CHESTERFIELD, United Kingdom, Feb. 2, 2016 /PRNewswire/ -- Mallinckrodt plc (NYSE: MNK), a leading global specialty biopharmaceutical company, today reported results for the first quarter of fiscal 2016. Amounts reported reflect presentation of the company’s former contrast media and delivery systems (CMDS) business as a discontinued operation. Unless otherwise noted, all comparisons of first quarter fiscal 2016 performance are to the first quarter of fiscal 2015.
Total company net sales were $914.8 million in the first quarter of fiscal 2016, up 20.3% on an operational basis from $768.2 million. Exceptional Specialty Brands segment performance, up 45.4%, was the primary growth contributor driven by solid organic growth in H.P. Acthar Gel (repository corticosteroid injection) and the inclusion of INOMAX (nitric oxide) for inhalation and Therakos® immunotherapy. Specialty Brands results were offset by decreased net sales within the Specialty Generics segment. The impact of foreign currency also lowered reported net sales by $9.2 million.
GAAP net income from continuing operations for the first quarter of fiscal 2016 was $115.9 million, or $1.00 per diluted share, compared with $87.4 million, or $0.74 per diluted share. The increase principally reflects increased net sales and profits from recently acquired assets in the Specialty Brands segment and net sales and profit contributions from Acthar. These factors were partially offset by higher selling, general and administrative (SG&A) costs, increased research and development (R&D) investments and higher interest expense resulting from the debt associated with the acquisitions of INOMAX and Therakos.
Adjusted net income for the first quarter of fiscal 2016 was $242.7 million, up 16.3% from $208.7 million. Adjusted diluted earnings per share were $2.09, up 16.8% from $1.79 a year ago.
During the quarter, the company repurchased 3.9 million shares under its share repurchase program. The diluted share count for the first quarter of fiscal 2016 reflects these purchases plus 0.8 million shares purchased under the program in the fourth quarter of fiscal 2015.
“The first quarter of fiscal 2016 was a strong one for Mallinckrodt, building on fourth quarter fiscal 2015 momentum, and driven by commercial execution across our Specialty Brands portfolio, particularly for Acthar and INOMAX,” said Mark Trudeau, President and Chief Executive Officer. “We are also pleased with the volume performance of OFIRMEV® (acetaminophen) injection and Therakos. The Specialty Brands segment now contributes nearly 60% of our total net sales.
“We continue to advance the Acquire to Invest growth strategy highlighted at our December Investor Briefing,” Trudeau continued. “Our increased R&D investment in the quarter resulted in initiation of three company-sponsored clinical trials and significant additional data generation activities for our Specialty Brands, particularly Acthar. Finally, we are very pleased with the acquisition of three commercial-stage hemostasis products, which adds depth and breadth to our hospital portfolio.”
GAAP gross profit was $491.7 million for the first quarter of fiscal 2016, up 21.5% over $404.8 million. This growth resulted from the addition and performance of both INOMAX and Therakos, and the performance of Acthar. Adjusted gross profit as a percentage of net sales was 74.3% for the quarter versus 72.8%.
GAAP SG&A expenses for the first quarter of fiscal 2016 were $242.5 million, compared with $224.1 million. However, adjusted SG&A as a percentage of net sales for the quarter was 24.9%, an improvement of 100 basis points. The absolute increase in SG&A expenses is primarily due to the addition of INOMAX and Therakos marketing and sales teams to the portfolio.
Income tax benefit in the first quarter was $32.1 million, versus a benefit of $10.3 million. The first quarter fiscal 2016 adjusted effective tax rate was 17.0%.
Liquidity
In the fiscal first quarter, Mallinckrodt generated $262.4 million in free cash flow. It used the strong cash generation combined with the cash received from the divestiture of CMDS to repurchase $275.4 million of ordinary shares. The cash balance at the end of the quarter was $521.9 million and debt was reduced by $67.6 million from the previous quarter. The company’s liquidity position remains quite strong and resilient, and management remains prepared to allocate capital towards share repurchases and additional business development targets.
BUSINESS SEGMENT RESULTS
Specialty Brands Segment
The segment benefitted from strong commercial execution throughout the first quarter of 2016 with net sales increasing $169.6 million to $543.2 million, compared with $373.6 million, an increase of 45.4%. As noted, the increase in net sales was driven by the inclusion and performance of INOMAX and Therakos, which collectively generated net sales of $161.2 million. Income from higher net sales was partially offset by higher SG&A costs associated with these products. Additionally, Acthar net sales were $286.7 million in the quarter, a 7.6% increase over $266.4 million. Mallinckrodt’s second largest product, INOMAX, generated net sales of $110.8 million, an increase of 15.8% reported and 16.1% operational over pro forma net sales of $95.7 million. Sales of the Therakos immunotherapy product line were $50.4 million, which represents growth of 4.5% reported and 8.5% operational over pro forma net sales of $48.2 million.
Specialty Generics Segment
Net sales for the first quarter fiscal 2016 decreased $26.6 million, or 9.4%, to $257.6 million, versus $284.2 million. This was primarily driven by net sales declines in oxycodone-related products and methylphenidate ER. Management continues to expect difficult year-over-year net sales comparisons in this segment for the next several quarters.
Nuclear Imaging Segment
The company completed the sale of its CMDS business to Guerbet S.A. in November 2015. The financial results of the CMDS business are presented as a discontinued operation in both the current and prior fiscal year. As a result, the Global Medical Imaging segment was renamed Nuclear Imaging at the beginning of fiscal 2016.
Net sales for the first quarter fiscal 2016 for the Nuclear Imaging segment were $103.6 million, compared with $101.9 million.
GUIDANCE UPDATE
Management is raising its fiscal 2016 guidance for adjusted diluted earnings per share from the previous $7.70 to $8.20 to a revised range of $7.85 to $8.30.
CONFERENCE CALL AND WEBCAST
Mallinckrodt will hold a conference call for investors on Tuesday, Feb. 2, 2016, 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 24832248.
- Through an audio replay: A replay of the call will be available beginning at 11:30 a.m. U.S. Eastern time on Tuesday, Feb. 2, 2016, and ending at 11:59 p.m. U.S. Eastern Time on Tuesday, Feb. 16, 2016. 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 (404) 537-3406. All callers will be required to provide the Conference ID of 24832248.
ABOUT MALLINCKRODT
Mallinckrodt is a global business that develops, manufactures, markets and distributes specialty pharmaceutical and biopharmaceutical products and therapies, as well as nuclear imaging products. Areas of focus include autoimmune and rare diseases in specialty areas like neurology, rheumatology, nephrology and pulmonology; immunotherapy and neonatal respiratory critical care therapies; analgesics and hemostasis products; and central nervous system drugs. 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; its Specialty Generics segment includes specialty generic drugs, active pharmaceutical ingredients and external manufacturing; and the Nuclear Imaging segment includes nuclear imaging agents. 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, operational growth, adjusted effective tax rate, pro forma first quarter fiscal 2015 INOMAX net sales, pro forma first quarter fiscal 2015 Therakos net sales, 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), 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 and 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 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).
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