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Mallinckrodt Is No Valeant-Philidor Situation, Morgan Stanley Says

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  • Mallinckrodt PLC (NYSE: MNK) shares have plunged 45 percent in the last three months, and are trading close to the lower-end of their 52-week range of $52.01 - $134.26.
  • Morgan Stanley’s David Risinger maintained an Equal-weight rating on the company.
  • Although Mallinckrodt’s shares dip on comparison with Valeant Pharmaceuticals Intl Inc (NYSE: VRX), the former’s structure is unlike that of VRX-Philidor, Risinger commented.

Mallinckrodt’s shares plummeted 17 percent on November 9, versus a 1 percent decline in the DRG, mostly on account of a negative tweet by a research newsletter. The tweet read, “At these prices $MNK has signif more downside than $VRX- far worse offender of the reimb sys – more to follow. VRX can't live in a vacuum."

In 2013 and early 2014, the same source had cited various Acthar issues. These concerns subsided over time, especially after Mallinckrodt acquired Questcor in April 2014.

“While Acthar has always been a controversial asset, we believe the key uncertainty is the drug's growth prospects rather than the issues previously raised by the newsletter,” analyst David Risinger wrote. He added that future pricing risk associated with Acthar appears limited.

Risinger said that Acthar's specialty pharmacy structure does not seem to be at risk. When Questcor Pharmaceuticals Inc (NASDAQ: QCOR) had raised Acthar’s price in 2007, it had also restricted the drug's availability to only one specialty distributor, namely CuraScript, while reducing the discounts offered to improve profit margins.

“By our understanding, CuraScript distributes Acthar to one of six specialty pharmacies within MNK's specialty pharmacy network (recently expanded from oneto six under MNK). However, this structure is not akin to VRX-Philidor because MNK does not own any of its specialty pharmacies,” Risinger wrote.

Management indicated that its pharmacies remain third-party players, separate from MNK ownership, which lowers potential conflicts of interest.

Latest Ratings for MNK

DateFirmActionFromTo
Sep 2020SVB LeerinkMaintainsMarket Perform
Aug 2020CitigroupMaintainsSell
May 2020JP MorganDowngradesNeutralUnderweight

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