SVB Leerink lowered its price target for Mallinckrodt (NYSE:MNK) to $2 from $5, citing a number of changes to its model. The stock closed at $1.80 on March 16.
Analyst Ami Fadia writes that her updated model reflects the latest debt refinancing/exchange terms as well as the recent District Court decision to permit CMS to collect $650-million in retroactive rebates as well as modify the go-forward rebate rate for its H.P. Acthar Gel, which the company estimates will impact results by $90-millon to 100-million in revenue, and which represents another significant cash liability that the company will need to account for.
“While the debt refinancing/exchange should permit the company to meet these obligations along with the opioid settlement payments, underneath the payments lies a business in which the growth prospects for Mallinckrodt are still very uncertain,” she added.
In the long-term, Ms. Fadia said she sees “potential headwinds for Acthar due to competition and payer pressure, declines in INOMax, Ofirmev and Amitiza due to loss of exclusivity, and the contribution from the pipeline like Stratagraft and terlipressin is unlikely to offset the declines in the products mentioned above.” As a result, she reiterated her “market perform” rating.
