This Specialty Pharma Has Significantly Less Upside Than We Thought, Barclays Says

Mallinckrodt has experienced substantial challenges since August 1. Despite announcing it would acquire immunotherapy company Therakos for $1.325 billion, shares are down 44 percent. That translates to roughly $4 billion in lost market capitalization in less than two months.

While Barclays' Douglas Tsao said that the price should rise to $100 per share, he noted that in the immediate term, shares may "come off current levels." That pressure is the primary driver behind Tsao's decision to lower Barclays' price target to $100 from $130 prior.

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Tsao, Barclays Hopeful Over Long Term

However, broadening the time horizon a bit, Tsao suggested that lupus data at the American College of Rheumatology meeting could provide much-needed good news for the stock. Further, Tsao said that sentiment for the company was positive among physicians, who "praised MNK's patient support programs and the sales rep efforts to facilitate reimbursement."

These allow Barclays to be "incrementally confident" in Mallinckrodt's ability to grow Acthar volumes, particularly as it relates to lupus. In conversations with two physicians, Tsao said that one "indicated a possibility to increase use meaningfully in coming years."

Reactions

The market has reacted negatively to Barclays' note, with the stock down another 5 percent in Thursday's trading. At writing, shares are moving to new, 52-week lows below $68.

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