Here's Why Mallinckrodt (MNK) Shares Are Lower Today

On Monday, shares of pharmaceutical company Mallinckrodt Plc. (NYSE:MNK) are slipping, down about 5% to $40.50 per share in afternoon trading—MNK dropped about 8% in heavy morning trading—after a new report from short-seller Citron Research targeted the company.

Citron’s report focused on Mallinckrodt’s key drug H.P. Acthar Gel, which can be used for many types of diseases including multiple sclerosis, dermatological diseases, and respiratory diseases. But due to huge price increases over the years, Acthar’s price tag comes in at almost $40,000 a vial; the drug brings in over $1 billion in revenue for Mallinckrodt.

The report goes on to reference comments made by Everett Neville, pharmacy benefits manager Express Scripts' (NASDAQ:ESRX) Senior Vice President, Supply Chain and Specialty, who criticized Acthar. “I don’t think it’s a very great – it’s a pretty poor drug with a very limited need," he said on a call hosted by Citigroup (NYSE:C) analysts. Interestingly, Express Scripts is the sole distributor of Acthar.

"Express Scripts has FINALLY changed its stance on Acthar and the effect will send shares of Mallinckrodt to ZERO," the report claimed. "The words of Express Scripts management will echo through the halls of Medicare and insurance companies as Acthar has finally met the truth: it is an old drug that is way too expensive and not as good as its competition."

This is not new behavior for Citron, who has targeted both Mallinckrodt and Express Scripts in the past, comparing the former to Valeant (NYSE:VRX) and the latter to Philidor Rx Services.

MNK stock is down over 14% year-to-date, and is a #3 (Hold) on the Zacks Rank.

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