Mallinckrodt and FTC Resolve Questcor Matter

Mallinckrodt announced that it has reached agreement with the U.S. Federal Trade Commission (FTC) to resolve, without admission of wrongdoing, the previously disclosed FTC investigation into the acquisition by Questcor Pharmaceuticals, Inc., of Synacthen® Depot, a synthetic ACTH product, in 2013. The product became part of Mallinckrodt's portfolio with its August 2014 acquisition of Questcor.

Under the agreement, Mallinckrodt will license the drug to a licensee, identified by the FTC as Marathon Pharmaceuticals, LLC, to develop and pursue possible U.S. Food and Drug Administration (FDA) approval of Synacthen Depot in two indications – Infantile Spasms (IS) and Nephrotic Syndrome (NS). The licensee will also acquire exclusive rights to the Synacthen trademark in the U.S. Under the agreement, Mallinckrodt will also pay $100 million to settle claims made by the FTC and five states – $90 million of which will be paid within 10 business days, $10 million within 90 days – plus $2 million to reimburse the states' legal fees.

Since acquiring Questcor, Mallinckrodt has cooperated fully with the FTC. A Mallinckrodt spokesperson said, "We are pleased with the agreement reached to resolve this legacy matter, although we continue to strongly disagree with allegations outlined in the FTC's complaint, believing that key claims are unsupported and even contradicted by scientific data and market facts, and appear to be inconsistent with the views of the FDA. Removing the distraction of litigation enables us to focus on advancing our increasingly diversified portfolio of medicines for the benefit of patients. The resolution also allows us to retain the rights to continue manufacturing and marketing Synacthen Depot to patients in other countries around the world where we already have rights. And, more importantly, we can continue to develop the product for all other indications in the U.S. except IS and NS, including our recently announced trial to explore its potential use for patients suffering from DMD."

Mallinckrodt currently derives no U.S. revenue from Synacthen Depot, and the resolution of this matter will not impact Mallinckrodt's net sales.

Synthetic ACTH products are relatively common – Synacthen Depot and others have been on the market outside of the U.S. for years, if not decades – and in Mallinckrodt's view are not especially complex to either formulate or manufacture at scale.

However, history has borne out the FTC's view that there are "high barriers to entry" for a synthetic ACTH in the U.S. market. Synacthen Depot has never been FDA-approved for use in the U.S. In fact, in all the time it has been commercially available, no owner (including the owner prior to Questcor) ever undertook U.S. development in any indication until after the Questcor acquisition when Mallinckrodt began preparation for development in DMD.

The Commission further states that U.S. market entry would require a sponsor to successfully conduct "clinical trials necessary for FDA approval." This supports Mallinckrodt's publicly stated view that the regulatory pathway for U.S. development of the product for either IS or NS would require a sponsor to enroll and successfully complete controlled clinical trials. This would entail convincing patients or the parents of infant patients in fragile, high-risk populations to forego existing approved, effective treatments and enroll in an experimental protocol where they risk receiving less effective treatment or no treatment at all.

In addition, recent market experience demonstrates that the time and resources required even to explore development of a synthetic ACTH for IS and NS can be prohibitive. In 2013, another publicly traded company developed its own synthetic ACTH product and announced plans to enter the U.S. market in IS and NS. Subsequently, in a 2016 call with investors, the company communicated that it would seek to partner with or sublicense the product to a larger company to avoid the "time, effort and resources" required for internal development.