November 10, 2015
By Alex Keown, BioSpace.com Breaking News Staff
NEW YORK – With one tweet, Andrew Left’s Citron Research caused shares of Mallinckrodt Plc to tumble nearly 20 percent Monday, after the short-seller said the firm is a “far worse offender” of the pharmaceutical reimbursement system than embattled Valeant Pharmaceuticals International Inc. .
In its tweet, Citron said looking at the share prices of Mallinckrodt, the company has significantly more downside than Valeant and is a “far worse offender” of the reimbursement system. Citron said in its tweet that more was to come on Mallinckrodt Plc and how it functions with the reimbursement system, but did not provide any additional information. Left though, told Reuters in an email that “the market has been so focused on Valeant that they forgot about other platform companies, which are levered and face the same headwinds in reimbursement.”
Mallinckrodt, a specialty biopharmaceutical company, is the manufacturer of H.P. Acthar Gel used in the treatment of patients with Systemic Lupus Erythematosus who are receiving corticosteroid therapy. Following the slide of the stock on Monday, a Mallinckrodt spokesperson told MarketWatch that the company generally doesn’t respond to market speculation, but, added that Mallinckrodt is “fully confident in our business model and remain focused on execution of our long-term growth strategy.”
Mallinckrodt is scheduled to release fourth-quarter results on Nov. 23. Mallinckrodt is currently trading at $59.07, down from Monday’s high of $66.01 per share.
Although Citron has not yet released any information on Mallinckrodt, the short-seller was successful in aiding in the declining stock value of Quebec-based Valeant Pharmaceuticals. In an October release, Citron Research decried Valeant for its “unsavory business practices of massive price raises on pharmaceuticals acquired in a rapid succession of acquisitions, while slashing research and development.” Additionally, the Citron report criticized Valeant’s relationship with Pennsylvania-based Philidor Rx Services, a specialty pharmacy acquired by Valeant last year. Philidor engages in the “prescriptions made easy” practice. Under this practice, a pharmaceutical company encourages physicians to submit prescriptions for the high-priced medication to a mail-order pharmaceutical company associated with the parent pharmaceutical company. That pharmacy sends the medication to the patient and then directly deals with the insurance company. Some who are critical of the “prescriptions made easy” practice prevents patients and insurance companies from switching to cheaper alternative prescriptions and serves to pad the bottom lines of companies such as Valeant.
At the end of October, Citron said it would not publish any more allegations against Valeant, after dubbing it the pharmaceutical Enron, comparing Valeant to the energy giant brought down by accounting scandals in 2001. Instead, he said the group does not want to be the investigative center of the Valeant connections to Philidor RX Services and other accounting issues the company uncovered.
“While Citron has been at the nexus of information on this story, we will not be releasing new allegations against Valeant in this piece, as we believe that it is not our responsibility to be the judge, jury, and executioner of the company’s deeds. Yes, we have reviewed numerous data points strongly suggesting that Valeant’s operation is far ‘dirtier’ than just Philidor, we are passing all new information on to the mainstream media investigative reporters, whose legal teams are far deeper than those at Citron,” the company posted on its blog.
Valeant has since severed ties with Philidor, but the company is still in crisis mode as Chief Executive Officer J. Michael Pearson is facing immense pressure, including some calls to resign, in the wake of the Philidor scandal, as well as legal and political investigations surrounding pricing of newly acquired drugs, including Nitropress and Isuprel, which the company gained after it acquired Salix Pharmaceuticals, Ltd. . Valeant then increased the prices for those drugs by 212 percent and 525 percent, respectively. Valeant acquired the two drugs in April.
Since a high of $259.98 per share price on Aug. 4, Valeant’s has plummeted to a year-low of $81.77 per share. The stock is currently trading at $81.85 per share.
