What’s behind Mallinckrodt’s Stratatech Acquisition?



Mallinckrodt’s continued inorganic growth

Mallinckrodt (MNK) acquired privately held development-stage company Stratatech on August 10, 2016. The financial details of the deal weren’t disclosed.

Stratatech is a regenerative medicine company with a focus on the development of proprietary skin substitute products. This acquisition has enlarged Mallinckrodt’s hospital portfolio. Mallinckrodt has historically expanded through acquisitions. To learn more about its inorganic growth strategy, please read Where Else Have We Seen Mallinckrodt’s ‘Acquire to Invest’ Strategy?

Mallinckrodt hasn’t yet quantified the acquisition’s effect on its guidance. Companies such as Valeant (VRX), Shire (SHPG), and Endo International (ENDP) have also grown in this inorganic way.

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What are the benefits of the acquisition?

Through this acquisition, MNK won access to development-stage products such as StrataGraft, regenerative skin tissue, and a technology platform for genetically enhanced skin tissues. StrataGraft is being developed as a biologic and currently is in two clinical trials, one phase two and one phase three study. In the phase three study, it’s being evaluated to treat severe partial thickness burns. Mallinckrodt anticipates the drug will get FDA (U.S. Food and Drug Administration) approval by fiscal 2020. The product is in phase two for treating severe full thickness burns. We’ll discuss the potential of StrataGraft in detail in the next article.

If you want exposure to highly risky Mallinckrodt but want to control excessive company-specific risks, you can opt for an ETF such as the SPDR S&P 500 ETF (SPY). Mallinckrodt accounts for 0.04% of SPY’s total holdings.


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