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Mallinckrodt Bull Turns Bear, Slashes Price Target By 66%

Mallinckrodt Bull Turns Bear, Slashes Price Target By 66%
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With concerns about Acthar, which fetches Mallinckrodt PLC (NYSE: MNK) roughly one-third of its revenues, UBS tempered its expectations.

The Analyst & Rating

UBS analyst Marc Goodman downgraded shares of Mallinckrodt from Buy to Neutral and lowered its 12-month price target from $70 to $24, a 66 percent downward revision.

The Thesis

Acthar volumes could come under pressure, contrary to previous expectations that it would continue to grow, Goodman said in a note. Going by the management's recent comments on Acthar, Goodman is not as optimistic as before.

The analyst made changes to his Acthar model, estimating declining volume, even as market share and pricing assumptions were left unchanged. This along with lower INOmax sales for potential Praxair, Inc. (NYSE: PX) competition, has led the analyst to significantly reduce his valuation.

UBS is moving to the sidelines at current levels until it has more visibility on Acthar volumes, INOmax competition, generics stability and pipeline. The firm lowered its earnings per share estimates for 2017 from $7.40 to $7.15 and that for 2016 from $8.15 to $7.15, assuming among other things, a 14 percent year-over-year drop in Acthar sales.

Price Action

At time of writing, shares of Mallinckrodt were down less than 1 percent at $21.62. The stock is down 56 percent in 2017.

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Latest Ratings for MNK

Nov 2017OppenheimerDowngradesOutperformPerform
Nov 2017UBSDowngradesBuyNeutral
Nov 2017Canaccord GenuityMaintainsHold

View More Analyst Ratings for MNK
View the Latest Analyst Ratings

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