MNK stock is currently trading near a low as US prosecutors open a criminal probe against opioid makers, of which Mallinckrodt (NYSE:MNK) is one of six major players.
The Wall Street Journal first reported that prosecutors at the US Attorney’s office for the Eastern District of New York were investigating six major pharmaceutical firms in relation to their role in the opioid crisis, which has claimed thousands of lives. Of the six firms being investigated, five have been subpoenaed, including distributor McKesson (NYSE:MCK) and drugmakers Teva Pharmaceutical (NYSE:TEVA), Johnson & Johnson (NYSE:JNJ), and Mallinckrodt. MNK stock is currently trading for just $3.77, only slightly above its lowest-ever valuation.
A spokesperson for Johnson & Johnson said the company “believes that at all times its anti-diversion policies and procedures for distribution of its opioid medications complied with the law. In fact, monitoring data shows that the company’s opioids were rarely diverted or abused.” However, Mallinckrodt, which was the biggest manufacturer of opioid painkillers between 2006 and 2012, declined to comment on the probe. With investors flocking from pharma stocks in their droves in recent years, MNK stock has collapsed over 97% since 2015.
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Stocks in opioid firms have shown some signs of stability in recent weeks with the prospect of a $48 billion USD global framework allowing for one single settlement to the crisis being announced to prosecutors in North Carolina, Pennsylvania, Tennessee, and Texas, who are “optimistic” other states would join the pending agreement. “Should the global opioid settlement framework be finalized […] We could also see read-through for other opioid-levered names like Endo and Mallinckrodt,” said SVP Leerink analyst Ami Fadia, providing some hope for MNK stock.
With MNK shares tanking in 2019 as the crisis weighs on investors’ minds, Mallinckrodt’s sales have also been affected. Last month, The Irish tax-registered pharmaceutical firm reported its quarterly results, in which sales of $743.7 million USD fell well short of the FactSet consensus of $770.5 million USD. Should the company be landed with any hefty settlement fees in the coming months, it could be in serious trouble.
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