DUBLIN - Mallinckrodt plc (NYSE American: MNK) ('Mallinckrodt' or the 'Company'), a global specialty pharmaceutical company, today reported results for the second quarter ended June 30, 2023.1
'Mallinckrodt continued to advance our strategic initiatives in the second quarter, delivering results in line with our expectations. I am particularly pleased to share that we achieved year-over-year revenue growth this quarter - an important step forward in our goal to stabilize the business in the near term and return to sustainable growth in the long term,' said Siggi Olafsson, President and Chief Executive Officer. 'We recorded another quarter of growth in the Specialty Generics segment and expect that sales growth in the segment will continue throughout the year, with Mallinckrodt remaining an important source of consistent supply and high-quality, U.S.-manufactured medicines for our customers amidst market disruptions. On the Specialty Brands side, the launch of Terlivaz (terlipressin) has exceeded our expectations, as we continued to gain rapid formulary access and increasing utilization in hospitals. Therakos and Acthar Gel (repository corticotropin injection) both performed as anticipated, with Therakos returning to growth and Acthar Gel performance rebounding. We look forward to the expected clearance for INOmax Evolve, a next-generation delivery system, from the U.S. Food and Drug Administration later this year.'
Mr. Olafsson continued, 'While we continue to navigate significant challenges in the market from competitive pressures, it is clear that everyone at Mallinckrodt has been working hard to execute on key opportunities across our portfolio. Simultaneously, we continue to actively evaluate our financial situation and consider our options. We have been engaged in advanced discussions with representatives of the opioid disbursement trust and our funded debt creditors and analyzing various proposals with respect to our opioid settlement and debt obligations. While these discussions are ongoing, our teams remain fully focused on advancing our business objectives, serving customers and delivering high-quality therapies to patients with severe and critical conditions.'
Second Quarter 2023 Financial Results1
Mallinckrodt's net sales in the second quarter of 2023 were $475.0 million, an increase of 1.3% on a reported and constant currency basis, as compared to the second quarter of 2022. The prior year quarter included $383.7 million in the predecessor period and $85.0 million in the successor period for a total of $468.7 million.
The Company's Specialty Brands segment reported net sales of $280.1 million, a decrease of 8.4% on a reported basis and 8.5% on a constant currency basis. The prior year quarter included $247.7 million in the predecessor period and $58.2 million in the successor period for a total of $305.9 million. This decline is primarily due to the impact of competition, continued scrutiny on overall specialty pharmaceutical spending and slower than expected returning patient volumes.
Mallinckrodt's Specialty Generics segment reported net sales of $194.9 million, an increase of 19.7% on a reported and constant currency basis. The prior year quarter included $136.0 million in the predecessor period and $26.8 million in the successor period for a total of $162.8 million. This increase is primarily due to growth in finished-dosage products as the broader market has experienced disruption in product quality and supply.
The Company recorded a net loss for the second quarter of $747.8 million, as compared to $193.5 million net loss in the predecessor period and $63.7 million net loss in the successor period for a total net loss of $257.2 million in the second quarter of 2022.
Mallinckrodt's Adjusted EBITDA in the second quarter was $144.0 million, as compared to $156.3 million in the second quarter of 2022. The net sales increase was offset by margin deterioration related to overall product mix, as the Specialty Generics business became a larger portion of the overall Company, coupled with the loss of Amitiza royalties associated with the loss of U.S. exclusivity. In addition to margin shift, the Company continued to invest in the launches of Terlivaz and StrataGraft (allogeneic cultured keratinocytes and dermal fibroblasts in murine collagen - dsat), which was partially offset by other reductions in selling, general and administrative (SG&A) expenses and research and development (R&D) expenses as a result of the Company's initiatives to improve its overall cost structure.
As a result of Mallinckrodt's ongoing evaluation of its financial situation and related discussions with its stakeholders, the Company has recorded $10.4 million of expense within SG&A in the second quarter related to professional fees that will continue into the third quarter and beyond and for which an adjustment is made within the Company's Adjusted EBITDA. The Company also expects to incur approximately $20.0 million to $30.0 million in incremental compensation costs, for which no adjustment is made within Adjusted EBITDA, related to these ongoing liability management discussions, of which approximately $5.0 million was recorded in the second quarter.
Six-Month 2023 Results2
Mallinckrodt's net sales were $899.6 million for the six months ended June 30, 2023, as compared to $874.6 million in the predecessor period and $85.0 million in the successor period for a total of $959.6 million for the six months ended July 1, 2022.
The Company recorded a net loss of $997.1 million, as compared to $313.1 million net loss in the predecessor period and $63.7 million net loss in the successor period for a total net loss of $376.8 million for the six months ended July 1, 2022.
Mallinckrodt's Adjusted EBITDA was $267.5 million, as compared with $303.0 million of Adjusted EBITDA in the predecessor period and $30.3 million of Adjusted EBITDA in the successor period for a total Adjusted EBITDA of $333.3 million for the six months ended July 1, 2022.
Second Quarter 2023 Business Segment Update
Specialty Brands Segment
Acthar Gel net sales declined 4.0% on a reported and constant currency basis, or $4.9 million, as compared to the comparable quarter of the prior year. Performance declines were driven by continued scrutiny on overall specialty pharmaceutical spending and competition, as well as slower-than-expected returning patient volumes, impacted primarily by affordability. As expected, Acthar Gel net sales improved sequentially, supporting the Company's guidance that Acthar Gel sales will decline between 15% and 20% for the year. Acthar Gel remains a critical product in Mallinckrodt's portfolio for both its high clinical value to patients and favorable position with prescribers. The Company is focused on the launch of the Acthar next-generation delivery device in the second half of 2024.
Terlivaz's launch progress continued to reflect positive momentum and significant enthusiasm from the medical community nearly one year following U.S. Food and Drug Administration (FDA) approval. The Company has gained formulary inclusion for Terlivaz at approximately 50% of targeted hospitals, ahead of the product's anticipated launch curve. Based on early utilization data, the Company expects peak year net sales between $200.0 million and $300.0 million.
INOmax (nitric oxide) gas, for inhalation continues to be the market leader in nitric oxide for critically ill newborns, despite sales performance being impacted by persistent competitive pressures. Mallinckrodt continues to work with the U.S. FDA on the 510(k) premarket notification application for INOmax Evolve and anticipates receiving clearance for the product in late 2023.
Therakos returned to sales growth this quarter, growing 5.0% on a reported basis and 4.5% on a constant currency basis, or $3.0 million, as compared to the comparable quarter of the prior year. Performance was driven by strength in the U.S. and reflected a return to historical growth trajectories for the product. The Company expects Therakos will continue to grow in the mid-single digits through the remainder of the year and looks forward to launching the product in Japan in the second half of this year.
Amitiza sales continued to be impacted by the U.S. market becoming fully genericized and multiple market entrants. Internationally, product sales declined in the Japanese market due to an unfavorable impact from pricing.
Specialty Generics Segment
Mallinckrodt's Specialty Generics segment continued to experience strong growth driven by the strength of its U.S.-based manufacturing, vertical integration and continuity of supply within dosage generics, as the active pharmaceutical ingredients business was relatively stable. Mallinckrodt benefits from its role as a consistent and reliable supplier of high-quality medicines to its customers.
The Company continues to expect Specialty Generics net sales growth in 2023, particularly as disruptions in the drug market supply chain and shortages in certain therapeutic areas persist. As manufacturing volumes have increased, Mallinckrodt's materials supply chain has been resilient, and the Company is working to meet robust demand with a focus on enhancing manufacturing labor resources.
Liquidity Update
Mallinckrodt's cash balance at the end of the second quarter was $480.6 million. Subsequent to the end of the second quarter, the Company drew $100 million on its now fully drawn accounts receivable financing facility. As of the date of filing, the Company's cash balance was approximately $550 million.
As the Company previously disclosed, on June 15, 2023, the Company did not make interest payments that were due that date on its 2028 First Lien Notes and 2029 Second Lien Notes. The Company's failure to make these interest payments before the expiration of applicable grace periods resulted in events of default and (absent prompt cure of such events of default or discharge of the 2028 First Lien Notes and the 2029 Second Lien Notes) cross-defaults under the Company's term loans and receivables financing facility. The Company has entered into forbearance agreements with the lenders and noteholders that run through August 15, 2023 (assuming the forbearance agreements are not earlier terminated) on account of these events of default and related cross-defaults. The Company has also entered into an amendment to its opioid deferred cash payments agreement that, along with related subsequent extensions, extended the due date for the $200.0 million installment payment payable to the opioid disbursement trust from June 16, 2023 to August 15, 2023. If the interest payments are not made prior to the expiration or termination of the forbearance agreements or the opioid installment payment is not made prior to the extended date under the amendment to the opioid deferred cash payments agreement, then the applicable funded debt creditors would be permitted to accelerate the applicable obligations and the opioid disbursement trust would be permitted to accelerate the Company's opioid settlement obligations. In that scenario, the Company would not have sufficient liquidity to meet all of these obligations.
Subject to approval by the Company's Board of Directors, Mallinckrodt's ongoing discussions with its various stakeholders contemplate entering into a restructuring support agreement that would include, among other things, initiating Chapter 11 proceedings. The Company expects to continue its current operations without material interruption and work with its business partners as usual during the course of these discussions and any potential restructuring.
About Mallinckrodt
Mallinckrodt is a global business consisting of multiple wholly owned subsidiaries that develop, manufacture, market and distribute specialty pharmaceutical products and therapies. The Company's Specialty Brands reportable segment's areas of focus include autoimmune and rare diseases in specialty areas like neurology, rheumatology, hepatology, nephrology, pulmonology, ophthalmology and oncology; immunotherapy and neonatal respiratory critical care therapies; analgesics; cultured skin substitutes and gastrointestinal products. Its Specialty Generics reportable segment includes specialty generic drugs and active pharmaceutical ingredients.
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Contact:
Daniel Speciale
Tel: 314-654-3638
Email: daniel.speciale@mnk.com
MALLINCKRODT PLC 