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Mallinckrodt Rose after Sale of Contrast Media & Delivery System

Peter Neil

Biotech Stocks Start December on a Good Note

(Continued from Prior Part)

XLV mid-caps surge

The mid-cap stocks of the Health Care Select Sector SPDR ETF (XLV) outperformed the SPDR S&P 500 ETF (SPY) and the fund itself. XLV mid-caps gave returns of 2.3% compared to SPY’s 0.95%, as well as XLV’s return of 1.7% on December 1, 2015. On the day, XLV had seven mid-cap stock in its portfolio, and all seven gave positive returns. The XLV mid-cap stock surge was driven by Tenet HealthCare (THC) and Mallinckrodt (MNK), as both rose by 5.3%. The other stocks that contributed were Dentsply International (XRAY) and Varian Medical System (VAR). They returned 2.2% and 1.1%, respectively.

The graph above reflects the performance of XLV’s mid-cap stock compared to XLV, SPY, and MNK.

Mallinckrodt sold Contrast Media & Delivery System

Mallinckrodt (MNK) rose by 5.3% and continued its upward trend after closing low at $53.4 on November 12, 2015. Ever since, the stock has moved up and recovered lost ground. On November 27, 2015, MNK completed the sale of Contrast Media & Delivery System.

As per the press release, MNK announced, “that it has closed the sale of its global contrast media and delivery systems (CMDS) business to Guerbet (GBT) in a transaction valued at approximately $270 million. The company’s CMDS operations encompassed four manufacturing facilities and a total of approximately 1,000 employees spread across the globe, including nearly 75 in the St. Louis area. This entire workforce and the manufacturing facilities have been transferred to Guerbet.”

MNK closed at $71.5 and was trading ~14.1% lower than the 100-day moving average price of $83.2. However, it was trading ~13.5% higher than the 20-day moving average price of $63.0. MNK’s trailing-12-month price-to-earnings ratio stood at 26x. Th book value of the stock is at $45.7 and with its current price, the stock is trading at a price-to-book value ratio (or PBV) of 1.56x as against the funds industry average of 7.2x. MNK has a weight of 0.25% in XLV’s portfolio.

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