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Citron: Mallinckrodt Makes Valeant Look Like Choirboys

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Citron: Mallinckrodt Makes Valeant Look Like Choirboys
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Valeant Pharmaceuticals Intl Inc (NYSE: VRX)'s 50 percent plunge on Tuesday is also sparking a selloff in another drug company that Citron's Andrew Left says is the “poster child” for price gouging: Mallinckrodt PLC (NYSE: MNK).

Mallinckrodt owns two different drugs, Acthar and Synacthen, used for the treatment of seizures in babies. According to Left, the drugs have a history of suspicious pricing changes, and they have never been directly compared to each other for differences in efficacy.

“Mallinckrodt is squeaking by without anyone talking about it. Mallinckrodt makes Valeant look like a bunch of choirboys,” Left told Real Money on Tuesday.

Related Link: Valeant's +40% Single-Day Decline Equates To Over $666 Million Loss For Bill Ackman

Mallinckrodt acquired Acthar via a buyout of Questcor in 2014.

Back in 2007, the price of Acthar jumped from $1,650/vial to $23,000/vial. Today a vial costs more than $30,000. In November 2015, the price of Synacthen in Canada jumped from $33.05/vial to $680/vial.

Left notes that the official explanation from Mallinckrodt for the jump in Synacthen’s price is that the company had been losing money on the drug and was forced to choose between a price hike and removing the drug from the market. Questcor gave a similar explanation for the leap in Acthar’s price back in 2007.

Left also questions the fact that the extremely expensive Acthar has never been tested against its relatively cheap alternative, Synacthen. He concluded that at least Valeant can point to the clear efficacy of its drugs to support its price hikes, which is more than Mallinckrodt can do at the moment.

Left will be appearing on CNBC at 5:30 p.m. ET to discuss Mallinckrodt. The stock was already down and sold off more after Real Money posted the story. The stock is 14.5 percent in today’s session and 52.1 percent in the past year.

Left told his thesis to CNBC on Tuesday evening, and producers were surprised when Mallinckrodt CEO Mark Trudeau called in to debate the Citron head directly. Read more on that by clicking here.

Disclosure: the author holds no position in the stocks mentioned.

Latest Ratings for VRX

DateFirmActionFromTo
Nov 2017Deutsche BankMaintainsHold
Nov 2017BMO CapitalMaintainsMarket Perform
Jul 2017Deutsche BankMaintainsHold

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