Mallinckrodt PLC (MNK) Soars on Back of 4Q Acthar Sales That Impressed Wall Street

Mallinckrodt PLC (NYSE:MNK) shares are rocketing a nice 16% after the drug maker unleashed a fourth quarter print that has left Wall Street impressed.

We think the stock rallied because even worse scenarios were anticipated,” points out Mizuho analyst Irina Rivkind Koffler.

Even on back of a robust fourth quarter where revenues for lead asset Acthar proved better than expected, the analyst calls the stock reaction “unexpectedly positive;” especially considering the guide for Acthar sales for 2018 suggests a roughly 16% year-over-year dip. Notably, this slip in year-over-year growth follows despite a 6.9% price boost just last month.

All the same, the analyst does not budge from the sidelines following the earnings show, reiterating a Neutral rating on MNK stock with a $21 price target, which implies a nearly 15% downside from current levels. (To watch Koffler’s track record, click here)

For the fourth quarter, MNK posted $792.3 million in revenues and $2.01 in adjusted EPS, beating out FactSet consensus looking for $768.4 million in revenues and $1.68 in adjusted EPS. MNK benefited from strength in Acthar revenues coupled with generics, gross margins, and taxes that were not as high for the quarter. Though Acthar sales of $295.2 million fell 9.3% year-over-year and 4.4% quarter-over-quarter, Wall Street was pleased to see that these sales nonetheless topped the Street’s forecasts of $288.2 million.

For 2018, MNK is reclassifying its generics segment to discontinued operations. The MNK team calls for a 3% to 6% boost in continuing operations sales, which includes a roughly $200 million for Sucampo, and adjusted diluted EPOS between $6.00 and $6.50, riding a 10% buyback from the fourth quarter.

“In 2017 we made strong progress in strategically reshaping our business to become an innovation-focused specialty pharmaceutical company,” said Mark Trudeau, President and Chief Executive Officer of Mallinckrodt, “further building out a portfolio that, over the long term, should produce sustainable growth of at least mid-single digits, with potential for higher growth longer term. We see a number of potential commercial and development catalysts for growth in the year ahead, with possible product launches, clinical trial milestones and data readouts. The occurrence of any one or more of these events may provide further benefit to shareholders.”

“Looking ahead,” Trudeau continued, “with the recent acquisitions of Sucampo and other transactions building out our roster of marketed brands as well as our branded pipeline, we are poised to begin fulfilling the promise of the innovative development portfolio we’ve built. In 2018 we will aggressively pursue key initiatives to support and accelerate progress as we solidify our transformation.”

TipRanks indicates an unsure Wall Street consensus gravitating closer to bullish standing than bearish. Out of 11 analysts polled in the last 3 months, 5 rate a Buy on MNK stock, 5 maintain a Hold, while 1 issues a Sell on the stock. With an encouraging return potential of 56%, the stock’s consensus average price target stands at $29.44.  

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