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Mallinckrodt, the Pharmaceuticals business of Covidien plc (COV - Analyst Report), has won the U.S. Food and Drug Administration (FDA) approval to manufacture and sell a generic version of CONCERTA (methylphenidate HCl) Extended-Release (ER) Tablets USP (CII) in 27 mg, 36 mg and 54 mg dosage strengths.

The tablets are used to treat patients, aged between 6 and 65, suffering from Attention Deficit Hyperactivity Disorder (ADHD). ADHD is a neurobehavioral disorder, usually diagnosed in childhood. Children with ADHD are inattentive, hyperactive and impulsive. Despite being a long-term chronic condition, it can be successfully treated with proper therapy and medication.

According to The American Psychiatric Association, roughly 3%–7% of school children have ADHD. The FDA approval is likely to boost Covidien’s Pharmaceutical business, as the company prepares to convert it into a stand-alone company by mid-2013. Covidien intends to divest Mallinckrodt in an effort to focus on its high-margin surgical product portfolio.

Mallinckrodt is a leading manufacturer of bulk acetaminophen in the world and the largest supplier of opioid pain management drugs in the U.S. It also features in the top 10 list of prescription-based generic pharmaceuticals manufacturers in the U.S.

The company plans to launch the Methylphenidate HCl ER Tablets in the 27 mg dosage strength immediately, followed by the 36 mg and 54 mg dosage strengths by the first quarter of 2013. Furthermore, Mallinckrodt will be submitting a supplement to its approved abbreviated new drug application for the 18 mg dosage strength in the same period. Management believes that it holds a six-month exclusivity period for each of the respective dosage strengths following its commercial launch.

In August last year, FDA had also approved Mallinckrodt’s EXALGO (hydromorphone HCl) Extended-Release Tablets 32 mg (CII) for Opioid-Tolerant Patients. Based on the latest FDA clearance and consistent operational efficiency, Covidien raised its fiscal 2013 sales growth guidance for the Pharmaceuticals business to 3%—6% from its earlier guidance of 1%—4%.

Covidien’s stock price increased 2.54% to close at $57.74 on December 31, 2012. The company’s pharmaceuticals product line faces stiff competition from companies such as Johnson & Johnson (JNJ - Analyst Report) and Pfizer Inc. (PFE - Analyst Report).

Currently, we have a long-term Neutral recommendation on the stock, which carries a short-term Zacks #3 Rank (Hold).

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