Mallinckrodt PLC: How Martin Shkreli Devastated MNK Stock
Shkreli (Briefly) Kills MNK Stock
Mallinckrodt is under fire for using its monopoly to hike prices of a drug treatment for lupus and multiple sclerosis by 2165%, to $28,000 per dose. (Source: “Complaint from Martin Shkreli may lead to FTC drug price suit,” New York Post, January 18, 2017.)
The Federal Trade Commission (FTC) has been looking into the pharmaceutical company Mallinckrodt and its Questcor Pharmaceuticals Inc (NASDAQ:QCOR) unit for several years, not long after Shkreli had filed a lawsuit in 2014 alleging that Mallinckrodt acquired the drug “Synacthen” from Novartis AG (ADR) (NYSE:NVS) and then ended its production in order to protect its profitable rival drug.
The main thrust of the FTC investigation centers around whether the deal to acquire Synachten gave Questcor a monopoly. Questcor was acquired by Mallinckrodt in 2014 for $5.8 billion.
That Martin Shkreli was a key agent of MNK stock’s downfall on Wednesday for nearly the same doings that resulted in him being branded by many as the most hated man in America is, to say the least, rather poetic.
Shkreli, you’ll recall, first became persona non grata when he was CEO of Turing Pharmaceuticals and oversaw the price hiking of “Daraprim,” a drug used to treat parasitic infections, from $13.50 to $750.00, which accounts to an over-5000% price increase. It seems that it takes one pharmaceuticals abuser to catch another one.
Since his tenure at Turing ended, Martin Shkreli was then indicted in December 2015 on securities law fraud, standing accused of cheating investors in a hedge fund he was running.
Beyond its applications for lupus and multiple sclerosis, Mallinckrodt’s “Acthar Gel” is also used to control spasms in infants, and Barack Obama’s FTC will likely file a suit against the company for monopolizing the market on the drug. (Source: Ibid.)
The drug is said to rake in about $1.0 billion in annual revenue.
Investors in MNK stock had been warned in June of the FTC probe, saying it “could have a material adverse effect on its financial condition, results of operations and cash flows.”
A Mallinckrodt spokesman said:
This legacy Questcor matter has been ongoing since Mallinckrodt acquired Questcor in 2014 and has been consistently disclosed in Mallinckrodt’s SEC filings. Mallinckrodt continues to cooperate fully with the FTC on this matter. We will provide updated information on any developments, if and when appropriate.
(Source: Ibid.)
While it’s not likely to turn around the public image problem surrounding Martin Shkreli, some may have a little bit of gratitude in their hearts for his contribution to a lawsuit against such high price hikes, no matter what his motivations were.
On the flipside, quite a few MNK stock investors are sure to join the already-sizable throng of Shkreli haters. While the MNK stock price fall was steep, albeit brief, the company does not need bad news like this, considering that MNK stock had such a poor showing in 2016, falling by nearly 35% last year.
