DUBLIN, Feb. 3, 2015 /PRNewswire/ -- Mallinckrodt plc (NYSE: MNK), a leading global specialty biopharmaceutical company, today reported results for the first quarter of fiscal 2015, which ended December 26, 2014.
Net sales were $866.3 million compared with $540.2 million in the first quarter of fiscal 2014, an increase of 60.4%. The increase was primarily driven by the inclusion and performance of H.P. Acthar® Gel (Acthar) repository corticotropin injection and OFIRMEV® (acetaminophen) injection, acquired in August 2014 and March 2014, respectively, and higher net sales in our Specialty Generics segment.
On a non-GAAP basis, adjusted net income(1) for the first quarter of fiscal 2015 was $213.8 million, compared with $51.2 million in the same quarter a year ago. Non-GAAP adjusted diluted earnings per share was $1.84, compared with $0.88 a year ago, primarily reflecting the accretive benefits of fiscal 2014 acquisitions.
On a GAAP basis, net income for the first quarter of fiscal 2015 was $92.7 million, or $0.79 per diluted share, compared with $45.6 million, or $0.78 per diluted share, in the prior-year period. The increase in net income reflects increased net sales and profits in the Specialty Brands and Specialty Generics segments and a lower effective tax rate. These factors were partially offset by higher selling, general and administrative costs and higher interest expense resulting from the acquisitions of Acthar and OFIRMEV. The fiscal 2015 diluted share count also reflects the issuance of shares in connection with the acquisition of Acthar.
“Mallinckrodt is off to a good start in fiscal 2015 driven by strong performance across all of our businesses. We achieved meaningful top- and bottom-line growth particularly in the Specialty Brands and Specialty Generics segments, increasing the proportion of total company net sales from specialty pharmaceuticals to over 75% in the quarter,” said Mark Trudeau, Chief Executive Officer and President of Mallinckrodt. “The strategies we have pursued have gone far toward transforming us into a leading specialty biopharmaceutical company, and we are highly focused on maintaining momentum and expanding our portfolio to provide durable, sustained growth.”
Gross profit was $438.7 million for the first quarter of fiscal 2015, compared with $255.6 million in the prior-year quarter, representing an increase of 71.6%. This significant growth was the result of the additions and performance of Acthar and OFIRMEV as well as continuing strength in the Specialty Generics segment as noted previously. Gross profit as a percentage of net sales was 50.6% for the quarter versus 47.3% in the same period prior year. This result was impacted by a $147.5 million increase in amortization and inventory fair value expenses primarily related to the acquisition of Acthar.
Selling, general and administrative (SG&A) expenses for the first quarter of fiscal 2015 were $262.5 million, compared with $146.2 million in the prior-year quarter. The increase in SG&A reflects the inclusion of $86.5 million in expenses from the addition of Acthar and OFIRMEV into Mallinckrodt’s portfolio.
Restructuring charges were $7.2 million for the quarter, compared with $8.0 million last year. Fiscal 2015 charges primarily relate to Specialty Brands segment restructuring, including acquisition-related restructuring actions.
The first quarter fiscal 2015 effective tax rate was negative 11.2% compared with 26.3% in the prior-year quarter. The effective tax rate reflects the mix of income and expense between U.S. and non-U.S. tax jurisdictions following the integration of our recent acquisitions and includes tax benefits on the amortization of recently acquired intangible assets. The fiscal 2015 first quarter non-GAAP effective tax rate was 20.0%.
Cash was $899.0 million as of December 26, 2014, an increase for the quarter of $191.2 million that is attributable to strong cash flows from operations.
BUSINESS SEGMENT RESULTS
During the first quarter of fiscal 2015, the integration of Questcor Pharmaceuticals, Inc. was substantially completed. With this, and given the increased significance of Specialty Brands to Mallinckrodt’s results and the expected long-term growth of this business compared to Specialty Generics, the company has changed its financial reporting to include three reportable segments: Specialty Brands, Specialty Generics and Global Medical Imaging. Historically, the company had presented the Specialty Brands and Specialty Generics businesses within the Specialty Pharmaceuticals segment.
Specialty Brands Segment
Net sales for the first quarter of fiscal 2015 increased $314.0 million to $373.6 million, compared with $59.6 million for the prior-year quarter. As noted, the increase in net sales was primarily driven by the inclusion and performance of Acthar and OFIRMEV, which generated net sales of $266.4 million and $71.4 million, respectively. These results were partially offset by a decline in net sales from EXALGO® (hydromorphone HCl) Extended-Release Tablets, CII, following the loss of exclusivity in May 2014.
Specialty Brands operating income for the first quarter of fiscal 2015 increased $156.4 million to $148.2 million, compared with an $8.2 million loss for the prior-year quarter. Segment operating margin was 39.7% compared with negative 13.8%.The increase in operating income and margin was primarily due to higher net sales from the fiscal 2014 acquisitions of Acthar and OFIRMEV. These higher net sales were partially offset by higher SG&A costs associated with these acquisitions.
Specialty Generics Segment
Net sales for the first quarter fiscal 2015 increased $34.3 million, or 13.7%, to $284.2 million, compared with $249.9 million for the prior-year quarter. The increase in net sales was primarily driven by a $35.4 million increase in sales of oxycodone-related products and a $11.0 million increase in other Specialty Generics products, partially offset by a decrease in Methylphenidate HCl Extended-Release Tablets, USP CII (Methylphenidate ER). Prior year net sales of oxycodone-related products were negatively impacted by a $19.4 million contractual payment. The decrease in Methylphenidate ER net sales is primarily attributable to the U.S. Food and Drug Administration’s reclassification of these products from an AB rating to a BX rating in November 2014.
Specialty Generics operating income for the first quarter of 2015 increased $19.3 million to $140.5 million, compared with $121.2 million for the prior-year quarter. Segment operating margin was 49.4% compared with 48.5%. The increase in operating income and margin was primarily due to higher net sales in oxycodone-related products. The prior-year quarter included an $11.7 million gain on the license of intellectual property to a third-party.
Global Medical Imaging Segment
Net sales in the company’s Global Medical Imaging segment were $199.3 million, versus $218.6 million in the prior-year quarter. For the first quarter of fiscal 2015, operating income for the segment was $17.3 million, compared with $4.4 million. Operating margin was 8.7%, compared with 2.0% in the prior-year period, which was impacted by the negative effect of higher nuclear raw material and production costs.
CONFERENCE CALL AND WEBCAST
Mallinckrodt will hold a conference call for investors on Tuesday, February 3, 2015, 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/investor_relations/.
To read full press release, please click here.
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