Mallinckrodt shares fall on Acthar worries, generics spinoff suspension

(Reuters) - Mallinckrodt Plc MNK.N suspended plans to spin off its specialty generics unit, citing opioid litigation uncertainties, and warned Acthar gel revenue was unlikely to exceed $1 billion this year, sending its shares down about 15% on Tuesday.

The company had announced the spinoff plan in December and expected to complete it in the second half of 2019. The division was put on the block in 2016 and talks with at least two likely buyers fell through, according to media reports from 2018.

“I think people would like to have visibility into how the earnings profile of the company is going to evolve and there’s just too many uncertainties,” said SVB Leerink analyst Ami Fadia.

Mallinckrodt, like other opioid producers, has been under pressure from a crackdown on addictive drugs in the United States in the wake of the opioid crisis and as state attorneys general file lawsuits against manufacturers.

An industrywide decline in prices for generic drugs, competition to two important drugs and litigation related to Acthar, its costly treatment for multiple sclerosis and a rare infant seizure disorder, have also been a drag. The stock has plunged about 60% this year.

On an earnings call with analysts, Chief Executive Mark Trudeau said the company was revisiting all options for the generics business, including a sale.

“What we’re actually seeing is a recapture of share across the entire business,” he said of the latest reported quarter.

The specialty generics business generated revenue of $195.5 million in the quarter, with well below “50% of the total business” coming from opioids.

Mallinckrodt, which beat second-quarter profit estimates, raised full-year adjusted earnings per share expectations to $8.40 to $8.70, compared with $8.30 to $8.60 earlier.

Fadia said the earnings per share forecast raise was due to lower spending. “Those things last only for a set amount of time.”

The company, which is looking to expand Acthar’s label to conditions including rheumatoid arthritis, reported a 9.1% drop in the treatment’s quarterly sales to $266.4 million, blaming reimbursement challenges.

Mallinckrodt, which has reached a tentative agreement to pay $15.4 million to resolve a U.S. Justice Department probe into marketing practices for Acthar, has sued the Centers For Medicare And Medicaid Services for changing how it calculated Medicaid discounts for the treatment.

Excluding items, Mallinckrodt earned $2.53 per share, ahead of estimates of $2.08, according to IBES data from Refinitiv.

Reporting by Tamara Mathias in Bengaluru; Editing by Sriraj Kalluvila