June 22, 2017

Mallinckrodt in Full Damage Control Mode

Citron Explains the Company's Admission

on Acthar's Adverse Events: Time to Call Your Lawyer

ADVERSE EVENTS on ACTHAR UP MORE THAN 280%

Including Increase in Deaths

Not only will Mallinckrodt Go to 0, but This Report Publishes

the Reason their Management might go to Jail

It is time to End this Dangerous Game of Greed NOW!

As if last month's comments from Express Scripts were not bad

enough for Mallinckrodt ...

The FDA has just disclosed information that could lead to

criminal prosecution of Mallinckrodt executives.

Three weeks ago, Express Scripts, the PBM whose subsidiaries are responsible for
executing the entire delivery chain for Mallinckrodt's Acthar, made a group of
damning statements: that Acthar was an old drug, grossly overpriced, with very
limited patient need, and was being used for label indications for which there was
no clinical evidence.

This Just Got Much More Serious than Profits

FDA Reports Acthar Adverse Events June 22, 2017 Page 1 of 7

 This week the FDA released the updated
Adverse Event database (FAERS) with
complete 2016 data.
https://www.fda.gov/drugs/guidancecomplianceregulatoryinformation/surveillance/adversedrugeffects/
https://open.fda.gov/data/faers/

Citron has spent a week extracting the files and created a database for analysis.
This is the first time this information is public.

This new data reports sharply increasing numbers of deaths and hospitalizations
associated with use of Acthar which are unprecedented over its history.

During the periods covered, Acthar is showing single digit increases in unit
volumes, while Adverse Events are being posted in excess 277% CAGR for the
period 2012 through 2016.

Acthar FAERS Deaths

90
80 82
70 69
60
50
40
30 28
20
10 10
0 4
2012 2013 2014 2015 2016

2012 2013 2014 2015 2016

Primary Outcome
FY 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Death 4 4 0 3 3 5 6 6 11 16 10 18 25 27 22 17 16
Disability 0 2 0 0 0 1 0 0 0 2 0 2 0 1 2 0 2
Hospitalization 6 22 8 15 23 17 21 23 38 27 90 50 70 41 147 93 154
Life-Threatening 0 4 0 0 2 0 0 0 2 0 1 2 4 0 4 1 3
Other Serious 23 10 7 9 20 15 7 15 27 14 30 23 38 33 110 98 185
Required Intervention 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0
Not Listed 4 10 4 7 18 20 18 16 9 29 723 19 10 32 1178 19 0
Total 37 52 19 34 66 58 52 60 88 88 854 114 147 134 1463 228 360
Full Year Total 37 171 258 1,203 2,185
YOY Growth Rate 362% 51% 366% 82%
4 Year CAGR 277%

FDA Reports Acthar Adverse Events June 22, 2017 Page 2 of 7

 Acthar FAERS Primary Outcome by Year
500 436
427
400

300
237
200

100 99 105
68 64 69 82
46 28
0 623
4 10
2012 2013 2014 2015 2016

Death Hospitalization Other Serious

Acthar F AERS Primary Outcome by Quarter

200 185
147 154
150
93
100 90
50 70 110
41 98
50 38 27 38
22 8 23 17 21 23 27 30 23 25 33
10 15 7 15 14 22
6 3 10 27 17 16
0 7 93 20 155 6 16 18
23
4 4 6 11
4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
2012 2013 2014 2015 2016

Death Hospitalization Other Serious

Primary 2012 2013 2014 2015 2016

Outcome 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Death 4 4 0 3 3 5 6 6 11 16 10 18 25 27 22 17 16
Disability 0 2 0 0 0 1 0 0 0 2 0 2 0 1 2 0 2
Hospitalization 6 22 8 15 23 17 21 23 38 27 90 50 70 41 147 93 154
Life-Threatening 0 4 0 0 2 0 0 0 2 0 1 2 4 0 4 1 3
Other Serious 23 10 7 9 20 15 7 15 27 14 30 23 38 33 110 98 185
Required
0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0
Intervention
Not Listed 4 10 4 7 18 20 18 16 9 29 723 19 10 32 1178 19 0
Total 37 52 19 34 66 58 52 60 88 88 854 114 147 134 1463 228 360

FDA Reports Acthar Adverse Events June 22, 2017 Page 3 of 7

These statistics are startling, considering Pulitzer Prize winning journalist
Gretchen Morgenson first introduced Wall Street to the negative FAERS data on
Acthar in 2014 long before the major jump in adverse events.
https://www.nytimes.com/2014/07/11/business/questcor-reveals-adverse-events-data-for-acthar-for-first-
time.html

Why this could now become a Criminal Matter

Citron believes the reason for the increase in adverse events is the company's
aggressive expansion of Acthar into new indications, where it has not conducted
clinical trials in order to prove its safety for those conditions.
This explanation is not just idle speculation. A recent Qui Tam Lawsuit, filed by
Barry Franks, former sales manager of Auto-Immune and Rare Disease Division of
Mallinckrodt. The following statements are excerpts from the lawsuit, and point
directly to the cause behind the increase in deaths and hospitalizations.
Franks, a seasoned and experienced pharma sales professional, was expected to
deliver sales results that were not supported by lawful drug sales practices.
These excerpts from the full suit provide investors a chilling picture of how the
company's policies directed sales reps to push Acthar beyond its label conditions.

33. However, the reason for the "explosive growth" of other

Rheumatology sales teams at that point in time was due, in
part, to MALLINCKRODT requesting that its representative
promote the Acthar drug in an illegal, off-label manner.
35. Franks was clear that he would not engage in illegal
activities to increase sales... Despite this, and being advised
that employees were told by compliance to not to "put anything
in writing" ...
37. "A similar push and acknowledgement that to keep his job,
Franks essentially had to push in off-label areas..."

FDA Reports Acthar Adverse Events June 22, 2017 Page 4 of 7

40. Franks is informed and believes that there were illegal
sales practices being committed in other regions...

42. Franks was also aware of other compliance related issues

at MALLINCKRODT, which Franks is informed and believes and
thereon alleges that these issues include but are not limited to:
potentially insurance/Medicare fraud related to the refills as
noted above, HIPAA violations where four or eight week
prescriptions were provided where there was no patient visit ...
This was done to "game the system" and potentially commit
insurance/Medicare fraud.)
Here's the full suit complaint. Citron strongly recommends all investors read it for
yourself:

/wp-content/uploads/2017/06/MNK-Franks-Complaint-7-2016-1.pdf

A Note to Mallinckrodt before you respond:

These are not the statistics of some short seller or journalist who you dispute in
Press Releases. This is not even the opinion of your PBM. This is the FDA. This is
not the time to issue some nonsense PR, this is the time to call your lawyers.
Remember, the FAERS database is voluntary -- it might actually understate the
harm you are doing to your off-label patients.

Note: Remember Mallinckrodt claims it does not definitively know the active
ingredient of this expensive and potentially dangerous drug. As stated on their
own website:

While the exact way that Acthar works in the body is unknown, further
studies are being conducted.

https://www.actharexcessprotein.com/learn-about-acthar/find-out-how-acthar-works.html

So while they have taken billions of dollars from Medicare they do not even
have a scientific grasp on the safety profile, let alone efficacy, while they

FDA Reports Acthar Adverse Events June 22, 2017 Page 5 of 7

knowingly HARM patients who as their sales team pushes the medication beyond
the core indications.

How have they done this? Through unscrupulous doctors!

As Mallinckrodt has become more and more aggressive expanding marketing into
untested indications, these are the type of doctors that have become associated
with Acthar.

According to the FDA, the TOP #1 prescriber of Acthar was Dr. David Mandel.
https://projects.propublica.org/checkup/drugs/8004

Dr. Mandel was charged criminally with importing misbranded drugs by the DOJ
https://www.fda.gov/ICECI/CriminalInvestigations/ucm412509.htm

Worse, read here that top prescriber Dr. Sean Orr was misdiagnosing people with
Multiple Sclerosis just so he could prescribe Acthar.
http://www.nbcnews.com/health/health-news/dr-sean-orr-accused-ms-misdiagnosis-scheme-back-business-
n395716

Note to Mallinckrodt:
Please Do not respond with your standard line that:
"HP Acthar Gel makes a significant difference in the lives of
thousands of very sick patients" and is responsibly priced.

Then why did the nations most pre-eminent formulary manager just state the
exact opposite?

The Future of Acthar: Imprimis

Enter Imprimis, who, through its spinoff Eton Pharmaceuticals, just announced it
will be launching a competitor to Acthar, while enlisting the former CEO of
Questcor to join its Board of Directors and advise on its' launch of an Acthar
competitor.

Eton plans on charging 40% less for its product than Mallinckrodts price.

FDA Reports Acthar Adverse Events June 22, 2017 Page 6 of 7

 When Imprimis did this to Mylan and the EpiPen, Mylan immediately created a
generic version at half the price of the branded EpiPen. Imprimis executed a
similar strategy with Turing Pharma, through the launch of a generic costing
1/750th of Turings price, immediately forcing Turing to reduce its drugs price.

Lower priced alternatives to Acthar will enable patients to be treated with a

product that has a direct filed safety profile with the FDA, and will create a
disincentive for bad medicine to be practiced for the sake of greed.

More importantly, by being able to focus on people who can really benefit by
Acthar and not be forced by the burden of a multi billion debt load, Eton will be
able to penetrate and dominate the only market that Acthar Gel has a place in
and not further hurt its patient base.

Conclusion
The most expensive drug on the Medicare dashboard is:

Untested,
Over Prescribed
Inferior to Competition
and now Dangerous

The FDA has told you, their former employees have told you, and we now wait for
the Department of Justice.

It is time for Congress or Express Scripts to act responsibly and stop this billion-
dollar charade before more people are hurt.

Cautious Investing to All

FDA Reports Acthar Adverse Events June 22, 2017 Page 7 of 7