Mallinckrodt is exploring the sale of its generic drug unit. Pharma analysts believe that if Mallinckrodt finds a suitor for its generic drug business, the sale could net the company as much as $2 billion. Mallinckrodt is looking to pivot away from generic drugs and towards branded drugs with higher margins. The company was originally focused on generic drugs and nuclear imaging, but as Mallinckrodt has grown it now has a mjaority of its revenues coming from branded specialty pharmaceuticals.
Mallinckrodt is based in England and has hired the Credit Suisse Group AG, an investment bank, to run the sales process for its generics business. There is no deal in place and there is no guarantee that Mallinckrodt’s exploration will eventually to the sale of its generics business. If a deal is found, generic pharma attorneys will likely be managing the sale. However, reports indicate that the company’s generics unit has been weighing down the rest of the company. Part of that is because Mallinckrodt has focused on opiate-based pain killers, generic drugs which are now prescribed less because of their potential for addiction. In an earnings call, the company’s Chief Financial Officer, Matthew Harbaugh, said that the segment will continue to have pressure from marketing pricing and competitive entrants in the upcoming quarters.
From 2015 to 2016 Mallinckrodt saw its generic drug sales fall about 18 percent. That was about a $1 billion drop in sales for the company. In the same time frame, branded specialty drugs jumped about 40 percent to around $2.3 billion. Part of that jump was due to new acquisitions, but Mallinckrodt is clearly turning its focus away from generics and towards branded drugs.
Mallinckrodt had 90 percent of its sales in the generics and nuclear imaging space in 2013 when it was spun off from Covidien. Acquisitions such as its $5.6 billion purchase of Questcor Pharmaceuticals in 2014 made it a significant player in the branded specialty drug space. The deal for Questcor in particular gave Mallinckrodt control of H.P. Acthar, an anti-inflammatory drug which now accounts for a third of the company’s revenue.
Mallinckrodt also off-loaded its nuclear imaging business in a sale to IBA Molecular for $690 million earlier this year.
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