying to distance itself from Acthar and [ii] insurers may tamp down reimbursements for indications other than multiple sclerosis and infantile spasms. Meanwhile, the company is likely stuck with its sagging Specialty Generics business after its sale attempt flopped.
With its business in disarray management attempted to buy itself a new narrative. Its $1.2 billion Sucampo deal will help diversity revenue and earnings. Sucampo specializes in gastrointestinal, ophthalmic, autoimmune, inflammatory, neurological and oncology disorders. Its top-selling Amitiza (lubiprostone) treats chronic idiopathic constipation (CIC) in adults, irritable bowel syndrome with constipation (IBS-C) in adult women and opioid-induced constipation (OIC) in adults suffering from chronic non-cancer related pain.
The FDA is currently reviewing an NDA for Amitiza in patients agents 6 to 17. If approved Amitiza could be the first branded treatment in the U.S. for constipation in the pediatric population. It could also provide Mallinkrodt the opportunity to leverage Sucampo’s current R&D efforts. In the past news of an acquisition, restructuring or increased share buybacks may have spiked the stock. Something appears to have changed now. Since the deal was announced MNK has fallen by over 30%.
