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(Reuters) — Drugmaker Mallinckrodt PLC said Tuesday it has suspended plans to spin off its specialty generics business, citing increasing uncertainties tied to opioid litigation.
The company’s shares rose 8% to $7 before the bell. They had plunged nearly 60% this year to Monday’s close as the company also struggled with an industry-wide decline in prices for generic drugs and litigation related to its Acthar gel.
Investors have been skeptical all along about the company’s plans to spin off the generics unit, Mizuho Securities analyst Irina Koffler said, noting that putting it on hold will help the company use cash to pay down debt.
The company, which also beat second-quarter profit expectations, had net debt of about $5.35 billion as of June 28.
Pharmaceutical companies such as Mallinckrodt that produce opioids have been under pressure as the U.S. government cracks down on drugs seen as addictive, while state attorneys general have filed lawsuits against the manufacturers.
Mallinckrodt’s specialty generics business, which generated revenue of $195.5 million in the latest quarter, largely makes opioid drugs and has come under pressure as more doctors in the United States shy away from prescribing addictive medicines.
The company first announced the spinoff plan in December and said it expected to complete it in the second half of 2019. The drugmaker had been looking to sell the division since 2016 and talks held with at least two potential buyers fell through, according to media reports from 2018.
Mallinckrodt said on Tuesday it would continue to consider a “range of options” to ultimately separate the business, consistent with its announced strategy.
The company said sales of Acthar, its costly treatment for a rare infant seizure disorder and multiple sclerosis, fell 9.1% to $266.4 million in the quarter, hurt by reimbursement challenges and insurer scrutiny of specialty pharmaceutical spending.
“Given current significant market uncertainties, the company now believes Acthar Gel net sales for 2019 are unlikely to exceed $1 billion,” Mallinckrodt said.
Ten analysts polled by Refinitiv IBES had expected revenue from the drug to cross $1 billion this year.
In June, Mallinckrodt tentatively agreed to pay $15.4 million to resolve a U.S. Justice Department probe into how a drugmaker it now owns marketed Acthar gel.
Second-quarter net income fell to $6.8 million, or 8 cents per share, from $15.6 million, or 19 cents per share, a year earlier, due to an impairment charge.
Excluding items, the company earned $2.53 per share, ahead of consensus estimates of $2.08, according to IBES data from Refinitiv.
(Reuters) — Mallinckrodt P.L.C., one of the largest manufacturers of the generic opioid painkiller oxycodone, will pay $35 million to resolve allegations that it failed to report suspicious drug orders, the U.S. Justice Department said Tuesday.