Mallinckrodt (MNK) PT Lowered to $87 at Mizuho Ahead of Q3 Print
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Mizuho Securities analyst Irina Koffler lowered her price target on Buy-rated Mallinckrodt plc (NYSE: MNK) to $87.00 (from $89.00) but maintained a Buy rating after updating thier model ahead of the 3Q:16 Earnings call on Nov 29.
Koffler commented, "We model $855.5M in 3Q:16 revenues and EPS of $1.92 vs. $834.2M and $1.91 consensus. Our model has been updated for the divested nuclear imaging business as well as a conservative market withdrawal of methylphenidate ER in 2Q:17. We also lowered estimates for the specialty generics business in 2016-2017 since mgmt. continues to reiterate its cautious stance and expects the business to remain under pressure next year. The stock has sold off on what we view as inflammatory short-seller comments on Acthar, rather than on any weakness in fundamentals. Consensus estimates appear beatable heading into the Nov 29 print and we think buy-backs were likely this quarter- so we reiterate our Buy rating but trim PT to $87 from $89 on model updates."
Notes Acthar scares continue to plague the stock: "Because of the unusual regulatory history of the drug and its high price, Acthar remains an easy target for far-fetched arguments. While the drug has more government utilization than we previously expected (~50%), usage has been appropriately restricted to patients who do not respond to steroids. Historically, drugs have only been removed from Part D formularies for safety or efficacy issues, so we believe it is unrealistic to expect Part D plans to suddenly stop reimbursing the product. Plus Acthar is already in the most restrictive reimbursement tiers within government plans, so further restrictions appear unlikely. Mallinckrodt is now conducting a number of placebo-controlled trials in patients already receiving steroids to highlight Acthar's efficacy and economic benefits when used appropriately. We model 3Q:16 Acthar revs of $304.3M vs consensus $309.3M Bloomberg consensus."
Shares of Mallinckrodt plc closed at $56.00 yesterday.
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