Please ensure Javascript is enabled for purposes of website accessibility

Why Mallinckrodt Stock Tumbled Today

By Keith Speights - May 5, 2020 at 4:49PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investors were disappointed by the company's Q1 results and the prospects of continued challenges from the COVID-19 pandemic.

What happened

Shares of Mallinckrodt (MNK) were tumbling 14.9% lower as of 3:43 p.m. EDT on Tuesday. The decline came after the drugmaker announced its first-quarter results before the market opened. Mallinckrodt reported net sales of $665.8 million, down nearly 16% year over year and below the average analyst estimate of $689.5 million. The company posted adjusted Q1 earnings of $1.64 per share, also down nearly 16% year over year but higher than the consensus Wall Street expectation of adjusted EPS of $1.45.

Probably the most concerning part of Mallinckrodt's Q1 update for investors was the company's outlook. CEO Mark Trudeau said that Mallinckrodt expects that "the next few quarters will be challenging due to the impact of COVID-19, as some of our products are sensitive to reduced numbers of surgical procedures and doctor visits."

So what

Despite Mallinckrodt's earnings beat, there wasn't much for investors to be happy about with the company's first-quarter update. Sales fell pretty much across the board. Acthar Gel continued to face reimbursement challenges, with sales plunging 25.1% year over year. Sales also fell for other top products including Inomax, Ofirmev, and Amitiza. Mallinckrodt's specialty generics segment also continued to struggle, with sales declining 6% year over year primarily due to a short-term disruption in the production of acetaminophen.

Finger pointing to frowning face icon on a tablet

Image source: Getty Images.

The only bright spot in the otherwise dismal results wasn't all that bright. Sales for the company's Therakos immunology platform rose 3.1% year over year to $63.7 million.

Mallinckrodt felt the effects of the COVID-19 pandemic in most of these areas. Patients staying at home resulted in lower demand for Acthar (a drug that stimulates the production of steroids in the body) and Therakos (an immunology platform). Delays in elective surgeries caused lower sales for Ofirmev (injectable acetaminophen). On the other hand, Inomax sales were higher than they would have otherwise been due to the use of inhaled nitric oxide by COVID-19 patients. However, the product faces stiffer competition than in the past.

Now what

The pharma stock is likely to remain highly volatile as long as the COVID-19 pandemic keeps patients from visiting their physicians and pushing back elective surgeries. There is also uncertainty for Mallinckrodt related to its ongoing litigation with the U.S. Department of Health and Human Services and Centers for Medicare and Medicaid Services (CMS) related to the calculation of Medicaid drug rebates for Acthar.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Mallinckrodt Public Limited Company Stock Quote
Mallinckrodt Public Limited Company

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.