Mallinckrodt (MNK) Beats On Q1 Earnings & Sales, Raises View

Mallinckrodt Public Limited Company (NYSE:MNK) reported better-than-expected results for the first quarter of 2019, led by strong performance of hospital products. The company also raised its guidance.

The company reported adjusted earnings of $1.94 per share in the quarter, up from the year-ago quarter’s $1.62. Also, the bottom line beat the Zacks Consensus Estimate of $1.73.

Net sales in the quarter came in at $790.6 million, up 4.7% year over year. The figure surpassed the Zacks Consensus Estimate of $771.5 million.

Mallinckrodt’s stock has gained 2% in the year so far against the industry’s growth of 8.8%.

Quarter in Detail

The company now operates two reportable segments aligned to the previously-announced separation — the Specialty Brands and the Specialty Generics (includes Amitiza).

Specialty brand sales came in at $547.3 million, down 0.4% year over year.

Acthar, Mallinckrodt’s largest product, generated sales of $223.9 million, down 8.2% due to reset process impacting returning patients.

Inomax, the company’s second-largest product, generated sales of $151.1 million, up 8.1% driven by continued and consistent demand and contract renewals. Ofirmev sales increased 16.6% year over year to $95.6 million, owing to strong demand and order timing.

Sales of the Therakos immunology platform were $61.8 million, up 7.7%.

Specialty Generics and Amitiza sales amounted to $243.3 million, up 17.6%. Amitiza posted net sales of $53.0 million, while Specialty Generics products net sales returned to growth with $190.3 million, up 3.5% driven by recapture of market share.

Adjusted selling, general and administrative expenses in the quarter were $211.4 million, up from $207.9 million in the year-ago quarter. Meanwhile, research and development expenses increased 4% to $85.3 million.

During the quarter, the company reduced total debt by $263.5 million.

Guidance Update

Total sales for Specialty Brands are expected to increase 1-4%. Total sales for Specialty Generics and Amitiza are now expected to increase 2-5% (previous guidance: 1-4% ). Earnings per share are now projected to be $8.30-$8.60, up from the previous projection of $8.10-$8.40.

Our Take

Impressive results in the first quarter bode well for Mallinckrodt. The hospital portfolio looks solid as Ofirmev and Inomax gained market share and the troubled generics segment has returned to growth.

This year is expected to be a transformative one for Mallinckrodt, as it strives to revive its portfolio/pipeline. In December 2018, the company announced that it intends to spin-off the Specialty Generics/Active Pharmaceutical Ingredients business along with Amitiza into a new company. The separation is expected in the second half of the year. We expect investors to focus on the same.

Zacks Rank & Key Picks

Mallinckrodt carries a Zacks Rank #3 (Hold).

Some better-ranked stocks are Bristol-Myers Squibb Co. (NYSE:BMY) , Roche (OTC:RHHBY) and Ligand Pharmaceuticals Inc. (NASDAQ:LGND) . While the first two sport a Zacks Rank #2 (Buy), Ligand carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Bristol-Myers’ earnings per share estimates have increased from $4.76 to $4.93 for 2020 in the past 60 days.

Roche’s earnings per share estimates have increased from $2.35 to $2.40 for 2019 in the past 60 days.

Ligand’s earnings per share estimates have increased from $28.72 to $29.14 for 2019 and from 24 cents to 69 cents for 2020 in the past 60 days.

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