Mallinckrodt Beats On Q1 Earnings, Sales Miss Estimates

Mallinckrodt plc (MNK - Analyst Report) reported adjusted earnings of $1.84 per share in the first quarter of fiscal 2015 (ended Dec 26, 2014), beating the Zacks Consensus Estimate of $1.57. Earnings also exceeded the year-ago figure of 88 cents per share. Earnings in the reported quarter were boosted by acquisitions.

Net sales for the quarter were $866.3 million, up 60.4% from the year-ago quarter but missed the Zacks Consensus Estimate of $888 million.

Quarter in Details

During the first quarter of fiscal 2015, Mallinckrodt integrated the operations of erstwhile Questcor Pharmaceuticals. Consequently, the company changed its financial reporting and operates under three segments now – Specialty Brands, Specialty Generics and Global Medical Imaging.

Sales from the Specialty Brands segment soared to $376.3 million from $59.6 million in the year-ago quarter. The increase in net sales was primarily driven by the inclusion of Acthar and Ofirmev, which generated net sales of $266.4 million and $71.4 million, respectively, and was partially offset by a decline in Exalgo sales following its loss of exclusivity in May 2014.

Specialty Generics generated sales of $284.2 million, up 13.7% from the year-ago quarter primarily driven by a $35.4 million increase in sales of oxycodone-related products. However, sales in this segment were impacted by a decrease in methylphenidate ER sales due to the FDA’s reclassification of these products from an AB rating to a BX rating in Nov 2014.

Sales from the Global Medical Imaging segment were $199.3 million in the reported quarter, down 8.8% year over year.

Research and development expenses came in at $42.4 million, up from $39.0 million in the year-ago quarter.

Selling, general and administrative expenses were $262.5 million, up 79.5%. The increase was due to higher Ofirmev and Acthar selling expenses.

Our Take

Mallinckrodt currently carries a Zacks Rank #2 (Buy). We are encouraged by the earnings beat in the first quarter boosted by the recent acquisitions of erstwhile Cadence Pharmaceuticals and Questcor.

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