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Can Sucampo Acquisition Turn Mallinckrodt Stock Around?
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The year 2017 has been challenging for Mallinckrodt plc . The stock has tumbled 55.7% in the last twelve months compared with the industry’s decline of 25%.
Armed with a worldwide presence, this specialty biopharmaceutical develops, manufactures, markets and distributes branded and generic specialty pharmaceutical and biopharmaceutical products and therapies along with nuclear medicine products.
However, the sales volume of Mallinckrodt’s lead drug Acthar declined while weaknesses in the generics segment still persist. This downside was driven by the payer environment faced by specialty drugs and the slump is expected to continue in the fourth quarter as well.
Additionally, the Dublin, Ireland-based company is also dealing with concerns related to Inomax. The company suffered a setback after a U.S. District Court invalidated 11 patents covering its second-largest product, Inomax. We remind investors that in February 2015, Mallinckrodt along with subsidiaries had filed a suit in the U.S. District Court for the District of Delaware against Praxair, Inc. (PX - Free Report) following receipt of a January 2015 notice from the latter. The notice was regarding Praxair’s submission of an Abbreviated New Drug Application ANDA containing a Paragraph IV patent certification with the FDA for a generic version of Inomax.
Subsequently, in July 2016, Mallinckrodt had filed a second suit against Praxair following receipt of a Paragraph IV notice concerning three additional patents recently added to the FDA Orange Book regarding its ANDA for a generic version of Inomax. Thereafter, a third suit was filed in September 2016. Mallinckrodt now plans to appeal against the court decision and stated that Inomax has patent protection till 2018.
The company’s generic segment continues to be soft as various product categories are witnessing stiff competition, which in turn hurts volumes as well as prices. Further adding to its woes, Mallinckrodt expects a double-digit decline in revenues from this segment in the near time. Also, continued sluggishness in this segment might adversely impact the company’s gross profit margin.
In a desperate attempt, the company recently announced that it will acquire Sucampo Pharmaceuticals with the aim of diversifying its portfolio. The Sucampo purchase will add two approved drugs namely, Amitiza and Rescula to Mallinckrodt’s portfolio. While the buyout makes sense to consolidate the company’s portfolio considering Amitiza’s potential, but it might not be enough to bail Mallinckrodt out of its current crisis.
Mallinckrodt has always been on the look-out for acquisitions to expand/diversify its portfolio. Apart from small tuck in acquisitions, the company had earlier acquired hemostasis drugs – Recothrom Thrombin topical (recombinant), PreveLeak and Raplixa (fibrin sealant) – from The Medicines Co. and strengthened its growing hospital portfolio.
But problems are far from over yet for Mallinckrodt as the company is also under the scanner for misuse of opioid drugs.
Consequently, we believe investors should steer clear of this stock as of now.
A medical advance is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating substantial revenue, and even more wondrous products are in the pipeline. Cures for a variety of deadly diseases are in sight, and so are big potential profits for early investors. Zacks names 5 stocks to buy now.
Image: Bigstock
Can Sucampo Acquisition Turn Mallinckrodt Stock Around?
The year 2017 has been challenging for Mallinckrodt plc . The stock has tumbled 55.7% in the last twelve months compared with the industry’s decline of 25%.
Armed with a worldwide presence, this specialty biopharmaceutical develops, manufactures, markets and distributes branded and generic specialty pharmaceutical and biopharmaceutical products and therapies along with nuclear medicine products.
However, the sales volume of Mallinckrodt’s lead drug Acthar declined while weaknesses in the generics segment still persist. This downside was driven by the payer environment faced by specialty drugs and the slump is expected to continue in the fourth quarter as well.
Additionally, the Dublin, Ireland-based company is also dealing with concerns related to Inomax. The company suffered a setback after a U.S. District Court invalidated 11 patents covering its second-largest product, Inomax. We remind investors that in February 2015, Mallinckrodt along with subsidiaries had filed a suit in the U.S. District Court for the District of Delaware against Praxair, Inc. (PX - Free Report) following receipt of a January 2015 notice from the latter. The notice was regarding Praxair’s submission of an Abbreviated New Drug Application ANDA containing a Paragraph IV patent certification with the FDA for a generic version of Inomax.
Subsequently, in July 2016, Mallinckrodt had filed a second suit against Praxair following receipt of a Paragraph IV notice concerning three additional patents recently added to the FDA Orange Book regarding its ANDA for a generic version of Inomax. Thereafter, a third suit was filed in September 2016. Mallinckrodt now plans to appeal against the court decision and stated that Inomax has patent protection till 2018.
The company’s generic segment continues to be soft as various product categories are witnessing stiff competition, which in turn hurts volumes as well as prices. Further adding to its woes, Mallinckrodt expects a double-digit decline in revenues from this segment in the near time. Also, continued sluggishness in this segment might adversely impact the company’s gross profit margin.
In a desperate attempt, the company recently announced that it will acquire Sucampo Pharmaceuticals with the aim of diversifying its portfolio. The Sucampo purchase will add two approved drugs namely, Amitiza and Rescula to Mallinckrodt’s portfolio. While the buyout makes sense to consolidate the company’s portfolio considering Amitiza’s potential, but it might not be enough to bail Mallinckrodt out of its current crisis.
Mallinckrodt has always been on the look-out for acquisitions to expand/diversify its portfolio. Apart from small tuck in acquisitions, the company had earlier acquired hemostasis drugs – Recothrom Thrombin topical (recombinant), PreveLeak and Raplixa (fibrin sealant) – from The Medicines Co. and strengthened its growing hospital portfolio.
But problems are far from over yet for Mallinckrodt as the company is also under the scanner for misuse of opioid drugs.
Consequently, we believe investors should steer clear of this stock as of now.
Zacks Rank
Mallinckrodt carries a Zacks Rank #5 (Strong Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Investor Alert: Breakthroughs Pending
A medical advance is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating substantial revenue, and even more wondrous products are in the pipeline. Cures for a variety of deadly diseases are in sight, and so are big potential profits for early investors. Zacks names 5 stocks to buy now.
Click here to see them >>