[Ip-health] Fierce Pharma: Mallinckrodt boosts buyback plan amid news of a 2, 000% price hike on infant drug

Thiru Balasubramaniam thiru at keionline.org
Sat Nov 28 02:38:02 PST 2015


Mallinckrodt boosts buyback plan amid news of a 2,000% price hike on infant

November 19, 2015 | By Tracy Staton

Mallinckrodt's shares have suffered since short seller Citron Research
called out the company's pricing policies and marketing efforts last week.
A newly disclosed price hike set off a storm of criticism earlier this
week. Now, the company is seeking to gin up shareholder support with a $500
million boost to its stock-buyback program.

Mallinckrodt shares closed on Wednesday at $57.61, down 16% since Nov. 8.
Citron mentioned Mallinckrodt ($MNK) on Twitter soon after, saying that the
company has "significantly more downside than Valeant" and calling it a
"far worse offender" of the reimbursement system.

"[M]ore to follow," Citron promised in the tweet. Mallinckrodt shares
dropped 17%, its biggest decline since it was spun off from Covidien in

And according to CBC News, more did follow--in the form of a newly
disclosed 2,000% price hike on Synacthen Depot, a drug that treats a
potentially dangerous form of infant epilepsy. Mallinckrodt raised the
price to $680 per vial from $33.05 per vial earlier this year, Alberta
health officials told CBC, which broke the news.

Mallinckrodt CEO Mark Trudeau

Mallinckrodt acquired Synacthen along with Questcor Pharmaceuticals last
year. Questcor had bought Synacthen from Novartis ($NVS) and didn't pursue
approval in the U.S.; it already sold H.P. Acthar Gel, and Synacthen would
have been a direct competitor to that med. Mallinckrodt now faces questions
from U.S. prosecutors about Questcor's decision to buy and stop developing
Synacthen for U.S. approval.

Now, Mallinckrodt says Synacthen has been underpriced in Canada, and that a
manufacturing change prompted the huge price increase. "When Mallinckrodt
acquired Questcor in 2014, Synacthen Depot ... was losing money ... and
still is," a company spokesman told the Canadian news service, adding that
it was forced to find a new manufacturer to supply the med.

In a statement to the St. Louis Business Journal, Mallinckrodt said
Synacthen will remain unprofitable even at a higher price. "Importantly,
though adjusting the price of the products will contribute to long-term
sustainability, the company does not expect the Synacthen products to be
profitable in the near-term, even with the new pricing model," the company
statement said.

Citron has targeted drugmakers before, but it gained new notoriety last
month when it issued a report accusing Valeant Pharmaceuticals ($VRX) of
using specialty pharmacy Philidor and other pharmacy relationships to
generate "phantom revenue." Valeant shares have nosedived since, as the
Philidor allegations multiplied, causing the company to cut ties with the
specialty pharmacy. Valeant says its dermatology sales will suffer from the
change, with some key products deriving a large chunk of revenue from
Philidor-dispensed scripts.

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