Mallinckrodt (MNK) Short Report Appears to Overstate Acthar CMS Sales - Leerink
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Leerink Partners analyst Jason Gerberry said Citron Research's latest short report on Mallinckrodt plc (NYSE: MNK) appears to overstate Acthar CMS sales.
Gerberry commented, "MNK shares are down -7-8% based on a “short report” citing CMS dashboard data which call into question Acthar Gel sales derived from government sources (“CMS”; Medicaid & Medicare). The report (LINK) appears to overstate Acthar CMS sales as a percent of total product sales, as the methodology utilized by CMS drug spending dashboard for Medicare spend is based on gross sales, not net., although it's unclear to what extent Acthar CMS sales are overstated. The report suggests MNK mgmt understated combined Medicaid/Medicare sales on an investor call, saying it was “about a little bit higher than a quarter of the business” vs. gross sales on CMS dashboard implying sales were 61% of total Acthar net revenue (an apples to oranges comparison). We don’t know the exact net sales of Acthar to Medicare/Medicaid, but we believe it is safe to assume Medicaid, after CPI price penalties had high discounts/rebates and assuming an 80% gross-to-net ratio on the Medicare book ($504m gross) suggests Acthar net sales would be closer to 38-45% range vs. the 61% figure cited in the short-report. Why this may matter – Acthar Gel is an old product lacking good randomized, controlled data consistent with most products approved in the modern era. The report appears to be an attempt to call into question whether the government should be paying Acthar’s average $80-100k net price/patient/year by calling to this to the attention of government figures who have been targeting excessive drug pricing issues. This type of issue became a major headache for MYL (OP) investors recently with EpiPen. MNK is presenting at a competitor's conference today and investor relations should become available to address questions soon, but on first blush it appears the short-report does overstate Acthar CMS derived sales but we need more data to say this is definitely a non-issue for MNK."
The firm maintained an Outperform rating and price target of $92 on MNK.
Shares of Mallinckrodt plc closed at $67.80 yesterday.
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