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According to the complaint, On August 14, 2014, Mallinckrodt acquired Questcor Pharmaceuticals, Inc. (“Questcor”) in a $5.6 billion transaction. As a result of the acquisition, Mallinckrodt added HP Acthar Gel (“Acthar”), an injectable medication made from pigs’ pituitary glands, to its drug portfolio. Acthar is the only approved therapeutic preparation of adrenocorticotropic hormone (“ACTH”) in the U.S., and is approved by the U.S. Food and Drug Administration (“FDA”) as a treatment for 19 different conditions, including infantile spasms, and difficult-to-treat autoimmune and inflammatory conditions. Given the monopoly status of Acthar in the U.S. market, Questcor, and later Mallinckrodt, repeatedly increased the price of Acthar 85,000% from $40 per vial in 2001 to over $34,000 per vial in 2017.
The complaint alleges that, throughout the Class Period, Mallinckrodt and its Chief Executive Officer (“CEO”), Mark Trudeau (“Trudeau”), made a series of false and misleading statements and failed to disclose material adverse facts about the long-term sustainability of the Company’s monopolistic Acthar revenues and the exposure of Acthar to reimbursement rates by Medicare and Medicaid. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that Acthar’s monopoly status as the only FDA-approved ACTH preparation was the product of unlawful anticompetitive practices and failed to disclose that its increasing reliance on Medicare and Medicaid meant that the Company’s monopolistic Acthar revenue would be threatened if the government took action to limit the price paid for this drug by taxpayers.
The truth about the Company’s dependence on Medicare and Medicaid for Acthar revenue began to surface on November 9, 2015, when Citron Research (“Citron”) issued a statement on Twitter comparing Mallinckrodt to Valeant Pharmaceuticals International, Inc. (NYSE:VRX). In the wake of the Citron comment, Mallinckrodt’s stock price fell 17% from a close of $69.89 per share on November 6, 2015, to close at $58.01 per share on November 9, 2015.
Subsequently, on November 16, 2016, Citron published a report (the “Citron Report”) accusing Trudeau and the Company of securities fraud in connection with Trudeau’s statements downplaying the Company’s reliance on Medicare and Medicaid for Acthar revenue. Among other things, the Citron Report reported that payments from Medicare and Medicaid comprised a substantially larger percentage of Acthar sales than Trudeau previously represented. In the wake of the Citron Report, Mallinckrodt’s stock price fell 18.4% from a close of $67.80 per share on November 15, 2016, to close at $55.32 per share on November 17, 2016.
Further information regarding the Company’s reliance on Medicare and Medicaid for Acthar revenue was revealed on November 29, 2016. During a conference call with investors on this date, Trudeau admitted that “Acthar now represents a significantly greater proportion of our operating income than one-third.” On this news, Mallinckrodt’s stock price declined 9.1% from a close of $57.67 per share on November 28, 2016, to close at $52.42 per share on November 29, 2016.
The truth about the Company’s anticompetitive and unlawful efforts to prevent an alternative ACTH treatment from reaching the U.S. market was fully revealed on January 18, 2017, when the FTC announced that Mallinckrodt had agreed to pay $100 million in connection with a joint settlement with the FTC and several states. The news of the settlement, and the fact that Mallinckrodt would lose its ACTH monopoly in the U.S., caused the Company’s stock price to decline 5.85% from a close of $49.42 per share on January 17, 2017, to close at $46.53 per share on January 18, 2017.
If you are a member of the class described above, you may no later than March 27, 2017, move the Court to serve as lead plaintiff of the class, if you so choose.
A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the Court must determine that the class member’s claim is typical of the claims of other class members, and that the class member will adequately represent the class. Your ability to share in any recovery is not, however, affected by the decision whether or not to serve as a lead plaintiff. Any member of the purported class may move the court to serve as a lead plaintiff through counsel of their choice, or may choose to do nothing and remain an inactive class member.
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Kessler Topaz Meltzer & Check, LLP
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