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STAINES-UPON-THAMES, United Kingdom, May 7, 2019 /PRNewswire/ -- Mallinckrodt plc (NYSE: MNK), a leading global specialty pharmaceutical company, today reported results for the three months ended March 29, 2019. Unless otherwise noted, the quarter comparisons are to the recast prior year comparable three months ended March 30, 2018.

Net sales were $790.6 million in the quarter as compared to $755.3 million, up 4.7%, or 5.0% on a constant-currency basis. Diluted income per share from continuing operations was $1.83 compared with a diluted loss per share of $0.24. Adjusted diluted earnings per share were $1.94 versus $1.62, an increase of 19.8%.

"We have started 2019 with continued strong operational execution, achieving robust top- and bottom-line growth, and resulting in significant cash generation as we continue to transform our company. The hospital portfolio continued its positive momentum, and as anticipated we saw the return to growth reported for the Specialty Generics products," said Mark Trudeau, President and Chief Executive Officer of Mallinckrodt. "We are very pleased with the overall progression of our pipeline and data generation efforts, a number of which were highlighted in recent announcements. We are also excited to share results from the Acthar Phase 4 rheumatoid arthritis clinical trial next month, and look forward to the Phase 3 pivotal trial results for our StrataGraft^® regenerative skin tissue and terlipressin investigational products later this year."

Trudeau continued, "As previously announced, our 2019 strategic priorities include (1) maximizing the value of the diversified, inline portfolio; (2) advancing further data generation and the pipeline; (3) completing the separation of the Specialty Generics and Amitiza segment; and (4) executing disciplined capital allocation, with net debt reduction a primary focus. Strong progress has been made on each of these fronts in the quarter."

Gross profit was $335.1 million with gross profit as a percentage of net sales of 42.4%, compared with 46.0%. Adjusted gross profit was $566.3 million, compared with $540.8 million, with adjusted gross profit as a percentage of net sales of 71.6% in both periods.

Selling, general and administrative (SG&A) expenses were $230.2 million or 29.1% of net sales, as compared to $211.2 million, or 28.0%, while adjusted SG&A expenses were $211.4 million or 26.7% of net sales, compared with $207.9 million or 27.5%. Both SG&A and adjusted SG&A expenses increased due to legal expenses, partially offset by focus on SG&A reduction including benefits from restructuring and acquisition synergies.

Research and development expenses were $85.3 million or 10.8% of net sales, as compared to $82.0 million or 10.9%, as the company continued to invest in its innovative pipeline and in-line portfolio data generation.

Income tax benefit was $204.7 million, for an effective tax rate of 413.5%. The adjusted effective tax rate was 16.0%.

BUSINESS SEGMENT RESULTS

Specialty Brands Segment
Net sales for the segment in the first quarter 2019 were $547.3 million.

• Acthar^® Gel net sales were $223.9 million, an 8.2% decrease, primarily driven by the annual benefit reset process impacting returning patients while navigating continued payer scrutiny on overall specialty pharmaceutical spending. The company continues to expect the product to exceed $1 billion in net sales for 2019.
• INOMAX^® (nitric oxide) gas, for inhalation, net sales were $151.1 million, up 8.1% due to continued, consistent demand and contract renewals fueled by the product's differentiated total service model.
• OFIRMEV^® (acetaminophen) injection net sales were $95.6 million, an increase of 16.6%, benefiting from continued strong demand and order timing.
• Therakos^® immunology platform net sales were $61.8 million, an increase of 7.7%, or 9.9% on a constant-currency basis, on growth in the U.S. in Cutaneous T-Cell Lymphoma, and internationally, including in acute Graft-versus-Host-Disease.

Specialty Generics and Amitiza Segment
The segment reported net sales in the first quarter 2019 of $243.3 million, an increase of 17.6%, or 17.7% on a constant currency basis. Amitiza^® (lubiprostone) generated net sales of $53.0 million, and the specialty generics products net sales returned to growth with $190.3 million, an increase of 3.5% driven by continued finished dose generics share recapture.

LIQUIDITY
Cash provided by operating activities in the quarter was $164.5 million and free cash flow of $124.7 million, allowing for a reduction of debt of $263.5 million in the quarter. Significant progress continues towards the goal of reducing net debt by more than $1 billion following the planned separation of the Specialty Generics and Amitiza segment, including use of free cash flow generation and separation proceeds.

Subsequent to the quarter close, the company has purchased $28.1 million in face value of fixed rate notes, and the current cash balance is in excess of $300 million.

2019 FINANCIAL GUIDANCE UPDATE
Based on the growth in hospital products and that reported for the Specialty Generics products, and the execution of its capital allocation strategy to reduce debt and thereby interest expense, Mallinckrodt is updating guidance for the 2019 fiscal year including raising adjusted diluted earnings per share guidance. The guidance below, unless indicated, is on a total company basis.

CONFERENCE CALL AND WEBCAST
Mallinckrodt will hold a conference call on Tuesday, May 7, 2019, beginning at 8:30 a.m. U.S. Eastern Time. This call can be accessed in three ways:

• At the Mallinckrodt website: http://www.mallinckrodt.com/investors.
• By telephone: For both listen-only participants and those who wish to take part in the question-and-answer portion of the call, the telephone dial-in number in the U.S. is (877) 359-9508. For participants outside the U.S., the dial-in number is (224) 357-2393. Callers will need to provide the Conference ID of 9885338.
• Through an audio replay: A replay of the call will be available beginning at 11:30 a.m. Eastern Time on Tuesday, May 7, 2019, and ending at 11:59 p.m. Eastern Time on Tuesday, May 21, 2019. Dial-in numbers for U.S.-based participants are (855) 859-2056 or (800) 585-8367. Participants outside the U.S. should use the replay dial-in number of (404) 537-3406. All callers will be required to provide the Conference ID of 9885338.

ABOUT MALLINCKRODT
Mallinckrodt is a global business consisting of multiple wholly owned subsidiaries that develop, manufacture, market and distribute specialty pharmaceutical products and therapies. The company's Specialty Brands reportable segment's areas of focus include autoimmune and rare diseases in specialty areas like neurology, rheumatology, nephrology, pulmonology and ophthalmology; immunotherapy and neonatal respiratory critical care therapies; and analgesics. Its Specialty Generics and Amitiza^® reportable segment includes specialty generic drugs, active pharmaceutical ingredients and AMITIZA (lubiprostone). To learn more about Mallinckrodt, visit www.mallinckrodt.com.

Mallinckrodt uses its website as a channel of distribution of important company information, such as press releases, investor presentations and other financial information. It also uses its website to expedite public access to time-critical information regarding the company in advance of or in lieu of distributing a press release or a filing with the U.S. Securities and Exchange Commission (SEC) disclosing the same information. Therefore, investors should look to the Investor Relations page of the website for important and time-critical information. Visitors to the website can also register to receive automatic e-mail and other notifications alerting them when new information is made available on the Investor Relations page of the website.

NON-GAAP FINANCIAL MEASURES
This press release contains financial measures, including adjusted net income, adjusted diluted earnings per share, adjusted gross profit, adjusted SG&A, net sales growth on a constant-currency basis, adjusted effective tax rate, net debt and free cash flow, which are considered "non-GAAP" financial measures under applicable SEC rules and regulations.

Adjusted net income, adjusted gross profit and adjusted SG&A represent amounts prepared in accordance with accounting principles generally accepted in the U.S. (GAAP) and adjusted for certain items that management believes are not reflective of the operational performance of the business. The adjustments for these items are on a pre-tax basis for adjusted gross profit and adjusted SG&A and on an after-tax basis for adjusted net income. Adjustments to GAAP amounts include, as applicable to each measure, amortization; restructuring and related charges, net; inventory step-up expenses; discontinued operations; changes in fair value of contingent consideration obligations; acquisition-related expenses; losses/gains on repurchase of debt; separation costs; tax effects of aforementioned adjustments as well as impacts from certain transactions, such as acquisitions or reorganizations; and other items identified by the company. Adjusted diluted earnings per share represent adjusted net income divided by the number of diluted shares.

The adjusted effective tax rate is calculated as the income tax effects on continuing and discontinued operations plus the income tax impact included in Mallinckrodt's reconciliation of net income, divided by income from continuing and discontinued operations plus the pre-tax, non-income, tax-related adjustments included in its reconciliation of adjusted net income (excluding dilutive share impact). The income tax adjustment included in the reconciliation of adjusted net income primarily represents the tax impact of adjustments between net income and adjusted net income as well as tax impacts from certain transactions, such as acquisitions or reorganizations.

Net sales growth on a constant-currency basis measures the change in net sales between current- and prior-year periods using a constant currency, the exchange rate in effect during the applicable prior-year period.

Free cash flow for the first quarter represents net cash provided by operating activities $164.5 million less capital expenditures of $39.8 million, each as prepared in accordance with GAAP.

The company has provided these adjusted financial measures because they are used by management, along with financial measures in accordance with GAAP, to evaluate the company's operating performance. In addition, the company believes that they will be used by certain investors to measure Mallinckrodt's operating results. Management believes that presenting these adjusted measures provides useful information about the company's performance across reporting periods on a consistent basis by excluding items that the company does not believe are indicative of its core operating performance.

These adjusted measures should be considered supplemental to and not a substitute for financial information prepared in accordance with GAAP. The company's definition of these adjusted measures may differ from similarly titled measures used by others.

Because adjusted financial measures exclude the effect of items that will increase or decrease the company's reported results of operations, management strongly encourages investors to review the company's consolidated financial statements and publicly filed reports in their entirety. A reconciliation of certain of these historical adjusted financial measures to the most directly comparable GAAP financial measures is included in the tables accompanying this release.

Guidance on the company's 2019 diluted earnings per share and effective tax rate has been provided only on a non-GAAP basis. This is due to the inherent difficulty of forecasting the timing or amount of items that would be included in the most directly comparable forward-looking GAAP financial measures. Because reconciliation is not available without unreasonable effort, it is not included in this release.

Further information regarding non-GAAP financial measures can be found on the Investor Relations page of the company's website.

CAUTIONARY STATEMENTS RELATED TO FORWARD-LOOKING STATEMENTS
Statements in this document that are not strictly historical, including statements regarding future financial condition and operating results, economic, business, competitive and/or regulatory factors affecting Mallinckrodt's businesses and any other statements regarding events or developments the company believes or anticipates will or may occur in the future, may be "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995, and involve a number of risks and uncertainties.

There are a number of important factors that could cause actual events to differ materially from those suggested or indicated by such forward-looking statements and you should not place undue reliance on any such forward-looking statements. These factors include risks and uncertainties related to, among other things: general economic conditions and conditions affecting the industries in which Mallinckrodt operates; the commercial success of Mallinckrodt's products; Mallinckrodt's ability to realize anticipated growth, synergies and cost savings from acquisitions; conditions that could necessitate an evaluation of Mallinckrodt's goodwill and/or intangible assets for possible impairment; changes in laws and regulations; Mallinckrodt's ability to successfully integrate acquisitions of operations, technology, products and businesses generally and to realize anticipated growth, synergies and cost savings; Mallinckrodt's and Mallinckrodt's licensers' ability to successfully develop or commercialize new products; Mallinckrodt's and Mallinckrodt's licensers' ability to protect intellectual property rights; Mallinckrodt's ability to receive procurement and production quotas granted by the U.S. Drug Enforcement Administration; customer concentration; Mallinckrodt's reliance on certain individual products that are material to its financial performance; cost containment efforts of customers, purchasing groups, third-party payers and governmental organizations; the reimbursement practices of a small number of public or private insurers; pricing pressure on certain of Mallinckrodt's products due to legal changes or changes in insurers' reimbursement practices resulting from recent increased public scrutiny of healthcare and pharmaceutical costs; limited clinical trial data for Acthar Gel; complex reporting and payment obligations under healthcare rebate programs; Mallinckrodt's ability to navigate price fluctuations; future changes to U.S. and foreign tax laws; Mallinckrodt's ability to achieve expected benefits from restructuring activities; complex manufacturing processes; competition; product liability losses and other litigation liability; ongoing governmental investigations; material health, safety and environmental liabilities; retention of key personnel; conducting business internationally; the effectiveness of information technology infrastructure; and cybersecurity and data leakage risks.

These and other factors are identified and described in more detail in the "Risk Factors" section of Mallinckrodt's Annual Report on Form 10-K for the fiscal year ended December 28, 2018. The forward-looking statements made herein speak only as of the date hereof and Mallinckrodt does not assume any obligation to update or revise any forward-looking statement, whether as a result of new information, future events and developments or otherwise, except as required by law.

CONTACTS

Investor Relations
Daniel J. Speciale, CPA
Vice President, Investor Relations and IRO
314-654-3638
daniel.speciale@mnk.com

Media
Daniel Yunger
Kekst CNC
212-521-4879
mallinckrodt@kekstcnc.com

Mallinckrodt, the "M" brand mark and the Mallinckrodt Pharmaceuticals logo are trademarks of a Mallinckrodt company. Other brands are trademarks of a Mallinckrodt company or their respective owners. © 2019 05/19

 

 

 

 

 

 

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