Mallinckrodt's shares have suffered since short seller Citron Research called out the company's pricing policies and marketing efforts last week. A newly disclosed price hike set off a storm of criticism earlier this week. Now, the company is seeking to gin up shareholder support with a $500 million boost to its stock-buyback program.
Mallinckrodt shares closed on Wednesday at $57.61, down 16% since Nov. 8. Citron mentioned Mallinckrodt ($MNK) on Twitter soon after, saying that the company has "significantly more downside than Valeant" and calling it a "far worse offender" of the reimbursement system.
"[M]ore to follow," Citron promised in the tweet. Mallinckrodt shares dropped 17%, its biggest decline since it was spun off from Covidien in 2013.
And according to CBC News, more did follow--in the form of a newly disclosed 2,000% price hike on Synacthen Depot, a drug that treats a potentially dangerous form of infant epilepsy. Mallinckrodt raised the price to $680 per vial from $33.05 per vial earlier this year, Alberta health officials told CBC, which broke the news.
|Mallinckrodt CEO Mark Trudeau|
Mallinckrodt acquired Synacthen along with Questcor Pharmaceuticals last year. Questcor had bought Synacthen from Novartis ($NVS) and didn't pursue approval in the U.S.; it already sold H.P. Acthar Gel, and Synacthen would have been a direct competitor to that med. Mallinckrodt now faces questions from U.S. prosecutors about Questcor's decision to buy and stop developing Synacthen for U.S. approval.
Now, Mallinckrodt says Synacthen has been underpriced in Canada, and that a manufacturing change prompted the huge price increase. "When Mallinckrodt acquired Questcor in 2014, Synacthen Depot ... was losing money ... and still is," a company spokesman told the Canadian news service, adding that it was forced to find a new manufacturer to supply the med.
In a statement to the St. Louis Business Journal, Mallinckrodt said Synacthen will remain unprofitable even at a higher price. "Importantly, though adjusting the price of the products will contribute to long-term sustainability, the company does not expect the Synacthen products to be profitable in the near-term, even with the new pricing model," the company statement said.
Citron has targeted drugmakers before, but it gained new notoriety last month when it issued a report accusing Valeant Pharmaceuticals ($VRX) of using specialty pharmacy Philidor and other pharmacy relationships to generate "phantom revenue." Valeant shares have nosedived since, as the Philidor allegations multiplied, causing the company to cut ties with the specialty pharmacy. Valeant says its dermatology sales will suffer from the change, with some key products deriving a large chunk of revenue from Philidor-dispensed scripts.
Special Report: The top 10 most expensive drugs of 2013 - H.P. Acthar Gel