DUBLIN, May 5, 2015 /PRNewswire/ -- Mallinckrodt plc (NYSE: MNK), a leading global specialty biopharmaceutical company, today reported results for the second quarter of fiscal 2015, which ended March 27, 2015.
Net sales were $909.9 million compared with $557.8 million in the second quarter of fiscal 2014, an increase of 63.1%. The increase was primarily driven by the inclusion and performance of H.P. Acthar® Gel (repository corticotropin injection) and OFIRMEV® (acetaminophen) injection, acquired in August 2014 and March 2014, respectively, and higher net sales in Mallinckrodt’s Specialty Generics segment.
On a non-GAAP basis, Mallinckrodt’s adjusted net income(1) for the second quarter of fiscal 2015 was $201.0 million, compared with $56.4 million in the same quarter a year ago. Non-GAAP adjusted diluted earnings per share were $1.72, compared with $0.95 a year ago, primarily reflecting the addition of 2014 acquisitions in its Specialty Brands segment and improved performance in its Specialty Generics segment.
On a GAAP basis, net income for the second quarter of fiscal 2015 was $98.8 million, or $0.84 per diluted share, compared with $11.6 million, or $0.20 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 an improved effective tax rate. These factors were partially offset by higher selling, general and administrative costs and interest expense resulting from the debt associated with 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 reported another strong quarter, driven by meaningful top- and bottom-line growth in our Specialty Generics and Specialty Brands segments. The revenue contributed by specialty biopharmaceutical products continues to increase as an overall percentage of net sales, and now comprises over 75% of the total,” said Mark Trudeau, Chief Executive Officer and President of Mallinckrodt. “The recent acquisition of Ikaria further demonstrates our strategic transformation into a leading specialty biopharmaceutical company as we further diversify our portfolio and maintain momentum to provide durable, sustained growth.”
Gross profit was $488.5 million for the second quarter of fiscal 2015, compared with $262.6 million in the prior-year quarter, representing an increase of 86.0%. 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. Gross profit as a percentage of net sales was 53.7% for the quarter versus 47.1% in the same prior year period. This result was impacted by a $110.3 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 second quarter of fiscal 2015 were $343.5 million, compared with $194.1 million in the prior-year quarter. The increase in SG&A expenses includes a $113.2 million increase attributable to the addition of Acthar and OFIRMEV marketing and sales organizations into Mallinckrodt’s portfolio. SG&A for the second quarter of fiscal 2015 also included charges of $38.0 million associated with the settlement of legacy Questcor-related litigation, $21.6 million of share-based compensation associated with the Questcor acquisition and a $13.3 million environmental remediation charge. SG&A expenses for the second quarter of fiscal 2014 included a $23.1 million environmental remediation charge. Adjusted SG&A as a percentage of net sales was 28.8% for fiscal 2015 and 27.3% for fiscal 2014.
Restructuring charges were $3.7 million for the quarter, compared with $21.7 million in the prior-year quarter.
Income tax benefit in the second quarter was $34.2 million, a rate of negative 80.9%, compared to a benefit of $20.3 million, which resulted in a positive rate of 236.0% in the prior year quarter. The increase in tax benefit of $13.9 million reflected an improved mix of income and expenses between relatively low tax and relatively high tax jurisdictions. The second quarter fiscal 2015 non-GAAP effective tax rate was 20.2%.
Cash on the balance sheet was $1.054 billion as of March 27, 2015, an increase for the quarter of $154.5 million attributable to strong cash flows from operations.
Six-Month Fiscal 2015 Results
In the first six months of fiscal 2015, net sales were $1.776 billion, compared with $1.098 billion in the first six months of the prior year, which represents a 61.8% increase. The increase was primarily driven by the inclusion and performance of Acthar and OFIRMEV, and higher net sales in Mallinckrodt’s Specialty Generics segment.
On a non-GAAP basis, adjusted net income was $414.8 million, compared with $107.6 million. Non-GAAP adjusted diluted earnings per share were $3.55, compared with $1.83 last year, an increase of 94.0%. The increases are primarily attributable to the accretive benefits of fiscal 2014 acquisitions.
On a GAAP basis, net income for the first six months of fiscal 2015 was $191.5 million, compared with $57.2 million for the same period in fiscal 2014. GAAP diluted earnings per share were $1.62 compared with $0.97 last year.
BUSINESS SEGMENT RESULTS
Specialty Brands Segment
Net sales for the second quarter of fiscal 2015 increased $279.2 million to $334.3 million, compared with $55.1 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 collectively generated net sales of $296.1 million compared with only $5.3 million in the prior year. These results were partially offset by a decline in net sales of EXALGO® (hydromorphone HCl) Extended-Release Tablets, CII, following the loss of exclusivity in May 2014.
Specialty Brands operating income for second quarter fiscal 2015 increased $123.5 million to $97.4 million, compared with a $26.1 million loss for the prior-year quarter. Segment operating margin was 29.1% compared with negative 47.4%.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 second quarter fiscal 2015 increased $93.6 million, or 34.8%, to $362.8 million, compared with $269.2 million for the prior-year quarter. The increase in net sales was primarily driven by a $46.9 million increase in net sales of hydrocodone-related products, the inclusion of $27.6 million in net sales associated with BioVectra and a $12.3 million increase in net sales of oxycodone-related products; which were partially offset by a decrease in net sales of Methylphenidate HCl Extended-Release Tablets, USP CII. The decrease in Methylphenidate ER net sales was 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 second quarter of 2015 increased $71.7 million to $203.7 million, compared with $132.0 million for the prior-year quarter. Segment operating margin was 56.1% compared with 49.0%. The increase in operating income and margin was primarily due to higher net sales of hydrocodone-related products.
Global Medical Imaging Segment
Net sales in the company’s Global Medical Imaging segment were $202.6 million, versus $222.4 million in the prior-year quarter. For the second quarter of fiscal 2015, operating income for the segment was $25.2 million, compared with $10.3 million. Operating margin was 12.4%, compared with 4.6% in the prior-year period.
2015 MALLINCKRODT UPDATED FISCAL YEAR GUIDANCE (excluding foreign currency impact)
Guidance Category | October 2014 | May 2015 |
Adjusted diluted earnings per share | $6.70 to $7.20 | $7.10 to $7.50 |
Total company net sales | $3.65 billion to $3.75 billion | $3.75 to $3.85 billion |
Non-GAAP effective tax rate | 20% to 23% | 18% to 20% |
CONFERENCE CALL AND WEBCAST
Mallinckrodt will hold a conference call for investors on Tuesday, May 5, 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/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 United States is (877) 359-9508. For participants outside the United States, the dial-in number is (224) 357-2393. Callers will need to provide the Conference ID of 22730989.
- Through an audio replay: A replay of the call will be available beginning at 11:30 a.m. U.S. Eastern Time on Tuesday, May 5, 2015, and ending at 11:59 p.m. U.S. Eastern Time on Tuesday, May 12, 2015. Dial-in numbers for U.S.-based participants are (855) 859-2056 or (800) 585-8367. Participants outside the United States should use the replay dial-in number (404) 537-3406. All callers will be required to provide the Conference ID of 22730989.
ABOUT MALLINCKRODT
Mallinckrodt is a global specialty biopharmaceutical and medical imaging business that develops, manufactures, markets and distributes specialty pharmaceutical products and medical imaging agents. Areas of focus include therapeutic drugs for autoimmune and rare diseases in specialty areas like neurology, rheumatology, nephrology and pulmonology; neonatal critical care respiratory therapies; and analgesics and central nervous system drugs for prescribing by office- and hospital-based physicians. The company’s core strengths include the acquisition and management of highly regulated raw materials; deep regulatory expertise; and specialized chemistry, formulation and manufacturing capabilities. The company’s Specialty Brands segment includes branded medicines and devices; its Specialty Generics segment includes specialty generic drugs, active pharmaceutical ingredients and external manufacturing; and the Global Medical Imaging segment includes contrast media and nuclear imaging agents. To learn more about Mallinckrodt, visit www.mallinckrodt.com.
(1)NON-GAAP FINANCIAL MEASURES
This press release contains financial measures, including adjusted net income, adjusted diluted earnings per share, adjusted gross profit, operational growth and non-GAAP effective tax rate, which are considered “non-GAAP” financial measures under applicable Securities and Exchange Commission 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), adjusted for certain items (on a pre-tax basis for adjusted gross profit and adjusted SG&A and on an after-tax basis for adjusted net income) that management believes are not reflective of the operational performance of the business. Adjustments to GAAP amounts include, as applicable to each measure, restructuring and related charges, net; amortization impairment charges; discontinued operations; acquisition-related expenses, significant legal and environmental charges and other items identified by the company. Adjusted diluted earnings per share represent adjusted net income divided by the number of diluted shares.
The non-GAAP effective tax rate is calculated as the income tax effects on continuing and discontinued operations plus the income tax impact included in our reconciliation of adjusted net income, divided by income from continuing and discontinued operations plus the pre-tax, non-income, tax-related adjustments included in our reconciliation of adjusted net income (excluding dilutive share impact). The income tax impact item included in our reconciliation of adjusted net income primarily represents the tax impact of adjustments between net income and adjusted net income as well as U.S. tax payments associated with internal installment sale transactions.
Operational growth 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.
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