Deutsche Bank Comment on Mallinckrodt (MNK) Following FDA Decision on Methylphenidate ER

Deutsche Bank maintained a Buy rating on Mallinckrodt plc (NYSE: MNK) with a price target of $104. Earlier the FDA said it has reason to believe that the company’s methylphenidate hydrochloride extended-release (ER) tablets, USP (CII) may not be therapeutically equivalent to the category reference drug Concerta®. As a result, the agency indicated that it has reclassified Mallinckrodt’s ANDA 202608 for methylphenidate ER dosage strengths of 27mg, 36 mg and 54 mg from AB (freely substitutable at the pharmacy level) to BX (presumed to be therapeutically inequivalent).

Commenting on develpments, analyst Gregg Gilbert said, "While we had flagged this as a potential risk in our initiation report in July, we did not believe this outcome was the most likely one, in part based on MNK managements’ apparent confidence on the subject."

"While we still have a Buy rating on the stock, seeing a risk that this news is likely to pressure the shares. If we have to remove methylphenidate ER from our model, we estimate revenue contribution of 5% and EPS contribution of 14% in F2015 (assumes a gross margin of 80% and no operating expenses). It is worth noting that this could be viewed favorably for ACT (Buy, USD240.62), which markets an authorized generic version of Concerta (made by JNJ and therefore likely to remain AB-rated). We do not yet know whether Kudco’s generic will be affected," he added.

For an analyst ratings summary and ratings history on Mallinckrodt plc click here. For more ratings news on Mallinckrodt plc click here.

Shares of Mallinckrodt plc closed at $92.99 yesterday.

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