Mallinckrodt Plc said on Tuesday it would spin off its generic drugs business as a separate unit and keep constipation medicine Amitiza as part of its specialty branded drugs business, which will be renamed as Sonorant Therapeutics Plc.
The company had said in December it was open to a sale of the generics business or would spin it off in the second half of 2019. It had said Amitiza would be part of the spun-off unit.
Shares of Mallinckrodt were down 6.3% in noon trading, as concerns related to its Acthar gel continued to weigh on the stock.
Mallinckrodt shares have lost about 30% of their value since the drugmaker said last week it was suing U.S. health agencies over changes to how Medicaid rebates are calculated for its Acthar gel, which is used to treat multiple sclerosis and infantile spasms.
"Acthar remains front and center to the Mallinckrodt debate and we believe that investors may be viewing the move of Amitiza back to brands as management looking to offset potential negative impact from an Acthar CMS ruling," SVB Leerink analyst Ami Fadia said.
Amitiza drug brought in sales of $53 million in the first quarter, constituting nearly 22% of the drugmaker's generic drug unit sales.
The company said on Tuesday it believed the new generics company, which will be called Mallinckrodt Inc., would emerge with less debt than previously anticipated without the Amitiza drug. It also cited the generic unit's strong performance.
"While we understand this short-term protective move, this only aggravates the longer-term cliff for Specialty Brands — with Ofirmev and Amitiza seeing generic entry by 2021," Stifel analyst Annabel Samimy said, referring to emerging competition for Amitiza and the company's injection to treat pain.
Mallinckrodt was founded in the St. Louis area 150 years ago. In addition to its Hazelwood headquarters, the company operates a manufacturing complex on the north Mississippi riverfront in St. Louis. The company employed about 1,500 people in the St. Louis region as of last year.
Sonorant will be a United Kingdom-based company after the spin off is completed.
It will maintain a presence in Bedminster, N.J., and St. Louis, where it will base employees in shared services functions such as finance, human resources and legal, according to a spokesman.
The new Mallinckrodt Inc. will have headquarters in the St. Louis area.
The Post-Dispatch contributed to this report.