Barron\'s - 09.09.2019

(Kiana) #1

14 BARRON’S September 9, 2019


REVIEW


26,797.


Dow Industrials:+394.






Dow Global Index:+7.






10-year treasury note:+0.


MALLINCKRODT’S EXPANDING LEGAL PUZZLE


Argentina in Crisis Again


Argentina imposed capital controls on


businesses, after the peso lost a quar-


ter of its value. Revoking capital con-


trols had been a signature reform of


President Mauricio Macri’s govern-


ment when it came to power in 2015.


Macri has also frozen gasoline and


some food prices, with inflation hit-


ting 55% and foreign currency re-


serves draining away. Peronist candi-


date Alberto Fernández is widely


expected to defeat Macri in the runoff


for the presidency in late October.


Freeing Freddie and Fannie


The Trump administration released a


plan to privatize the two mortgage


giants Fannie Mae and Freddie Mac.


The two have been under government


conservatorship since being bailed out


during the financial crisis in 2008.


Both parties had promised to abolish


the pair, which back more than half of


all U.S. mortgages.


Drugmaker’s


Litany of Woe


The shares of drugmaker Mallinckrodt approached


penny stock territory last week, after Bloomberg re-


ported that it had hired restructuring advisors. Analysts


say the company denies that it is close to filing for bank-


ruptcy. But there’s not much that could go wrong that


hasn’t gone wrong for Mallinckrodt stockholders.


Mallinckrodt (ticker: MNK) shares have dropped


99% in the past five years and the company’s market cap


has shrunk from $15 billion to $200 million, as the


Irish-domiciled, St. Louis-based outfit found its opera-


tions at the center of some of the pharmaceutical indus-


try’s biggest controversies. Steep price hikes? Check.


Questionable sales practices? Check. Opioids? Check.


While the pricing and marketing of Mallinckrodt’s


lead product, Acthar Gel, brought the business its first


unwelcome headlines, a crush of opioid lawsuits now


threatens a balance sheet already leveraged with net


debt that’s nearly five times Mallinckrodt’s annual cash


flow. Current cash just about equals debt that comes


due next year.


The company sells more than $3 billion a year worth


of drugs, but it’s fair to say that its most urgent busi-


ness is to get out from under a mountain of lawsuits.


At last count, Mallinckrodt says it was aware of 2,


opioid-related cases. The company says it can’t esti-


mate its possible losses in these suits, but on Friday it


agreed to settle two of them for $30 million. One other,


over Acthar Gel sold to Medicaid programs, could cost


it as much as $600 million, the drugmaker warns.


—Bill Alpert


$3.8 T


The current size of the Federal


Reserve’s balance sheet, down


from a peak of $4.5 trillion.


13.9%


Decline in chip sales in the first


half according to IHS Markit, the


biggest drop since 2009.


63.2%


Labor force participation rate in


September, up from 63% in


August.


$1,


The price of gold rose 1% on


Tuesday, hitting a six-year high.


The reason: trade and recession


fears


A Post-Labor Day Rally


Global manufacturing contracted,


while the Chinese yuan, the Argentine


peso, and the Brexit-battered British


pound fell, and on Tuesday the Dow


industrials lost 285 points. Stocks


then rallied on news of trade talks


resuming, and were undeterred by a


below-expectations jobs report. On the


week, the Dow industrials rose 1.49%


to 26,797.46; the S&P 500 gained


1.79% to 2978.71; and the Nasdaq


Composite advanced 1.76% to 8103.07.


Dorian Moves Slowly On


A slow-moving Hurricane Dorian,


which had been upgraded to Category


5, with wind speeds up to 185 miles


per hour, killed at least 20 people in


the Bahamas. The Abaco Islands and


Grand Bahama weredevastated when


the storm stalled. Dorian then fell to


Category 2 but grew larger, then lum-


bered toward the Florida coast, ham-


mering the coastlines of Georgia and


the Carolinas with wind, rain, and


storm surge.


See You in October


The U.S. and China hiked tariffs on


each other, deepening trade tensions


and bolstering the belief that Presi-


dent Trump wants to decouple the two


economic giants. Trump, in fact,


warned China not to delay resuming


negotiations because he’d double tar-


iffs “when he won [reelection].” After


a Thursday phone call between Chi-


nese and American trade representa-


tives, the two countries agreed to meet


in October.


Chaos in Commons


Boris Johnson returned after the Au-


gust recess to find he had lost his


one-member majority—the defecting


Tory walked across the floor while


the PM was speaking—and over 20


members of his Conservative Party


joined the opposition to vote to delay


Brexit on Oct. 31. Johnson had sus-


pended Parliament until mid-Octo-


ber, raising fears he would trigger a


hard exit. The PM, in turn, threat-


ened a snap election, and to ban de-


fectors from running as Tories. The


House blocked that attempt, and the


thrust and parry continues.


To get Numbers by Barron’s


daily, sign up wherever


you listen to podcasts or at


Barrons.com/podcasts


THE NUMBERS


HE SAID


“I’d rather


be dead in


aditch.”


United Kingdom Prime Minister


Boris Johnson on his feelings


about a Brexit delay.


Joel Arbaje (Mallinckrodt); Jeremy Selwyn/Getty Images (Johnson)
Free download pdf