What happened

Shares of Mallinckrodt (MNK) closed down 12% on Thursday despite the company reporting positive results from the phase 3 Confirm clinical trial of its drug candidate terlipressin in patients with hepatorenal syndrome type 1 (HRS-1), a disease that stems from liver issues and often results in kidney failure and death.

So what

Mallinckrodt was light on the details from the Confirm study -- it's saving them for a medical meeting -- but the company said the clinical trial met its primary endpoint of verified HRS-1 reversal, which requires improvement in kidney function, avoidance of dialysis, and short-term survival.

Today's decline may be because investors are worried about Mallinckrodt holding back the data, but given the lack of drugs approved to treat HRS-1 and the severity of the disease -- median survival is less than two weeks and 80% of patients die within the first three months -- any improvement over placebo is likely to lead regulators to approve the drug.

On the other hand, the details of the trial will ultimately be important for how much revenue Mallinckrodt can generate from terlipressin, since the efficacy will affect how much Mallinckrodt can charge for the drug. Improving survival by a few days isn't worth nearly as much as a long-term cure.

Doctor showing a report to a patient in a hospital bed

Image source: Getty Images.

Now what

While today's move comes following the release of top-line results from the Confirm study, today's double-digit decline may have nothing to do with the news, given the company's extreme volatility. Mallinckrodt is embroiled in opioid lawsuits and is in a fight with the Centers for Medicare and Medicaid Services over coverage of its Acthar Gel by Medicaid. Investors may be taking the lack of a post-news share-price pop as a sign they should move on.