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CHESTERFIELD, United Kingdom, May 3, 2016 /PRNewswire/ -- Mallinckrodt plc (NYSE: MNK), a leading global specialty biopharmaceutical company, today reported results for the second quarter of fiscal 2016. Amounts reported reflect presentation of the company's former contrast media and delivery systems (CMDS) business as a discontinued operation. Unless otherwise noted, all comparisons of fiscal 2016 second quarter or first half performance are to the comparable periods of fiscal 2015.

Total Mallinckrodt net sales were $918.0 million in the second quarter of fiscal 2016, up 12.7% on a constant-currency basis. Specialty Brands segment revenue was up 60.0% and the primary component of overall net sales acceleration. Results were led by solid volume growth in H.P. Acthar Gel (repository corticosteroid injection), the inclusion of INOMAX (nitric oxide) gas for inhalation and Therakos^® immunotherapy platforms, and incremental volume growth for OFIRMEV^® (acetaminophen) injection. Specialty Brands results were partially offset by decreased net sales within the Specialty Generics and Nuclear Imaging segments.

GAAP net income from continuing operations for the quarter was $120.3 million, or $1.07 per diluted share, compared with $75.2 million, or $0.64 per diluted share. The increase principally reflects higher net sales and profits from recently acquired assets in the Specialty Brands segment and strong net sales and profit contribution from Acthar. In addition, selling, general and administrative (SG&A) costs decreased due to ongoing restructuring and 2015 charges that did not recur in fiscal 2016. These factors were partially offset by higher interest expense resulting primarily from the debt associated with the acquisitions of INOMAX and Therakos, and the impairment of in-process research and development intangible assets acquired in our fiscal 2013 CNS Therapeutics, Inc. acquisition.

Adjusted net income for the quarter was $224.8 million, up 12.9% from $199.1 million. Adjusted diluted earnings per share were $2.01, up 18.2% from $1.70.

During the quarter, the company repurchased 3.4 million shares under its share repurchase program.

"Mallinckrodt's performance in the second quarter of fiscal 2016 was again very strong, driven by exceptional commercial execution across our Specialty Brands portfolio," said Mark Trudeau, President and Chief Executive Officer. "Each of the key branded products contributed volume growth –  Acthar, INOMAX, Therakos and, notably, OFIRMEV –  expanding patient access so more people may benefit from these drugs. The Specialty Brands segment continues to contribute nearly 60% of our total net sales.

"The strength of our growth strategy is evidenced by these results," Trudeau continued. "We continue to acquire under-resourced assets for underserved patient populations in areas of high unmet medical need. Then we invest in commercial and scientific support for these assets, including generating additional data and sponsoring clinical and health economic studies. By following this strategy and focusing on execution, we are making steady progress and creating near- and long-term value for patients and shareholders."

GAAP gross profit was $479.6 million for the quarter, up 3.6% over $462.9 million. This growth resulted from the addition and performance of both INOMAX and Therakos, and the performance of Acthar and OFIRMEV; partially offset by decreased gross profit from the Specialty Generics segment. Adjusted gross profit as a percentage of net sales was 71.4% versus 71.9%.

GAAP SG&A expenses for the quarter were $231.2 million, compared with $308.4 million. However, adjusted SG&A as a percentage of net sales for the quarter was 25.3%, an improvement of 250 basis points. The decrease in absolute SG&A expenses is primarily due to fiscal 2015 legal, environmental and equity costs – as well as benefits from restructuring – all partially offset by the addition of INOMAX and Therakos marketing and sales teams to the business.

Income tax benefit in the second quarter was $53.6 million, versus a benefit of $34.1 million. The adjusted effective tax rate was 15.7% compared to 20.2%.

Six-Month Fiscal 2016 Results

Net sales were $1.833 billion, up 15.5% compared with $1.587 billion. The increase came primarily through the inclusion and performance of INOMAX and Therakos, and continued net sales performance of Acthar. Specialty Brands results were partially offset by decreased net sales within the Specialty Generics segment.

On a GAAP basis, net income was $329.4 million, compared with $191.5 million. Diluted earnings per share from continuing operations were $2.07 compared with $1.38.

On a non-GAAP basis, adjusted net income was $467.5 million, compared with $407.8 million. Adjusted diluted earnings per share were $4.09, compared with $3.49, an increase of 17.2%.

Liquidity

In the first six months of fiscal 2016, Mallinckrodt generated $448.7 million in free cash flow, with $186.3 million in the second quarter. The company used a portion of this strong cash generation and the cash received from the divestiture of CMDS to repurchase $501.6 million of ordinary shares and to acquire the Hemostasis products. Mallinckrodt's cash balance at the end of the quarter was $341.4 million. The company's liquidity position remains quite strong and resilient, and management remains focused primarily on allocating capital to share repurchases, debt reduction and additional business development targets.

BUSINESS SEGMENT RESULTS

Specialty Brands Segment

The segment benefited from strong commercial execution throughout the second quarter with net sales increasing to $535.0 million, compared with $334.3 million, an increase of 60.0%. As noted, the increase in net sales was driven by the inclusion and performance of INOMAX and Therakos, which collectively generated net sales of $165.7 million. Additionally, Acthar net sales were $248.4 million in the quarter, an 8.9% increase over $228.0 million. Mallinckrodt's second largest product, INOMAX, generated net sales of $115.5 million, an increase of 13.8% reported over pro forma net sales of $101.5 million, and up 13.9% on a constant-currency basis. OFIRMEV net sales were $71.1 million compared with $68.1 million, an increase of 4.4%. Net sales of the Therakos immunotherapy product line were $50.2 million, which represents growth of 11.6% reported over pro forma net sales of $45.0 million, and up 13.0% on a constant-currency basis.

Specialty Generics Segment

Net sales for the segment in the second quarter decreased 27.1%, to $264.4 million, compared with $362.8 million, driven principally by net sales declines in various product categories due to increased competition. This quarter's comparison also reflects an exceptionally strong second quarter in fiscal 2015. Management continues to expect difficult year-over-year net sales comparisons in this segment moving forward.

Nuclear Imaging Segment

The company completed the sale of its CMDS business to Guerbet S.A. in November 2015. The financial results of the CMDS business are presented as a discontinued operation in both the current and prior fiscal year. The Global Medical Imaging segment was renamed Nuclear Imaging at the beginning of fiscal 2016.

Net sales for the second quarter fiscal 2016 for the Nuclear Imaging segment were $102.2 million, compared with $109.5 million.

GUIDANCE UPDATE

Management is raising its fiscal 2016 guidance for adjusted diluted earnings per share from the previous $7.85 to $8.30 to a revised range of $8.15 to $8.50.

CONFERENCE CALL AND WEBCAST

Mallinckrodt will hold a conference call for investors on Tuesday, May 3, 2016, beginning at 8:30 a.m. U.S. Eastern Time. This call can be accessed in three ways:

• At the Mallinckrodt website: http://www.mallinckrodt.com/investors.
• By telephone: For both listen-only participants and those who wish to take part in the question-and-answer portion of the call, the telephone dial-in number in the U.S. is (877) 359-9508. For participants outside the U.S., the dial-in number is (224) 357-2393. Callers will need to provide the Conference ID of 73221217.
• Through an audio replay: A replay of the call will be available beginning at 11:30 a.m. U.S. Eastern time on Tuesday, May 3, 2016, and ending at 11:59 p.m. U.S. Eastern Time on Tuesday, May 17, 2016. Dial-in numbers for U.S.-based participants are (855) 859-2056 or (800) 585-8367. Participants outside the U.S. should use the replay dial-in number (404) 537-3406. All callers will be required to provide the Conference ID of 73221217.

ABOUT MALLINCKRODT

Mallinckrodt is a global business that develops, manufactures, markets and distributes specialty pharmaceutical and biopharmaceutical products and therapies, as well as nuclear imaging products. Areas of focus include autoimmune and rare diseases in specialty areas like neurology, rheumatology, nephrology and pulmonology; immunotherapy and neonatal respiratory critical care therapies; analgesics and hemostasis products; and central nervous system drugs. The company's core strengths include the acquisition and management of highly regulated raw materials and specialized chemistry, formulation and manufacturing capabilities. The company's Specialty Brands segment includes branded medicines; its Specialty Generics segment includes specialty generic drugs, active pharmaceutical ingredients and external manufacturing; and the Nuclear Imaging segment includes nuclear imaging agents. To learn more about Mallinckrodt, visit www.mallinckrodt.com.

Mallinckrodt uses its website as a channel of distribution of important company information, such as press releases, investor presentations and other financial information. It also uses its website to expedite public access to time-critical information regarding the company in advance of or in lieu of distributing a press release or a filing with the U.S. Securities and Exchange Commission (SEC) disclosing the same information. Therefore, investors should look to the Investor Relations page of the website for important and time-critical information. Visitors to the website can also register to receive automatic e-mail and other notifications alerting them when new information is made available on the Investor Relations page of the website.

NON-GAAP FINANCIAL MEASURES

This press release contains financial measures, including adjusted net income, adjusted diluted earnings per share, adjusted gross profit, adjusted SG&A, net sales growth on a constant-currency basis, adjusted effective tax rate, pro forma fiscal 2015 INOMAX net sales, pro forma fiscal 2015 Therakos net sales, and free cash flow, which are considered "non-GAAP" financial measures under applicable SEC rules and regulations.

Adjusted net income, adjusted gross profit and adjusted SG&A represent amounts prepared in accordance with accounting principles generally accepted in the U.S. (GAAP) and adjusted for certain items that management believes are not reflective of the operational performance of the business. The adjustments for these items are on a pre-tax basis for adjusted gross profit and adjusted SG&A and on an after-tax basis for adjusted net income. Adjustments to GAAP amounts include, as applicable to each measure, restructuring and related charges, net; amortization and impairment charges; discontinued operations; acquisition-related expenses; changes in fair value of contingent consideration obligations; inventory step-up expenses; significant legal and environmental charges; recurrent cash tax payments to the U.S. Internal Revenue Service associated with internal installment sales transactions; and other items identified by the company. Adjusted diluted earnings per share represent adjusted net income divided by the number of diluted shares.

The adjusted effective tax rate is calculated as the income tax effects on continuing and discontinued operations plus the income tax impact included in Mallinckrodt's reconciliation of net income, divided by income from continuing and discontinued operations plus the pre-tax, non-income, tax-related adjustments included in its reconciliation of adjusted net income (excluding dilutive share impact). The income tax impact item included in its reconciliation of adjusted net income primarily represents the tax impact of adjustments between net income and adjusted net income as well as U.S. tax payments associated with internal installment sale transactions.

Net sales growth on a constant-currency basis measures the change in net sales between current- and prior-year periods using a constant currency, the exchange rate in effect during the applicable prior-year period.

Pro forma second quarter fiscal 2015 INOMAX net sales represent $101.5 million of INOMAX net sales under its prior ownership. Pro forma second quarter fiscal 2015 Therakos net sales represent $45.0 million of its net sales under its prior ownership.

Free cash flow for the first six months of fiscal 2016 represents net cash provided by operating activities of $540.1 million less capital expenditures of $91.4 million, each as prepared in accordance with GAAP. For the second quarter, the company generated $228.7 million in net cash provided by operating activities less capital expenditures of $42.4 million.

The company has provided these adjusted financial measures because they are used by management, along with financial measures in accordance with GAAP, to evaluate the company's operating performance. In addition, the company believes that they will be used by certain investors to measure Mallinckrodt's operating results. Management believes that presenting these adjusted measures provides useful information about the company's performance across reporting periods on a consistent basis by excluding items that the company does not believe are indicative of its core operating performance. These adjusted measures should be considered supplemental to and not a substitute for financial information prepared in accordance with GAAP. The company's definition of these adjusted measures may differ from similarly titled measures used by others.

Because adjusted financial measures exclude the effect of items that will increase or decrease the company's reported results of operations, management strongly encourages investors to review the company's consolidated financial statements and publicly filed reports in their entirety. A reconciliation of certain of these historical adjusted financial measures to the most directly comparable GAAP financial measures is included in the tables accompanying this release.

Cautionary Statements Related to Forward-Looking Statements

Statements in this document that are not strictly historical, including statements regarding future financial condition and operating results, economic, business, competitive and/or regulatory factors affecting Mallinckrodt's businesses and any other statements regarding events or developments that we believe or anticipate will or may occur in the future, may be "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995, and involve a number of risks and uncertainties.

There are a number of important factors that could cause actual events to differ materially from those suggested or indicated by such forward-looking statements and you should not place undue reliance on any such forward-looking statements. These factors include risks and uncertainties related to, among other things: general economic conditions and conditions affecting the industries in which Mallinckrodt operates; the commercial success of Mallinckrodt's products; Mallinckrodt's ability to realize anticipated growth, synergies and cost savings from acquisitions; conditions that could necessitate an evaluation of Mallinckrodt's goodwill and/or intangible assets for possible impairment; changes in laws and regulations;  Mallinckrodt's ability to successfully integrate acquisitions of operations, technology, products and businesses generally and to realize anticipated growth, synergies and cost savings; Mallinckrodt's ability to successfully develop or commercialize new products; Mallinckrodt's ability to protect intellectual property rights; Mallinckrodt's ability to receive procurement and production quotas granted by the U.S. Drug Enforcement Administration; customer concentration; Mallinckrodt's reliance on certain individual products that are material to its financial performance; cost containment efforts of customers, purchasing groups, third-party payers and governmental organizations; the reimbursement practices of a small number of public or private insurers; limited clinical trial data for H.P. Acthar Gel; complex reporting and payment obligations under healthcare rebate programs; Mallinckrodt's ability to navigate price fluctuations; Mallinckrodt's ability to achieve expected benefits from restructuring activities; complex manufacturing processes; competition; product liability losses and other litigation liability; ongoing governmental investigations; material health, safety and environmental liabilities; retention of key personnel; conducting business internationally; and the effectiveness of information technology infrastructure.

These and other factors are identified and described in more detail in the "Risk Factors" section of Mallinckrodt's Annual Report on Form 10-K for the fiscal year ended September 25, 2015. The forward-looking statements made herein speak only as of the date hereof and Mallinckrodt does not assume any obligation to update or revise any forward-looking statement, whether as a result of new information, future events and developments or otherwise, except as required by law.

CONTACTS

Investor Relations
Coleman N. Lannum, CFA
Senior Vice President, Investor Strategy and IRO
314-654-6649
cole.lannum@mallinckrodt.com

Media
Rhonda Sciarra
Senior Communications Manager
314-654-8618
rhonda.sciarra@mallinckrodt.com

Meredith Fischer
Senior Vice President, Communications and Public Affairs
314-654-3318
meredith.fischer@mallinckrodt.com