Rheumatologist Explains Why Mallinckrodt's Acthar Is A Winner

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Piper Jaffray reiterated its Overweight rating and $97 target price on Mallinckrodt PLC MNK after a Rheumatologist gave favorable view on Acthar for the treatment of Lupus.

According to a note from analyst David Amsellem, the rheumatologist noted that the results from a placebo (PBO)-controlled study that Mallinckrodt presented last November is driving him to use Acthar more in his lupus patients, and not necessarily just as a last resort treatment.

The note says Mallinckrodt presented data from a study in 38 patients with persistently active systemic lupus erythematosus (SLE). Though the study did not meet its primary endpoint, Acthar was significantly better than placebo on a number of secondary endpoints. The primary endpoint was complete resolution of skin or joint activity per the Hybrid SLE Disease Activity Index at four weeks.

"Our featured speaker suggested that this primary endpoint set a very high bar for success, and further suggested that a range of other endpoints are just as important in assessing an efficacy signal," Amsellam wrote in a note.

The analyst said that rheumatologist also suggested that response durability (at least through 24-weeks) could drive even further usage in SLE.

"We continue to believe that visibility on sustained volume growth for Acthar is strong. Given that backdrop, along with high barriers to Acthar competition in our view and favorable dynamics for the hospital segment, we believe MNK is well-positioned to deliver a long-term EPS CAGR potentially in the low double-digits," Amsellam highlighted.

Mallinckrodt got Acthar as part of its $5.6 billion buyout of Questcor. For the first quarter, Acthar net sales rose 7.6 percent to $286.7 million and accounted for 31 percent of the total company sales. For fiscal 2015, Acthar generated net sales of $1.037 billion.

The US FDA has approved Acthar for 19 indications including disorders in the area of neurology, rheumatology, nephrology, and pulmonology. The drug is pricey as it sells for around $33,000 per vial ($200,000 plus annually).

Amsellam said managed care access has not been a big issue for Acthar as treatment options in lupus are lacking.

Shares of Mallinckrodt were up 0.44 percent to $62.13.

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Posted In: Analyst ColorBiotechPrice TargetReiterationAnalyst RatingsGeneral
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