Mallinckrodt (MNK) to Sell Recothrom and Preveleak to Baxter

Mallinckrodt plc MNK entered into an agreement with Baxter International Inc. BAX wherein the former will sell certain hemostasis products to the latter for approximately $185 million.

Of the total, $153 million will be paid upfront while the remaining will be paid as milestone payments in future.

The products include Recothrom Thrombin topical (Recombinant) and Preveleak Surgical Sealant. Baxter will assume other expenses, including contingent liabilities associated with Preveleak.

However, Mallinckrodt will retain Raplixa (Fibrin sealant (human)) for topical use and is evaluating strategic options for this product.

The company acquired these products from The Medicines Co. MDCO to strengthen its growing hospital portfolio.

The moves is in line with Mallinckrodt’s strategy to streamline its business to evolve as a top-performing specialty pharmaceutical company. It will help the company to focus on innovative medicines and therapies like terlipressin and StrataGraft, and the recently acquired products stannsoporfin, xenon gas and OCR-002.

The divestiture of the products will dilute Mallinckrodt's bottom-line by $0.10 to $0.15 in 2018. The transaction is expected to close in the first half of 2018.

Earlier, Mallinckrodt sold its Intrathecal Therapy business for approximately $203 million to Piramal Enterprises Limited's subsidiary, Piramal Critical Care in the UK. The company also sold its global Nuclear Imaging business to IBA Molecular for approximately $690 million due to lingering challenging conditions.

In December 2017, the company announced that it will acquire Sucampo Pharmaceuticals, Inc. SCMP to revive its beleaguered portfolio.

 

 

Mallinckrodt’s stock has tumbled 58.3% over a year compared with the industry’s decline of 24.8%.

The year 2017 has been challenging for Mallinckrodt as sales volume of lead drug Acthar declined while weaknesses in the generics segment still persist. This downside is attributed to the payer environment faced by specialty drugs and the slump is expected to continue in the fourth quarter as well.

Additionally, the Dublin, Ireland-based company is also dealing with concerns related to Inomax. The company suffered a setback after a U.S. District Court invalidated 11 patents covering its second-largest product, Inomax. 

The company’s generic segment continues to be soft as various product categories are witnessing stiff competition, which in turn hurts volumes as well as prices. Further adding to its woes, Mallinckrodt expects a double-digit decline in revenues from this segment in the near time. Also, continued sluggishness in this segment might adversely impact the company’s gross profit margin.

Zacks Rank

Mallinckrodt carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Baxter International Inc. (BAX) : Free Stock Analysis Report
 
The Medicines Company (MDCO) : Free Stock Analysis Report
 
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Mallinckrodt PLC (MNK) : Free Stock Analysis Report
 
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