Oppenheimer Suggests Buying Mallinckrodt On FTC Investigation Inspired Weakness

Oppenheimer remains Outperform-rated on Mallinckrodt PLC (NYSE: MNK) saying near-term concerns over Acthar competition are overblown, as he expressed confidence in Acthar's durability.

The brokerage, which has a $72 price target on Mallinckrodt shares, said the company’s key brands, Acthar and INOmax, would continue to drive growth over the next 12–18 months.

“While Marathon Pharma will be able to develop Synacthen for two indications, infantile spasms and nephrotic syndrome, neither is a growth area for Acthar, and we believe it will take Marathon significant investment/time to gain approval (if at all) for Synacthen in the US,” analyst Derek Archila wrote in a note.

The analyst welcomed FTC settlement as it removes the overhang from the stock. He added the $100 million settlement as a “small price” to pay to further secure Acthar durability.

“MNK's ongoing development of Synacthen for Duchenne muscular dystrophy remains upside,” Archila continued.

Further, the analyst believes there is no threat of competition, as he estimates Marathon could reach the market in five to seven years (if at all), and by then, Mallinckrodt would have likely reduced its Acthar contribution.

“While we would have been more concerned if MNK had to license Synacthen to Big Pharma which have virtually unlimited resources, that didn't happen,” Archila added.

At last check, shares of Mallinckrodt were up 7.34 percent at $49.89.