Mallinckrodt Presents Facts to Refute Short-Seller Claims
May 19, 2017
Recent media reports have cited allegations by self-acknowledged short sellers whose thesis on Mallinckrodt, the company believes, is not based on fact and is intentionally misleading. This statement serves to present facts and correct inaccuracies in those media reports.
Mallinckrodt does not publicly disclose profitability of the individual products in its diversified portfolio. Inflated assertions regarding H.P. Acthar® Gel’s contribution to the company’s overall profitability are incorrect. The drug contributes significantly to the company’s profitability, but at a substantially lower level of operating profitability than the 100% erroneously asserted by short seller claims. The suggestion that there is and will be no operating income contribution from other company products is patently untrue.
Allegations that Mallinckrodt carries $8 billion in debt are incorrect. As disclosed in Mallinckrodt’s most recent quarterly report from March 31, 2017, the company’s debt was approximately $6 billion and Mallinckrodt’s debt, net of cash, was $5.8 billion.
In fiscal 2016, Mallinckrodt had $617 million in GAAP operating income and non-GAAP adjusted operating income (OI) of more than $1.4 billion. While Mallinckrodt has not commented on or issued guidance related to OI for 2017, current consensus OI estimates for the company are well in excess of $1 billion on a non-GAAP basis. Speculation that Mallinckrodt’s annualized OI for 2017 will be $300 million based on results from the most recent quarter is erroneous.
H.P. Acthar Gel’s efficacy in its approved indications is strongly supported by evidence. The U.S. Food and Drug Administration (FDA) reviewed the label in 2010, and determined there in fact was sufficient scientific and clinical evidence to support the 19 indications now in the current label. The drug makes a significant difference in the lives of thousands of very sick patients with high unmet medical needs. Mallinckrodt prices its products responsibly, and in a way that reflects the value they offer patients, providers and the U.S. healthcare system as a whole.
Since acquiring H.P. Acthar Gel in 2014, Mallinckrodt has invested more than a quarter of a billion dollars into the drug, including building a larger body of evidence for the drug through clinical trials and health economic outcomes research data; payer engagement; manufacturing modernization; and other medical affairs and research activities.
MNK-1411 (formerly Synacthen® Depot) is simply not a “generic competitor to Acthar” – the two products are very different drugs. MNK-1411 is not approved by the FDA for any indications, and has never been commercialized in the United States. H.P. Acthar Gel is a biologically derived, 39-peptide chain that includes more than simply ACTH, while MNK-1411 is a synthetic 24-peptide chain. Importantly, the company believes the regulatory path for any corticotropin-type new drug application would require FDA approval and could take many years if successful.
In the commercial reimbursement space, the majority of payers have an established pathway for the use of H.P. Acthar Gel in those patients for whom it is appropriately prescribed – those with conditions covered by the FDA-approved label and for whom the product’s extensive existing data and clinical experience support H.P. Acthar Gel’s use as a proven therapy. The prior-authorization and reimbursement processes used by commercial payers rely on these criteria, and are not bypassed through co-pay programs.
Mallinckrodt has arms-length contracts for services with subsidiaries of Express Scripts for product distribution to a network of several independent, individually contracted specialty pharmacies, and separately for order processing. A separate subsidiary of Express Scripts, United BioSource Corporation, also manages a patient assistance program which provides free product to low-income, uninsured or underinsured patients who qualify. Utilization of all these services is a standard industry practice for most specialty pharmaceutical drugs, of which H.P. Acthar Gel is one.
For further information regarding H.P. Acthar Gel, please see: http://www.mallinckrodt.com/about/news-and-media/2263463
About H.P. Acthar® Gel (repository corticotropin injection)
H.P. Acthar Gel is an injectable drug approved by the FDA for the treatment of 19 indications. Of these, today the majority of Acthar use is in these indications:
- As an orphan monotherapy medication for the treatment of IS in infants and children under 2 years of age.
- Inducing a diuresis or a remission of proteinuria in nephrotic syndrome without uremia of the idiopathic type or that due to lupus erythematosus.
- Treatment of acute exacerbations of multiple sclerosis in adults.
- Use during an exacerbation or as maintenance therapy in selected cases of systemic lupus erythematosus.
- Use during an exacerbation or as maintenance therapy in selected cases of systemic dermatomyositis (polymyositis).
- Use as adjunct therapy for short-term administration in select cases of rheumatoid arthritis, to tide patients over an acute episode or exacerbation.
- Treatment of symptomatic sarcoidosis.
Important Safety Information
- Acthar should never be administered intravenously.
- Administration of live or live attenuated vaccines is contraindicated in patients receiving immunosuppressive doses of Acthar.
- Acthar is contraindicated where congenital infections are suspected in infants.
- Acthar is contraindicated in patients with scleroderma, osteoporosis, systemic fungal infections, ocular herpes simplex, recent surgery, history of or the presence of a peptic ulcer, congestive heart failure, uncontrolled hypertension, primary adrenocortical insufficiency, adrenocortical hyperfunction or sensitivity to proteins of porcine origins.
- The adverse effects of Acthar are related primarily to its steroidogenic effects.
- Acthar may increase susceptibility to new infection or reactivation of latent infections.
- Suppression of the hypothalamic pituitary adrenal (HPA) axis may occur following prolonged therapy with the potential for adrenal insufficiency after withdrawal of the medication. Cushing's Syndrome may occur during therapy but generally resolves after therapy is stopped. Monitor patients for signs and symptoms.
- Monitor patients for elevation of blood pressure, salt and water retention, and hypokalemia.
- Acthar often acts by masking symptoms of other diseases/disorders. Monitor patients carefully during and following discontinuation.
- Acthar can cause gastrointestinal (GI) bleeding and gastric ulcer with an increased risk for perforation with certain GI disorders. Monitor for signs of bleeding.
- Acthar may be associated with central nervous system (CNS) effects ranging from euphoria, insomnia, irritability, mood swings, personality changes, depression, and psychosis. Existing conditions may be aggravated.
- Patients with comorbid disease may have that disease worsened. Caution should be used in patients with diabetes and myasthenia gravis.
- Prolonged use of Acthar may produce cataracts, glaucoma and secondary ocular infections.
- Acthar is immunogenic and prolonged use may increase the risk of hypersensitivity reactions.
- There is an enhanced effect in patients with hypothyroidism and those with cirrhosis of liver.
- Long-term use may have negative effects on growth and physical development in children. Monitor pediatric patients.
- Decrease in bone density may occur. Monitor during long-term therapy.
- Pregnancy Class C: Acthar has been shown to have an embryocidal effect and should be used during pregnancy only if the potential benefit justifies the potential risk to the fetus.
- Common adverse reactions include fluid retention, alteration in glucose tolerance, elevation in blood pressure, behavioral and mood changes, increased appetite and weight gain.
- Specific adverse reactions reported in IS clinical trials in infants and children under 2 years of age included: infection, hypertension, irritability, Cushingoid symptoms, constipation, diarrhea, vomiting, pyrexia, weight gain, increased appetite, decreased appetite, nasal congestion, acne, rash, and cardiac hypertrophy. Convulsions were also reported, but these may actually be occurring because some IS patients progress to other forms of seizures and IS sometimes mask other seizures, which become visible once the clinical spasms from IS resolve.
Please see full Prescribing Information here for additional Important Safety Information.
Mallinckrodt is a global business that develops, manufactures, markets and distributes specialty pharmaceutical products and therapies. Areas of focus include autoimmune and rare diseases in specialty areas like neurology, rheumatology, nephrology, pulmonology and ophthalmology; immunotherapy and neonatal respiratory critical care therapies; and analgesics and hemostasis products. The company's core strengths include the acquisition and management of highly regulated raw materials and specialized chemistry, formulation and manufacturing capabilities. The company's Specialty Brands segment includes branded medicines and its Specialty Generics segment includes specialty generic drugs, active pharmaceutical ingredients and external manufacturing. To learn more about Mallinckrodt, visit www.mallinckrodt.com.
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Coleman N. Lannum, CFA
Senior Vice President, Investor Strategy and IRO
Daniel J. Speciale, CPA
Director, Investor Relations
Senior Communications Manager
Chief Public Affairs Officer