Yahoo Finance Mallinckrodt Tops Q2 Earnings & Revenues on Acquisitions - Analyst Blog
Mallinckrodt plc MNK reported adjusted earnings of $1.72 per share in the second quarter of fiscal 2015 (ended Mar 27, 2015), beating the Zacks Consensus Estimate of $1.48. Earnings also exceeded the year-ago figure of 95 cents per share. Earnings in the reported quarter were boosted by acquisitions in fiscal 2014.
Net sales for the quarter were $909.9 million, up 63.1% from the year-ago quarter, easily surpassing the Zacks Consensus Estimate of $853 million.
Quarter in Details
Post the recent acquisitions (erstwhile Questcor Pharmaceuticals and Cadence), 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 $334.3 million from $55.1 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 $296.1 million. Sales in the segment were partially offset by a decline in Exalgo sales following its loss of exclusivity in May 2014.
Specialty Generics generated sales of $362.8 million from $269.2 million in the year-ago quarter primarily driven by an increase in sales of hydrocodone-related products and oxycodone-related products along with the inclusion of sales from BioVectra. 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 $202.6 million in the reported quarter, down 8.9% year over year.
Research and development expenses came in at $47.0 million, up 13.5% from the year-ago quarter. Selling, general and administrative expenses were $343.5 million, up from $194.1 million in the year-ago quarter. The increase was due to higher Ofirmev and Acthar selling expenses.
2015 Outlook
Mallinckrodt expects net sales to come between $3.75 billion and $3.85 billion. The Zacks Consensus Estimate of $3.7 billion is well within the guided range. Earnings per share are projected between $7.10 and $7.50. The Zacks Consensus Estimate of $7.29 is within the projected range.
Our Take
Mallinckrodt currently carries a Zacks Rank #2 (Buy). We are encouraged by the earnings beat in the second quarter boosted by the acquisitions of erstwhile Cadence Pharmaceuticals and Questcor Pharmaceuticals.
The Cadence Pharmaceuticals acquisition added Ofirmev to the company’s specialty pharmaceuticals portfolio and expanded its pain management franchise while the Questcor acquisition added Acthar Gel to its portfolio.
Meanwhile, in a bid to expand into the hospital growth platform, Mallinckrodt acquired privately-held critical care company Ikaria, Inc. from a Madison Dearborn-led investor group. The acquisition will further boost performance.
Other favorably-placed stocks in the health care sector include Actavis plc ACT, Endocyte, Inc ECYT, and Shire plc SHPG. All three carry a Zacks Rank #2.
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