Robbins LLP: Mallinckrodt plc (MNK) Misled Shareholders According to a Recently Filed Class Action
Robbins LLP announces that a class action complaint was filed against Mallinckrodt plc (NYSE: MNK) in the U.S. District Court for the District of Columbia. The complaint is brought on behalf of all purchasers of Mallinckrodt securities between November 25, 2014 and January 18, 2017, for alleged violations of the Securities Exchange Act of 1934 by Mallinckrodt’s officers and directors. Mallinckrodt develops, manufactures, markets, and distributes branded and generic specialty pharmaceutical products and therapies in the United States, Europe, the Middle East, Africa, and internationally. Among Mallinckrodt’s drug portfolio is a medication known as Acthar Gel (“Acthar”), which is the only approved therapeutic preparation of adrenocorticotropic hormone in the United States, and is approved as a treatment for 19 different conditions. Mallinckrodt acquired Questcor Pharmaceuticals, Inc. on August 14, 2014.
Mallinckrodt Accused of Downplaying Its Reliance on Medicare and Medicaid Programs
According to the complaint, Questcor, and later Mallinckrodt, used its monopoly status to repeatedly increase the price of Acthar by 85,000%, from $40 per vial in 2001 to over $34,000 per vial in 2017. Acthar became an important revenue source for Mallinckrodt, representing 34% of the company’s overall sales in 2016. On an October 6, 2015 conference call with investors, Mallinckrodt’s Chief Executive Officer, Mark Trudeau, stated that the company’s combined revenues for Medicare and Medicaid constituted roughly 25% of the company’s total revenues and that the proportion of Acthar revenues attributable to Medicare and Medicaid was “a little higher than that.” However, the complaint alleges that Mallinckrodt officials failed to disclose that Acthar’s monopoly status was the product of unlawful anticompetitive practices. In addition, Mallinckrodt allegedly failed to disclose that its increasing reliance on Medicare and Medicaid meant that the company was highly exposed to changes in reimbursement levels for these programs.
On November 16, 2016, Citron Research published a report accusing Mallinckrodt of securities fraud in connection with Trudeau’s prior statements which downplayed the company’s reliance on Medicare and Medicaid for Acthar revenue. The report revealed that Medicare paid approximately $504 million and Medicaid paid $144.6 million for Acthar in 2015, and these payments amounted to 61.32% of Mallinckrodt’s total Acthar revenue in 2015. During a conference call on November 29, 2016, Trudeau admitted that “Acthar now represents a significantly greater proportion of our operating income than one-third.” On January 18, 2017, the Federal Trade Commission (“FTC”) announced that Mallinckrodt had agreed to pay $100 million in connection with a joint settlement with the FTC and several states. On this news, Mallinckrodt’s stock declined by 5.85% to close at $46.53 per share on January 18, 2017.
Mallinckrodt Shareholders Have Legal Options
Concerned shareholders who would like more information about their rights and potential remedies can contact attorney Darnell R. Donahue at (800) 350-6003, or you can complete the form below and we will contact you directly.