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Mallinckrodt (MNK) Earnings, Sales Decline Y/Y in Q3


Mallinckrodt Public Limited Company MNK reported disappointing results for third-quarter 2017.

The company reported adjusted earnings of $1.97 per share in the reported quarter, down from the year-ago figure of $2.04 due to continued pricing pressure within the Specialty Generics.

Net sales in the quarter came in at $793.9 million, down 10.5% year over year.

Mallinckrodt’s stock price has declined 61.1% in the year so far, compared with the industry’s fall of 31.7%.

Quarter in Detail

The company reports results under two segments — Specialty Brands and Specialty Generics.

Sales at the Specialty Brands segment were $591.4 million, down 6.6% from the year-ago quarter. Acthar, Mallinckrodt’s largest product, garnered sales of $308.7 million, down 5.6% due to volume declines. Mallinckrodt is experiencing an industry wide issue where an increasing number of written prescriptions are going unfilled. The impact to Acthar sales increased at the end of the quarter. Sales of the drug are expected to be down sequentially as well.

Inomax, its second-largest product, generated sales of $125.7 million, down 0.9%. Ofirmev sales dipped 0.3% year over year to $75.4 million.

Sales of the Therakos immunology platform were $55.3 million, up 1.5%.

As expected, weakness in the Specialty Generics segment continues due to competitive pressure. The segment recorded sales of $189.1 million, down 21.1%.

Adjusted selling, general and administrative expenses in the reported quarter decreased 18.7% to $197.5 million. Meanwhile, research and development expenses declined 12.4% to $59.5 million.

Our Take

Mallinckrodt’s third-quarter results were dismal as Acthar sales declined on volume while weaknesses in the generics segment persist. Inomax is also facing weaknesses.

The company is currently streamlining its business. The company aims to focus better on its specialty pharmaceutical business after having sold its Nuclear Imaging business. The company also sold its Intrathecal Therapy business. The acquisition of hemostasis drugs — Recothrom Thrombin topical (recombinant), PreveLeak and Raplixa (fibrin sealant) — from The Medicines Co. MDCO has strengthened Mallinckrodt’s growing hospital portfolio.

Earlier in the month, Mallinckrodt announced that it will acquire a clinical stage biopharmaceutical company Ocera Therapeutics, Inc. Ocera's experimental product OCR-002, an ammonia scavenger, is being evaluated for the treatment of hepatic encephalopathy, a neuropsychiatric syndrome associated with hyperammonemia, a complication of acute or chronic liver disease.

The candidate is currently in phase II. Mallinckrodt will discuss with FDA to confirm the regulatory pathway to gain FDA approval and subsequently launch the IV formulation, expected by 2022, and the oral formulation, expected by 2024.

Zacks Rank & Key Picks

Mallinckrodt currently carries a Zacks Rank #3 (Hold).

Some better-ranked health care stocks in the same space are Ligand Pharmaceuticals Inc. LGND and Adaptimmune Therapeutics plc ADAP. Both companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ligand’s earnings per share estimates have moved up $3.68 to $3.70 for 2018 over the last 30 days. The company delivered positive earnings surprises in two of the trailing four quarters, with an average beat of 6.19%. The share price of the company has increased 44.2% year to date.

Adaptimmune’s loss per share estimates have narrowed from 96 cents to 72 cents for 2017 and from 90 cents to 76 cents for 2018 over the last 60 days. The company reported positive earnings surprises in two of the trailing four quarters, with an average beat of 24.79%. The share price of the company has increased 101.5% year to date.

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