Famed Short-Seller Says This Drug Stock is One You Need to Drop ASAP
11/17/2016 5:38:27 AM
November 17, 2016
By Alex Keown, BioSpace.com Breaking News Staff
NEW YORK – Shares of Mallinckrodt (MNK) are tumbling this morning after Citron Research’s Andrew Left, a famed shirt seller, told Real Money, sister site to The Street, that it was time to “dump Mallinckrodt.”
On Wednesday, Left published a scathing report on his site, claiming that Mallincrodt’s Chief Executive Officer Mark Trudeau has committed securities fraud. Left said Trudeau was “exposed by none other than the newly released Medicare drug-spending dashboard.” Left also said the company was overly-reliant on reimbursements from Medicare and that Trudeau continues to “lie to the investing public” about the company’s dependency on the Medicare system. He claimed Mallinckrodt’s Acthar Gel is “the single most expensive drug per treatment” reimbursed by the government. Left cited a report from the Centers for Medicare & Medicaid Services that indicated the government spent $162,371 per patient on H.P. Acthar Gel in 2015, which translated into more than $503 million. Left said Acthar Gel is at risk if the government begins to clamp down on drug prices.
Mallinckrodt, a specialty biopharmaceutical company, is the manufacturer of H.P. Acthar Gel used in the treatment of patients with Systemic Lupus Erythematosus who are receiving corticosteroid therapy. Acthar Gel accounted for 31 percent of Mallinckrodt’s second quarter revenue. Not only is the drug the most expensive, Left said in his note that there are questions as to its efficacy. He cited a report in Neurology Today that indicated there is no evidence “the medication is in any way superior to methylprednisolone for MS relapses.”
“As the new GOP majority debates the future of the Medicare system, and if one wants to determine if the system is broken or not just think about this: Doctors do not even know if the most expensive drug reimbursed by Medicare, at $162,000 per patient, even works,” Left said in his note. “President-Elect Trump has made it a promise to cut waste, fraud and abuse from the government's healthcare reimbursement system. With Medicare's own data, Citron has now proven that Mallinckrodt is the embodiment of all three.”
This is not the first time Left has discredited Mallinckrodt. This time last year Left claimed the firm is a “far worse offender” of the pharmaceutical reimbursement system than embattled Valeant Pharmaceuticals (VRX). Left, a famed short-seller, predicted the stock price will fall to $20. This morning shares hit a low of $54.93, down from Tuesday’s closing price of $67.80.
BioSpace reached out to Mallinckrodt to see if the company had a response to Left’s criticism, but has not yet heard back. We will update when we do.
In August, Mallinckrodt announced an investment of more than $80 million to build a new campus in New Jersey to support the company’s fast-growing specialty brands. For the past 18 months, Mallinckrodt has involved itself in multiple acquisition deals, including the acquisition of U.K.-based Therakos from The Gores Group for about $1.325 billion that expanded the company’s reach into the hospital market. Earlier this week, the company announced a deal to acquire Statatech Corporation, a regenerative medicine company that develops skin substitute products. Financial terms of that deal were not disclosed. The deal with The Gores Group, as well as others, brought multiple properties in the United States under the Mallinckrodt umbrella, the company said.
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