We Like This Mallinckrodt PLC (MNK) Deal to Take Over Sucampo, Cheers Louise Chen

Cantor's Louise Chen finds MNK's choice to acquire Sucampo not only an impressive way to close out 2017, but a move that shifts the company's story beyond leading asset Acthar's reimbursement challenges.


Cantor analyst Louise Chen is throwing her positive two cents in on Mallinckrodt PLC (NYSE:MNK) and the biotech player’s decision to take over Sucakmpo in a “strategic” roughly $1.2 billion acquisition.

In reaction, the analyst reiterates an Overweight rating on MNK stock with a $42 price target, which implies an 84% upside from where the shares last closed. (To watch Chen’s track record, click here)

The MNK team looks for accretion to EPS next year of a minimum of $0.30, looking for likely even twice that (if not more) by 2019, on the assumption the deal closes by the first quarter of 2018. Worthy of note, FactSet consensus angles for $6.93 in EPS from Mallinckrodt in the new year.

“We like this deal because it brings a commercial product (Amitiza) and two Phase 3 pipeline assets (CPP-1X/sulindac, VTS-270) in rare diseases with combined peak sales of $450MM+,” explains Chen, who adds that another advantage is a diversified portfolio for the company: “This deal, and the other ones announced by MNK earlier this year, expand the company’s portfolio and pipeline assets to diversify the growth and dialogue for the story beyond Acthar. Concerns about competition and reimbursement challenges for Acthar have been an overhang on MNK’s stock, in our opinion.”

Ultimately, “We think this deal helps advance MNK towards its vision of becoming an innovation-driven specialty pharmaceutical growth company focused on improving outcomes for patients with severe and critical conditions. MNK expects completion of the Phase 3 trial for CPP-1X/sulindac at the end of 2018. The NDA filing is expected in early 2019, with approval also anticipated in 2019. According to MNK, peak U.S. potential net sales for the product are $300MM +,” Chen surmises, noting that should VTS-270, the experimental treatment for Niemann-Pick disease type C1 garner a green light, the treatment can offer patients with a therapy that directly targets and modifies the disease.

Currently, the Phase 3 study is ongoing, and the analyst looks ahead to 2018, when an NDA filing is anticipated, with approval likely come 2019. The MNK team sets peak net sales for the drug at roughly $150 million plus.

TipRanks points to a cautiously optimistic Wall Street surveying Mallinckrodt’s prospects, with 9 out of 14 analysts polled in the last 3 months sidelined on the biotech stock, but 5 bullish. Is the stock overvalued or undervalued taking under account analyst expectations? With a solid return potential of nearly 43%, the stock’s consensus target price stands at $32.55.  

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