EXCLUSIVE: Mallinckrodt Continues To Cooperate With Questcor-Related Government Investigations

In a Wednesday update to an earlier report, Probes Reporter dug into the potential impact of the ongoing multi-agency investigation of Mallinckrodt PLC MNK’s Questcor Pharmaceuticals. The potential impact of the investigations is at the forefront of investors’ minds following the massive 51.4 percent sell-off in Valeant Pharmaceuticals Intl Inc VRX on Tuesday. Valeant is currently under investigation by the SEC over drug pricing.

Mallinckrodt acquired Acthar, a drug used to treat seizures in babies, 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.

Looking At The Actual 10-Q

According to Mallinckrodt’s 10-Q filed in February of this year, the investigations have to do with Questcor’s “promotional practices and related matters.”

In the company’s own words, “The ultimate resolution, after taking into account amounts already accrued, could have a material adverse effect on [the company's] financial condition, results of operations and cash flows.”

In a statement to Benzinga, a spokesperson for Mallinckrodt said, “These are historical matters, previously disclosed in our filings. Mallinckrodt continues to cooperate with the government investigations.”

Related Link: Citron: Mallinckrodt Makes Valeant Look Like Choirboys

What It Could Mean For Investors

According to Probes Reporter, if a company’s management says that there’s a material risk, investors should believe them.

“Even post-merger, Mallinckrodt management and their array of experts judged the Questcor SEC investigation and involvement by the US Attorney’s Office (read: criminal exposure) remains a material exposure to the post-deal company," the Probes report read.

During an on-air discussion with Cintron’s Andrew left on CNBC Tuesday night, Mallinckrodt CEO Mark Trudeau called comparisons between Valeant and Mallinckrodt “completely inaccurate.”

On Wednesday afternoon, Mallinckrodt shares are down almost 12 percent at $52.50. The stock began 2016 near the $72 level.