News Release
Mallinckrodt plc Reports Fiscal 2014 Fourth Quarter and Fiscal 2014 Financial Results
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Notable fiscal year included integration of H.P. Acthar®
Gel and OFIRMEV®, strong growth
in the base business, and substantial restructuring progress
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Fourth quarter net sales of $789 million, up 44.8%, and adjusted
diluted earnings per share of $1.68, up 71.4%
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Fiscal 2014 net sales of $2.54 billion, up 15.2%, and adjusted
diluted earnings per share of $4.94, up 57.8%
DUBLIN--(BUSINESS WIRE)--Nov. 19, 2014--
Mallinckrodt
plc (NYSE: MNK), a leading global specialty biopharmaceutical
company, today reported results for the fourth quarter of fiscal 2014
and full year fiscal 2014, both of which ended September 26, 2014.
Net sales were $789.3 million for the fourth quarter of fiscal 2014
compared with $545.2 million reported in the fourth quarter of fiscal
2013, an increase of 44.8%. Strong net sales were 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 continuing strength in
its base Specialty Controlled Substance Generics portfolio.
On a non-GAAP(1) basis, adjusted net income for the fourth
fiscal quarter of 2014 was $145.2 million, compared with $56.8 million a
year ago. Non-GAAP adjusted diluted earnings per share were $1.68,
reflecting the accretive benefits of acquisitions and strong results in
its Specialty Pharmaceuticals segment.
On a GAAP basis, the company incurred a net loss for the fourth quarter
of fiscal 2014 of $352.4 million compared with net income of $33.5
million in the same period a year ago. The fiscal 2014 net loss reflects
$355.6 million of non-cash impairment charges in the quarter primarily
related to Global Medical Imaging segment goodwill and intangibles, and
$75.1 million of restructuring charges. The company also incurred a
$92.7 million increase in amortization and inventory fair value
adjustment expenses from fiscal 2014 acquisitions, in addition to $30.0
million of transaction costs associated with the acquisition of Questcor
Pharmaceuticals, Inc.
“We had a solid quarter in what was a strong year for Mallinckrodt, and
believe that we are well-positioned strategically and financially for
long-term success,” said Mark Trudeau, Chief Executive Officer and
President, Mallinckrodt. “The meaningful top-line and bottom-line growth
we achieved is being driven by strength in our Specialty Pharmaceuticals
segment in both the Brands and Specialty Controlled Substance Generics
portfolios, paired with streamlined costs from our ongoing restructuring
initiatives. We continue to be pleased with the performance of our
Specialty Pharmaceuticals business, including the growth we have seen
with OFIRMEV and the promise of Acthar now that it has been added to the
portfolio in the fourth quarter.”
Gross profit was $400.6 million for the fourth quarter of fiscal 2014,
compared with $252.1 million in the prior-year period, driven by the
ongoing shift to high-margin specialty pharmaceuticals. This significant
growth was the result of the additions and performance of Acthar and
OFIRMEV as well as continuing strength in the base Specialty Controlled
Substance Generics portfolio. Gross profit, as a percentage of net
sales, was 50.8% for the quarter, versus 46.2% in the prior-year period.
This result was impacted by a $92.7 million increase in amortization and
inventory fair value expenses primarily related to the Questcor
Pharmaceuticals, Inc. acquisition that closed in the fourth quarter.
Selling, general and administrative (SG&A) expenses for the fourth
quarter of fiscal 2014 were $280.5 million, compared with $135.5 million
in the same period in 2013. SG&A expenses as a percentage of net sales
were 35.5% in the fourth quarter of fiscal 2014, compared with 24.9% in
the prior year. The increase in SG&A includes the addition of Acthar and
OFIRMEV selling expenses, $30.0 million in transaction costs primarily
associated with the Questcor acquisition as well as $15.0 million in
legal settlement costs, primarily from a cash settlement associated with
terminating the company’s PENNSAID® licensing agreement with
Nuvo Research Inc.
The company incurred restructuring charges of $29.5 million under the
$100 million to $125 million restructuring program, bringing the total
charges incurred under the program to $89.4 million. Unrelated to its
restructuring program, the company incurred $45.6 million in expense,
enabling it to realize restructuring savings from its fiscal 2014
acquisitions.
The fiscal 2014 fourth quarter non-GAAP effective tax rate was 22.0%.
Full-Year Fiscal 2014 Results
In fiscal 2014, net sales were $2.540 billion, compared with $2.205
billion in the prior year, representing a 15.2% increase. Net sales of
the Specialty Pharmaceuticals segment increased to $1.613 billion
compared with $1.218 billion, up 32.5% due to the inclusion and
performance of Acthar and OFIRMEV, and strength in the base Specialty
Controlled Substance Generics portfolio.
On a non-GAAP basis, adjusted net income was $324.8 million, compared
with $180.7 million last year. Non-GAAP adjusted diluted earnings per
share were $4.94, compared with $3.13 last year, an increase of 57.8%.
This was attributable to the inclusion and performance of Acthar and
OFIRMEV, strength in the base Specialty Controlled Substance Generics
portfolio, ongoing restructuring to lower the company’s overall cost
base, and lower tax provision expense. These factors were partially
offset by higher cost of goods sold experienced in the Global Medical
Imaging segment and higher interest expense in fiscal year 2014.
On a GAAP basis, the company incurred a $319.3 million loss compared
with a $58.8 million gain for the same period in 2013. The fiscal 2014
net loss reflects $355.6 million of non-cash impairment charges
primarily related to Global Medical Imaging segment goodwill and
intangibles and $128.6 million of restructuring charges. The company
also incurred a $152.6 million increase in amortization and inventory
fair value adjustment expenses and $65.1 million in transaction costs as
the result of its fiscal 2014 acquisitions. The prior year was impacted
by $74.2 million of legal, tax, accounting and other professional fees
associated with separation from its former parent.
The fiscal 2014 non-GAAP effective tax rate was 23.5%.
Turning to certain balance sheet items, the company’s cash position on
September 26, 2014 was $707.8 million compared with $275.5 million on
September 27, 2013 reflecting the strong underlying performance of the
business. Notably, its net debt leverage further decreased from 3.1 in
mid-August, following the close of the Questcor acquisition to 2.8 on
September 26, 2014. Fiscal 2014 cash flows were not impacted by the
$355.6 million impairment charges detailed above.
BUSINESS SEGMENT RESULTS
Specialty Pharmaceuticals Segment
Net sales in the Specialty Pharmaceuticals segment for the fourth
quarter of fiscal 2014 were $564.8 million compared with $304.4 million
in the prior-year period. Net sales in Brands were $213.9 million,
compared with $57.1 million last year, led by Acthar and OFIRMEV net
sales, partially offset by decreased sales of EXALGO®
(hydromorphone HCl) Extended-Release Tablets, CII. Net sales in
Specialty Generics and Active Pharmaceutical Ingredients (API) were
$350.9 million, compared with $247.3 million last year, driven by
increased profitability on certain Specialty Controlled Substance
Generics products.
Segment operating income in the quarter was $222.3 million, compared
with $76.9 million last year. Segment operating margin was 39.4%,
compared with 25.3%, reflecting the further shift to high-margin
specialty pharmaceutical products, the inclusion and performance of
Acthar and OFIRMEV, and continuing strength in its base Specialty
Controlled Substance Generics portfolio.
Global Medical Imaging Segment
Net sales in the company's Global Medical Imaging segment were $213.4
million, versus $229.0 million in the fourth quarter of fiscal 2013. For
the fiscal fourth quarter, operating income in the segment was $21.2
million, compared with $30.8 million last year. Operating margin was
9.9%, compared with 13.4% last year, reflecting lower net sales and
higher cost of goods sold partially offset by benefits from
restructuring.
CONFERENCE CALL AND WEBCAST
Mallinckrodt will hold a conference call for investors on Wednesday,
November 19, 2014, beginning at 8:30 a.m. U.S. Eastern Time. This call
can be accessed in three ways:
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At the Mallinckrodt website: http://www.mallinckrodt.com/investor_relations/.
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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.
All callers will be required to provide the Conference ID of 19935233.
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Through an audio replay: A replay of the call will be available
beginning Wednesday afternoon, November 19, 2014, and ending at 11:59
p.m. U.S. Eastern Time on November 26, 2014. The dial-in numbers for
U.S. participants are (855) 859-2056 or (800) 585-8367. For
participants outside the U.S., the replay dial-in number is (404)
537-3406. All callers will be required to provide the Conference ID of
19935233.
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 disease specialty
areas like neurology, rheumatology, nephrology and pulmonology along
with 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
Pharmaceuticals segment includes branded and specialty generic drugs and
active pharmaceutical ingredients, and the Global Medical Imaging
segment include contrast media and nuclear imaging agents. Mallinckrodt
has more than 5,500 employees worldwide and a commercial presence in
roughly 65 countries. The company's fiscal 2014 revenue totaled $2.54
billion. 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 represents net income, prepared in accordance with
accounting principles generally accepted in the U.S. (GAAP), excluding
the after-tax effects related to separation costs; restructuring and
related charges, net; amortization; impairment charges; discontinued
operations; and other items identified by the company. Adjusted diluted
earnings per share represents adjusted net income divided by the number
of diluted shares. The non-GAAP effective tax rate reflects the tax
impact of adjustments between net income and adjusted net income and
certain effects associated with acquisitions.
Adjusted gross profit represents gross profit, prepared in accordance
with GAAP, excluding amortization, inventory step-up expense and certain
legal matters included in cost of sales.
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. This measure is one of
the performance metrics that determines management incentive
compensation.
The company has provided these non-GAAP 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 non-GAAP 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 non-GAAP measures should be considered supplemental to and not a
substitute for financial information prepared in accordance with GAAP.
The company's definition of these non-GAAP measures may differ from
similarly titled measures used by others.
Because non-GAAP 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 the non-GAAP financial measures to the
most directly comparable GAAP financial measures is included in the
tables accompanying this release.
Cautionary Statements Related to Forward-Looking Statements
Statements in this press release that are not strictly historical,
including statements regarding, future financial condition and operating
results, economic, business, competitive and/or regulatory factors
affecting our business and any other statements regarding events or
developments that we believe or anticipate 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 we
operate; the commercial success of our products, including H.P. Acthar®
Gel ("Acthar"); our ability to protect intellectual property rights; our
ability to maintain important business relationships; the lack of patent
protection for Acthar, and the possible United States Food and Drug
Administration ("FDA") approval and market introduction of additional
competitive products; our reliance on certain individual products that
are material to our financial performance; our ability to continue to
generate revenue from sales of our products to treat on-label
indications and to develop other therapeutic uses for them; our ability
to receive procurement and production quotas granted by the U.S. Drug
Enforcement Administration; our ability to obtain and/or timely
transport molybdenum-99 to our technetium-99m generator production
facilities; customer concentration; cost containment efforts of
customers, purchasing groups, third-party payors and governmental
organizations; our ability to successfully develop or commercialize new
products; competition; our ability to achieve anticipated benefits of
price increases; our ability to successfully integrate acquisitions of
operations, technology, products and businesses generally and to realize
anticipated growth, synergies and cost savings; the reimbursement
practices of a small number of large public or private issuers; complex
reporting and payment obligations under healthcare rebate programs;
changes in laws and regulations; conducting business internationally;
foreign exchange rates; material health, safety and environmental
liabilities; product liability losses and other litigation liability;
information technology infrastructure and restructuring activities.
Additional information regarding the factors that may cause actual
results to differ materially from these forward-looking statements is
available in (i) our SEC filings, including our Annual Report on Form
10-K for the fiscal year ended September 27, 2013 and our Quarterly
Reports on Form 10-Q for the quarterly periods ended December 27, 2013,
March 28, 2014 and June 27, 2014; (ii) the SEC filings of Cadence
Pharmaceuticals, Inc., which was acquired by Mallinckrodt on March 19,
2014, including its Annual Report on Form 10-K for the fiscal year ended
December 31, 2013; and (iii) the SEC filings of Questcor
Pharmaceuticals, Inc.’s, which was acquired by Mallinckrodt on August
14, 2014, including its Annual Report on Form 10-K for the year ended
December 31, 2013 (and the amendment thereto on Form 10-K/A), its
Quarterly Reports on Form 10-Q for the quarterly periods ended March 31,
2014 and June 30, 2014, and its Current Report on Form 8-K filed with
the SEC on July 10, 2014. The forward-looking statements made herein
speak only as of the date hereof and neither Mallinckrodt nor any of its
affiliates 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.
Source: Mallinckrodt plc
Mallinckrodt plc
John Moten, 314-654-6650
Vice President,
Investor Relations
john.moten@mallinckrodt.com
or
Rhonda
Sciarra, 314-654-8618
Communications Manager
rhonda.sciarra@mallinckrodt.com
or
Meredith
Fischer, 314-654-3318
Senior Vice President, Communications and
Public Affairs
meredith.fischer@mallinckrodt.com
