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Press Release

Mallinckrodt plc Reports Fourth Quarter and Fiscal 2017 Results, Announces 2018 Guidance and Sets 2018 Strategic Priorities

Mallinckrodt
Posted on: 28 Feb 18

STAINES-UPON-THAMES, United Kingdom, Feb. 27, 2018 /PRNewswire/ -- Mallinckrodt plc (NYSE: MNK), a leading global specialty pharmaceutical company, today reported results for the three months and fiscal year ended Dec. 29, 2017. Unless otherwise noted, the quarter comparisons are to the prior year comparable three-month period ended Dec. 30, 2016 and the fiscal year comparisons are to the prior fiscal year ended Sept. 30, 2016 as prescribed by GAAP.

Net sales were $792.3 million in the fourth quarter, down 4.5%, or 4.8% on a constant-currency basis.

GAAP gross profit was $421.0 million with gross profit as a percentage of net sales of 53.1%, compared with 53.7%, impacted by ongoing pricing pressures in the Specialty Generics segment, but partially offset by non-recurring supply chain benefits in the Specialty Brands segment. Adjusted gross profit was $592.8 million, compared with $623.9 million. Adjusted gross profit as a percentage of net sales was 74.8% versus 75.2%.

"In 2017 we made strong progress in strategically reshaping our business to become an innovation-focused specialty pharmaceutical company," said Mark Trudeau, President and Chief Executive Officer of Mallinckrodt, "further building out a portfolio that, over the long term, should produce sustainable growth of at least mid-single digits, with potential for higher growth longer term. We see a number of potential commercial and development catalysts for growth in the year ahead, with possible product launches, clinical trial milestones and data readouts. The occurrence of any one or more of these events may provide further benefit to shareholders."

"Looking ahead," Trudeau continued, "with the recent acquisitions of Sucampo and other transactions building out our roster of marketed brands as well as our branded pipeline, we are poised to begin fulfilling the promise of the innovative development portfolio we've built. In 2018 we will aggressively pursue key initiatives to support and accelerate progress as we solidify our transformation."

Mallinckrodt's 2018 strategic initiatives include:

Maximizing the productivity and contribution of both inline brands and the near-term development portfolio;

Further streamlining the organization - moving to discontinued operations and seeking to dispose of non-core assets; streamlining its operating model to increase efficiency and productivity, allowing greater investment into its Specialty Brands segment. With this the company seeks to reduce its annual selling, general and administrative (SG&A) spend by $100 million no later than the early 2020s while continuing to increase R&D spending.

Ensuring a highly disciplined capital allocation strategy with a focus on reducing debt and pursuing business development and share repurchases where they make sense;

Continuing to refine the senior management team to increase focus on performance and drive sustainable growth for the future, illustrated by the recent recruitment of Mark Casey as General Counsel;

Attracting additional innovative pharmaceutical expertise to the company's Board of Directors, similar to the third quarter 2017 appointment of David Norton.

Returning to fourth quarter results, GAAP SG&A expenses in the quarter were $175.0 million or 22.1% of net sales, benefited from the reduction of contingent consideration, as compared to $368.3 million, or 44.4% of net sales in the comparable quarter, which was impacted by significant legal and pension settlement charges. Adjusted SG&A expenses were $212.6 million or 26.8% of net sales, compared with $217.2 million or 26.2%.

Research and development expenses were $86.4 million or 10.9% of net sales in the fourth quarter, impacted by a $10.0 million up-front payment for the xenon gas licensing agreement.

Income tax benefit was $1.599 billion versus $121.7 million, for an effective tax rate of negative 18,590.7% and positive 40.8%, respectively. Income tax benefit in the fourth quarter includes a one-time tax benefit of $1.5 billion from tax reform and finalization of the previously announced legal entity reorganization, which primarily related to a reduction in the interest-bearing deferred tax liabilities. As a result of adjustments primarily related to the foregoing factors, the adjusted effective tax rate was 13.0% compared with 15.7%.

GAAP diluted earnings per share results from continuing operations was $17.40 in the fourth quarter compared with a loss per share from continuing operations of $1.67. Adjusted diluted earnings per share were $2.01 versus $1.91.

Fiscal Year 2017 Results

Net sales were $3.222 billion, down 4.7% compared with $3.381 billion; impacted by comparison with the extra selling week in 2016 and ongoing pressure in the Specialty Generics segment.

Diluted earnings per share from continuing operations were $18.09 compared with $4.39, reflecting the benefits from tax reform and finalization of the previously announced legal entity reorganization. Adjusted diluted earnings per share were $7.49, compared with $7.85.

BUSINESS SEGMENT RESULTS

Specialty Brands Segment

Net sales for the Specialty Brands segment were $582.2 million for the quarter, compared with $603.1 million, a decrease of 3.5%, or 3.7% on a constant-currency basis.

H.P. Acthar® Gel (repository corticotropin injection) net sales in the quarter were $295.2 million, a 9.3%2  decrease over $325.4 million impacted by the previously disclosed patient withdrawal issues. The company has taken a number of steps to address the issue, including engagement with payers, prescribers and patients, and we remain focused on returning H.P. Acthar Gel to growth.

INOMAX® (nitric oxide) gas, for inhalation, generated net sales of $125.6 million, up 6.2%, or 6.1% on a constant-currency basis, over $118.3 million. OFIRMEV® (acetaminophen) injection net sales were $78.0 million compared with $72.5 million, an increase of 7.6%2. Net sales of the Therakos® immunology platform were $57.2 million compared with $47.4 million, an increase of 20.7%, or 18.4% on a constant-currency basis, benefited from a favorable comparison to the prior year.

Specialty Generics Segment

Net sales in the fourth quarter decreased 8.0% to $195.8 million, compared with $212.9 million. On a constant-currency basis, segment net sales declined 8.5%.

LIQUIDITY

Mallinckrodt's cash provided by operating activities in the fourth quarter was $278.8 million with free cash flow of $244.0 million. For the year, Mallinckrodt's cash provided by operating activities was $727.3 million with free cash flow of $541.2 million.

During the fourth quarter, Mallinckrodt repurchased approximately 10% of the company, buying 9.4 million ordinary shares for $214.0 million.

Through its cash generation and borrowings under Mallinckrodt's existing revolving credit facility in preparation for the Sucampo acquisition, Mallinckrodt's cash balance at the end of the fourth quarter was $1.261 billion. Following this transaction, the company remains focused on reducing its debt throughout the 2018 fiscal year.

2018 MALLINCKRODT FINANCIAL GUIDANCE

Driven by its ongoing transformation, Mallinckrodt will prospectively classify the "Specialty Generics Disposal Group" as discontinued operations, which includes the Specialty Generics segment3, certain non-promoted branded products within the Specialty Brands segment, and the company's ongoing post-divestiture supply agreement. Beginning in the first quarter of fiscal 2018, the historical financial results attributable to the Specialty Generics Disposal Group will be reflected in our consolidated financial statements as discontinued operations. Mallinckrodt seeks to dispose of these products to further its strategic evolution to being a brands-focused innovation-driven specialty pharmaceutical growth company.

For more information:
www.prnewswire.com/news-releases/mallinckrodt-plc-reports-fourth-quarter-and-fiscal-2017-results-announces-2018-guidance-and-sets-2018-strategic-priorities-300604743.html

Editor's Details

Mike Wood
PharmiWeb.com
www.pharmiweb.com
editor@pharmiweb.com

Last updated on: 28/02/2018

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