• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Healthcare

Mallinckrodt's Top Drug Could Go the Way of EpiPen

The drug that's helping boost the company's stock could become its biggest risk.
By JAMES PASSERI Aug 25, 2016 | 08:39 AM EDT
Stocks quotes in this article: MNK, VRX, MYL

Mallinckrodt's (MNK)  most critical drug, Acthar Gel, has a long history of price hikes that could prove a liability for shareholders as watchdogs continue adding new pressures across the industry.

Senate regulators recently have been gunning for drugmakers with a record of hiking drug prices, such as Wednesday's announcement by a Senate special committee that is requesting answers over Mylan's (MYL)  "drastic price increase" on its allergy treatment EpiPen, a drug whose prices have risen 480% to roughly $600 since 2008.

Mylan was quick to slash its prices Thursday after Democratic presidential nominee Hillary Clinton -- who's been no stranger to attacking Big Pharma price hikers -- called Mylan's policies "outrageous" and "troubling" examples of putting shareholders ahead of corporate shareholders. Mylan said in a statement it will effectively reduce out-of-pocket costs by about 50% for EpiPen patients with "savings cards."

And the same committee also subpoenaed beleaguered drugmaker Valeant Pharmaceuticals  (VRX)  in April -- a company Clinton has also accused of "price gouging" -- with the hearings culminating in Valeant's ousted CEO Michael Pearson apologizing for putting shareholder interests above patients.

"One day the media will turn its attention on Mallinckrodt and understand how they are gaming the system," short-seller Andrew Left said in a Wednesday phone interview with Real Money.

Left's case is that the price of Acthar Gel, which is used to treat multiple sclerosis and lupus, has been boosted to exorbitant levels, and is not going to realize the gains expected from analysts at firms like Piper Jaffray, which boosted its price target on Mallinckrodt to $112 from $103 and reiterated its Outperform rating.

Acthar is Mallinckrodt's top-selling product, comprising 31% of the company's second-quarter net sales, based on its most recent filing with the Securities and Exchange Commission. As Left puts it: "The company lives and breathes on Acthar."

Left, who manages the bear-focused Web newsletter Citron Research, feels Acthar is in precariously worse shape than the EpiPen, which "has been tested and it works," as opposed to Acthar, which he argues has never received a meaningful independent clinical trial since the drug's 1952 approval. At the time, the FDA tested more for safety than efficacy by today's standards.

Acthar prices are today listed at upward of $34,000 a vial, up from reports of about $50 in the early 1990s, and the drug has been widely cited among those that have recently drawn public ire from patients and lawmakers.

Mallinckrodt responded Thursday in an email to Real Money noting, "Mr. Left continues to recycle allegations about Mallinckrodt and its products that aren't supported by fact," highlighting that Mallinckrodt net sales for its fiscal third quarter climbed 11% "driven entirely by volume" across the company's "well diversified portfolio of highly durable Specialty Brands."

The drugmaker noted its growth in volume supported by investments in "new clinical and health economic data," and that Mallinckrodt has made nearly 20 data presentations for Acthar Gel over the period.

"There is ample data and experience to demonstrate the effectiveness of Acthar in seriously ill patients, and when compared with some of the alternative treatments, Acthar can be cost effective," the company concluded.

Acthar's exponential rise in price occurred while under the drug portfolio of Questcor, which was acquired by Mallinckrodt for $5.6 billion in April 2014. Questcor managed to keep Acthar prices on the rise by purchasing the rights, in 2013 for $135 million, of competitor Synacthen, which produced a synthetic version of the anti-inflammatory drug that threatened to curb pricing strategy, Left said.

Martin Shkreli -- the former CEO of MSMB Capital who was arrested on charges of using funds from his drug company Retrophin to pay off MSMB investments -- saw the benefits of this, hoping to compete against Questcor, according to Left. "When he had Retrophin, he tried to buy the synthetic form of Acthar, and then in the 11th hour, Questcor bought the synthetic of their own drug," he added.

Meanwhile, Piper Jaffray analysts, in their Wednesday rating report, argued that critics' attempts to demonize the legitimacy of Acthar prices are unfounded, and that the drug is likely to continue servicing as a chief growth driver. Analysts note that while access to Acthar is "still tightly restricted," there is "greater standardization of Acthar coverage among the myriad payers, generally making the process of getting an Acthar prescription filled more predictable and in our view making it more likely that physicians/practices will be more consistent writers of Acthar Rx's."

Mallinckrodt shares closed down 4.7% Wednesday, also off a Wednesday announcement that the company is selling its nuclear-imaging businesses to Virginia-based IBA Molecular for roughly $690 million.

"I am not short the stock," Left concluded. "But there will be plenty of time to short the stock when the company gets the attention from Congress it deserves."

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

Employees of TheStreet are restricted from owning individual securities.

TAGS: Investing | U.S. Equity | Healthcare | Drug Approvals | Stocks

More from Healthcare

Let's See How These Three Dividend Aristocrats Stack Up

Chris Versace
Dec 10, 2019 11:30 AM EST

Two food-related names and one in health care look like promising investments right now.

Cooper Cos. Can Rally Further After Some Sideways Consolidation

Bruce Kamich
Dec 5, 2019 2:42 PM EST

Time to review the charts and indicators.

This Dividend Stock Is Tipping the Scales for Investors

Chris Versace
Dec 5, 2019 2:08 PM EST

As more Americans struggle with obesity, Medifast sees strength in weight-loss offerings.

Avita Medical Could Double in 2020 but Not Without Risk

Bruce Kamich
Dec 5, 2019 9:53 AM EST

A 'promising' stock.

Raise Stops on NovoCure

Bruce Kamich
Dec 4, 2019 2:55 PM EST

NVCR's prices are poised to head higher in the months ahead.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 10:10 AM EST BOB LANG

    Banking a Big Winner in SRPT, Rolling Up

    Nov. 20 here on the CC, I mentioned buying some Ma...
  • 10:36 AM EST GARY BERMAN

    Fibocall: How High Can Crude Go?

    On crude: I am looking for higher, but please b...
  • 08:20 AM EST BOB LANG

    Webinar Time - Talkin' Calendars, Butterflys

    join me later today after the market close as we t...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2019 TheStreet, Inc., 14 Wall Street, 15th Fl, NY, NY 10005

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login