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Mallinckrodt cuts $5.6bn deal to buy Questcor

Irish company continues move from medical imaging to pharma products

Mallinckrodt has dug deep into its pockets to buy Questcor Pharma and gain ownership of its fast-growing specialty drug HP Acthar Gel.

The $5.6bn-deal is a cash-and-share transaction that Ireland-based Mallinckrodt says will give it a robust growth platform in the coming years as it continues to shift the balance of its portfolio away from medical imaging and into specialty pharmaceuticals.

Acthar (repository corticotropin injection) grew almost 50 per cent last year to bring in revenues of $799m and accounts for substantially all of Questcor's revenues and profits.

It is tipped to become a $1bn product this year, with 19 FDA-approved autoimmune and inflammatory indications - including infantile spasms, multiple sclerosis relapse and sarcoidosis - as well as several additional uses in clinical testing.

Under the terms of the deal, Questcor's shareholders will receive $30 in cash and 0.897 Mallinckrodt shares for each share they own. It is the second transaction for Mallinckrodt in as many months, having announced a $1.3bn bid for Cadence Pharma and its fast-growing painkiller injection Ofirmev (acetaminophen) in February.

On the closure of the deal, the combined company will make around 70 per cent of its turnover from specialty pharmaceuticals and active pharmaceutical ingredients (APIs), with a particular focus on pain management, central nervous system disorders, kidney disease, rheumatology and autoimmune/inflammatory disorders.

"We currently expect solid double-digit revenue growth for Acthar to continue in the future, driven by educational efforts and further expansion into indications currently on the Acthar label," said Mallinckrodt chief executive Mark Trudeau on a conference call yesterday.

Trudeau will be CEO of the combined company, while three other Questcor executive, including CEO Don Bailey, will have seats on the board.

Mallinckrodt investors seemed to be wary of the deal, however, and the Irish firm's share price went on the slide yesterday after it was announced.

One factor may be that Questcor and Acthar have been somewhat controversial of late, with a US federal probe into the company's marketing practices and insurer Aetna announcing it would only reimburse Acthar use for infantile spasms.

Furthermore, earlier this year activist group Citron Research published a report claiming some batches of Acthar were found to have low levels of corticotropin on testing, which they said placed it at risk of being withdrawn by the FDA.

Questcor has responded by saying that Acthar is a naturally-derived, complex formulation based on multiple pituitary peptides so it is not meaningful to focus on one component. The FDA has also said it will look into the claims.

Article by
Phil Taylor

8th April 2014

From: Sales

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