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Mallinckrodt (MNK) Closes InfaCare Pharmaceutical Buyout

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Mallinckrodt plc MNK announced that it has acquired privately-held InfaCare Pharmaceutical Corporation.

This specialty pharmaceutical company focuses on the development and commercialization of proprietary pharmaceuticals for neonatal and pediatric patients.

InfaCare's product candidate, stannsoporfin, is expected to become the first and only pharmacologic option for the treatment of neonates for severe hyperbilirubinemia, or severe jaundice if and when approved.

The company made an upfront payment of $80 million. Mallinckrodt is also required to pay up to $345 million as milestone payments. The acquisition to be dilutive to the bottom line by 15 cents to 20 cents for 2017 and modestly higher in 2018.

Per estimates, the total number of term births is estimated at 3.7 million per year and, of those, approximately 750,000 infants are treated for jaundice. Among these, a large number are unresponsive to phototherapy. Hence, there is an unmet need for treatment of these infants. The combined potential patient treatments required annually in the United States for severe jaundice is approximately 70,000 to 125,000.

We note that Mallinckrodt is currently focused on reshaping its product portfolio through strategic acquisitions and non-core asset divestitures to transform the portfolio and become a high-performing specialty pharmaceutical company.

The acquisition will diversify its pediatric pipeline and strengthen the brands business.

The company’s generic segment continues to face weakness as various product categories are witnessing stiff competition, which is hurting both volumes and prices. The company expects double-digit declines in revenues from this segment. In addition, continued expected weakness in this segment will adversely impact gross profit margins also. The company sold its Nuclear Imaging business due to persistent challenging conditions. The company also sold its Intrathecal Therapy business to focus on key areas. While Acthar sales continue to be strong on the back of increased formulary positions and access for appropriate patients in both the commercial and public environments, sales of Therakos is expected to decline.

Investors interested in the healthcare sector can consider stocks stocks like include Alexion Pharmaceuticals, Inc. ALXN and Regeneron Pharmaceuticals, Inc. REGN and Vertex Pharmaceuticals, Incorporated VRTX as valuable picks.

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