Newspaper article St Louis Post-Dispatch (MO)

St. Louis Firms Deny Short-Seller's Allegation of 'Murky Alliance'

Newspaper article St Louis Post-Dispatch (MO)

St. Louis Firms Deny Short-Seller's Allegation of 'Murky Alliance'

Article excerpt

If you believe Jim Chanos, the health care axis of evil runs directly through north St. Louis County.

Chanos is a short-seller, meaning that he bets on stocks he thinks will go down. His firm, Kynikos Associates, is named after the Greek word for "cynic."

Because Chanos famously predicted the fall of Enron back in 2001, the rest of Wall Street pays attention when he announces new short positions. Recently, he gave a scathing appraisal of two North County companies, Mallinckrodt and Express Scripts.

Chanos' presentation, which he made May 18 in Las Vegas, is heavy on St. Louis references. His slide about the companies' "murky alliance" shows a darkened Gateway Arch, and his allegation of "performance-enhancing drug prices" is illustrated by Mark McGwire in a Cardinals uniform.

Many of Chanos' points are not new. He accuses Mallinckrodt of aggressively raising prices on its best-selling drug, Acthar, an issue that led to a $100 million settlement with the Federal Trade Commission in January. He notes that several U.S. attorneys are investigating Express Scripts and that the company may lose its biggest customer, Anthem.

Those matters are widely known and should be priced into the stocks. What's new in Chanos' rant are two things: He says Mallinckrodt shares will be rendered worthless by the Acthar issue, and he alleges that three Express Scripts subsidiaries helped Mallinckrodt push Acthar's price up to $35,000 per dose.

Mallinckrodt claims that Chanos' math, which shows Acthar accounting for all of the company's operating profit this year, is wrong. "The suggestion that there is and will be no operating income contribution from other company products is patently untrue," a company statement says. Mallinckrodt also says Chanos overstated its debt.

Express Scripts spokesman Brian Henry denies any nefarious ties between his company and its North County neighbor. …

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