Mallinckrodt MNK reported adjusted earnings of $2.05 per share in the third quarter of fiscal 2015 (ended Jun 26, 2015), beating the Zacks Consensus Estimate of $1.85 and up 70.8% year over year.
In the reported quarter, net sales came in at 965.1 million, up 47.8% from the year-ago quarter, but missed the Zacks Consensus Estimate of $979 million.
The Quarter in Detail
The company reports its results under three segments – Specialty Brands, Specialty Generics and Global Medical Imaging.
Sales from the Specialty Brands segment came in at $446.2 million compared to $84.9 million in the year-ago quarter. The increase in net sales was primarily driven by the inclusion of Acthar and Inomax, which generated net sales of $350.2 million. Ofirmev sales increased 16.7% from the prior-year period to $62.1 million.
Specialty Generics generated sales of $307.9 million down 6.5% from the year-ago quarter reflecting a decrease in net sales of methylphenidate ER (due to FDA’s reclassification of these products to a BX rating in Nov 2014) and oxycodone-related products (due to steep competition). However, an increase in sales of hydrocodone-related products partially offset the fall in revenue in this segment.
Sales from the Global Medical Imaging segment were $201.6 million, down 11.2% year over year.
Research and development expenses came in at $45 million, up 5.4% from the year-ago quarter. Selling, general and administrative expenses were $332.7 million, up 50.3% from the year-ago quarter.
On Jul 27, 2015, Mallinckrodt announced that it has entered into a definitive agreement to sell its global contrast media and delivery systems (CMDS) business to Guerbet. The transaction is valued at approximately $270 million and is expected to close in the next few months. The planned divestiture of Mallinckrodt’s CMDS business is aimed at refining its portfolio and transforming the company into a leading specialty biopharmaceutical company with focus on long-term, durable and sustained growth.
Our Take
Mallinckrodt’s third-quarter fiscal 2015 results were mixed with the company beating on bottom-line estimates but missing on the top line. Performance at the Specialty Brands segment was impressive. The company will continue to benefit from performance by Acthar, Ofirmev and Inomax, going forward.
Mallinckrodt carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the health care sector are Dr. Reddy’s Laboratories Ltd. RDY, Ligand Pharmaceuticals Incorporated LGND and Progenics Pharmaceuticals, Inc. PGNX. While Dr. Reddy's and Ligand carry a Zacks Rank #1 (Strong Buy), Progenics hold a Zacks Rank #2 (Buy).
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