- Mallinckrodt plc, facing falling sales of its top drug, announced Tuesday it will buy Maryland-based Sucampo Pharmaceuticals Inc. for $18 per share in a deal worth about $1.2 billion including debt.
- Adding Sucampo will boost earnings per share by approximately $0.30 in 2018 and at least twice that figure in 2019, Mallinckrodt said. Sucampo currently markets Amitiza, a constipation drug that brought in $456 million in global sales last year.
- In addition to Amitiza, Sucampo has two rare disease drug candidates in Phase 3 testing, with approvals expected in 2019 if all goes well. That potential could help Mallinckrodt — which has historically spent less than 10% of revenue on R&D — grow, as sputtering sales of its top-selling H.P. Acthar Gel and a recent patent setback raise investor questions.
Mallinckrodt has recently come under fire for raising prices on H.P. Acthar Gel, its top-selling product approved for conditions ranging from multiple sclerosis to infantile spasms and eye diseases.
Sales of the drug fell by 5.6% in the third quarter, spooking investors and contributing to a more than 30% drop in Mallinckrodt's share price. The company maintains that some prescriptions written for H.P. Acthar Gel were going unfilled at the pharmacy, adding to a calendar shift that subtracted a week's sales from the current period versus a year ago.
Acquiring Sucampo will give Mallinckrodt a drug to diversify its product revenue — a large portion of which comes from sales of H.P. Acthar Gel.
"We've been very clear to say we want no single product to account for more than a third of our operating income, and we will get there both through the commercializations of development assets, as well as acquiring other commercial assets," said company CEO Mark Trudeau on a Nov. 5 earnings call.
Prior M&A this year, such as the November acquisition of Ocera Therapeutics Inc., had primarily added developmental assets to Mallinckrodt's business portfolio.
Global sales of Amitiza — which is OK'd in the U.S. for chronic ideopathic constipation, irritable bowel syndrome with diarrhea and opioid-induced constipation — totaled $456 million last year, Mallinckrodt said.
Sucampo, however, markets Amitiza through several collaboration deals. Under an agreement with Takeda Pharmaceutical Co. Ltd. covering North America, for example, Sucampo sells Amitiza for a negotiated supply price to Takeda, which then resells the drug to the market. Sucampo also recognizes a royalty for between 18% and 26% on Takeda's net product sales.
Other agreements cover commercialization in China, Japan and the rest of the world.
On the development side of the ledger, Mallinckrodt will pick up Sucampo's drug candidates for a rare neurodegenerative disease called Niemann-Pick Type C (NPC) and a genetic condition known as Familial Adenomatous Polyposis, or FAP.
So-called VTS-270 is in Phase 3 testing for NPC and could be submitted to the Food and Drug Administration for approval next year, provided it shows a positive readout. Mallinckrodt estimates peak annual sales of $150 million.
For FAP, Sucampo's CPP-1X/sulindac is also in Phase 3 study. A New Drug Application could come in early 2019, Mallinckrodt forecasts, with a larger potential market predicted.
Picking up the two assets will help fill out the top end of Mallinckrodt's pipeline, helping compensate for a relatively low level of in-house R&D investment.
Mallinckrodt said it would pay for the acquisition by tapping a revolving credit facility and a newly secured term loan, or cash on hand.
Shares in Mallinckrodt rose by less than 1% Tuesday, while Sucampo stock jumped by nearly 6%.