CADX To Receive $14.5M Or $0.15/Share In Non-Dilutive Funds

| About: Mallinckrodt PLC (MNK)

By Jake King

Cadence Pharmaceuticals (CADX) announced that it will terminate its option to acquire privately-held Incline Therapeutics in order for The Medicines Company (NASDAQ:MDCO) to buy Incline instead. Once the MDCO acquisition of Incline is closed (anticipated in January), CADX will receive $13M for its terminated option plus another $1.5M from MDCO's purchase of Incline shares owned by Cadence. CADX is also entitled to a potential pro rata share of future milestone payments related to Cadence-owned Incline shares. The transaction improves CADX's balance sheet by 20% and enables the company to throw additional resources behind the growth of Ofirmev, the company's lead product. We recently reported on Cadence's progress improving Ofirmev sales, which are set to grow significantly as providers increase adoption of the non-opioid analgesic and prescribe more product per patient. A number of physicians presented at the company's Investor Day last week, highlighting the shift away from traditional opioid pain medications in the healthcare industry and suggesting that Ofirmev presents a compelling alternative. Ofirmev is an IV formulation of acetaminophen for moderate to severe pain than can be paired with traditional narcotic analgesics to treat severe pain when necessary.

Cadence also revealed in Wednesday's 8-k that privately-held Fresenius Kabi filed an Abbreviated New Drug Application containing a "Paragraph IV" patent certification for a generic version of Ofirmev. Cadence can respond by either filing a patent infringement suit (if applicable) that would bar the product from approval for at least 30 months, or work towards a settlement with Fresenius. Last month, Cadence settled a generic challenge from Perrigo (NASDAQ:PRGO), allowing the drug manufacturer to bring a generic form of Ofirmev to market in December of 2020, one year ahead of patent expiration. The news was a surprise bonus for CADX, as most analysts expected a settlement to allow generics in 2017 or 2018, and some even expected a 2014 entrance. Cadence, however, has yet to settle with another challenger, Exela Pharma, which, in combination with today's patent suit, may overhang shares until resolution. A deal similar to the Perrigo settlement, will offer considerable relief for the stock. Whether through settlement or litigation, Cadence needs to clear out its challengers. Read our original report here, which details Ofirmev's growth potential.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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