Q4 2022 Mallinckrodt PLC Earnings Call
Speaker 2: The conference will begin shortly. To raise and lower your hand during Q&A, you can dial star 1 1.
Speaker 3: Good day, and thank you for standing by. Welcome to the Mallinckrodt Q4 2022 earnings announcement. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star-one-one on your telephone.
Speaker 3: You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Dan Special, Chief Investor Relations Officer. Please go ahead.
Speaker 4: Thank you, Tanya. And I'd like to welcome everybody to today's call. With me this morning our CEO , Siggy Oldson.
Speaker 4: and Brian Reasons, our COF O. Stiggy will start with an overview of the business performance, Brian will take you through the financials. Before we begin, let me remind you that you'll hear us make some forward-looking statements and that possible that actual results could be materially different from our stated expectations.
Speaker 4: Please note these four looking statements are made as of today and we assume no obligation to update them, even in the event that new information or factual results or future expectations change materially.
Speaker 4: We encourage you to refer to the cautionary statements contained in our SCC filings for more in-depth explanation of the inherent limitations of such forward looking statements.
Speaker 4: We will also provide selected non-GAAP adjusted measures related to our financial performance.
Speaker 4: A reconciliation of these non-GAAP measures is included in our earnings year lease, which can be found on our website, malincroft.com.
Speaker 4: We use our website as a channel to distribute important and time critical company information and you should look at the investor relations page of our website for this information.
Speaker 4: As noted in our earnings release, our fourth quarter ended on December 30, 2022, and the comparative period we will be discussing this morning is the predecessor quarter into December 31, 2021.
Speaker 4: As a result of the application of fresh start accounting, the company's GAAP financial statements for the periods prior to June 16, 2022, the date of our emergence, are not comparable to those periods subsequent to June 16, 2022.
Speaker 4: Further, the results in the quarter compare a normal 13-week period to a 14-week period in 2021.
Speaker 4: While the exact quantification of the impact of the extra selling week in 2021 is extremely difficult to determine, we believe it reduced reported quarterly net sales growth rates of the company as a whole by approximately 6-9 percentage points.
Speaker 4: The numbers we will discuss this morning make no adjustment for that comparison and are presented on a constant currency basis unless otherwise noted.
Speaker 4: For the quarter, Mallinckrodt reported a gap net loss of $250 million and a net loss of $911 million.
Speaker 4: for the 2022 fiscal year. After adjusting for specified items, our non-GAAP adjusted EBITDA was $176 million for the quarter and $675 million for the fiscal year 2022.
Speaker 4: the 2022 fiscal year. After adjusting for specified items, our non-GAAP adjusted EBITDA was $176 million for the quarter and $675 million for the fiscal year 2022. With that, I'll turn the call over to Siggy. Siggy?
Speaker 5: Thanks Dan and good morning everyone. I'm pleased to be with you today to discuss our successful quarter for Malincroz and share some color on what is ahead for our company. I'll start by briefly touching on a few key highlights about our full year performance. We executed well and I'm incredibly proud of how we finished the year.
Speaker 5: exceeding our EBITDA guidance and achieving the high end of net sales guidance for the year.
Speaker 5: Brian will provide a further caller on the financial results as well as guidance for 2023 later in the call, but I wanted to kick things off with these positive results after it ties directly back to our strategic initiatives.
Speaker 5: As you may recall, we have been focused on executing our three near-term strategic priorities.
Speaker 5: strengthening the balance sheet, stabilizing our portfolio and making the right investment in our pipeline.
Speaker 5: We are beginning to see evidence of solid execution of these initiatives in the full-year results.
Speaker 5: We achieved net sales at the high end of our guidance range, reflecting our team's efforts to stabilize the portfolio, and EBDA exceeding our guidance range as we continue to focus on discipline cost controls and making thoughtful investment in our pipeline.
Speaker 5: We also saw a slight increase in cash and hand during the fourth quarter. I believe our liquidity will allow us to continue making important investment in the business.
Speaker 5: For our portfolio, we made a solid progress in the launch of Terlivers. And we continue to see a strong engagement from clinical community on the role of Terlivers in treating and reversing hepatocrenal syndrome, including discussion of Terli Preson in a 2023 review article from the New England Journal of Medicine.
Speaker 5: Early clinical consensus appears to align with public clinical guidelines, which recommended the use of televerse alpha-first line therapy for appropriate patients. We also recently welcomed Dr. Peter Ricksettom, our chief scientific officer, to oversee efforts
Speaker 5: to advance our pipeline and round out our excessive committee. Peter brings 30 plus years of research and development experience and the proven records of executing clinical programs and advancing proper development pipelines to Mollicrot.
Speaker 5: We are fortunate to have him on board.
Speaker 5: We made good progress throughout the year in achieving other key objectives, including putting in place a full management team, adding industry leaders to the board at the independent directors, and working to reinvigorate our company's culture.
Speaker 5: 2023 is a pivotal year for the company and we stand ready to navigate the opportunities and the challenges we have ahead of us.
Speaker 5: I am pleased with our efforts to date and I have a great confidence in Marlinclot's long-term ability to drive value for stakeholders.
Speaker 5: Now, let's do a deeper dive on the performance across the business segments during the fourth quarter, beginning with Specialty Brands.
Speaker 5: First up is actor gel, which we believe is showing an early sign of stabilization.
Speaker 5: We were pleased to see the overall market for active growth slightly in 2022. We are also encouraged by the stabilization and patient demand and continue to work with patients to ensure appropriate access for patients that need this therapy.
Speaker 5: With our continued commitment to the products, after remains a top choice for price drivers, and we are continuing to work closely with them to make this therapy available to ask many appropriate patients as possible. That said, there is a competition in the market, which is expected to continue to have an impact on performance in 2023.
Speaker 5: where we anticipate the product of revenue will be climbed a roughly 10% from 2022.
Speaker 5: As mentioned last quarter, development of our actor next generation delivery device has been completed. But we do not anticipate a launch in 2023.
Speaker 5: We continue to work towards the resolution of a regulatory matter involving one of our partners not specific to our device.
Speaker 5: We remain optimistic about the important role the device will play in our portfolio if approved, an easier and more patient-friendly version of actors tell for single unit doses.
Speaker 5: We'll continue to update you on any developments on the resolution of the third party matter after year progresses.
Speaker 5: I'm excited to share our progress with Telivus this quarter. In September of last year, Telivus became the first and only FDA approved therapy to improve kidney function in adults with HRS, with rapid reduction in kidney function, at devastating condition with a high mortality rate. Since approval, we have been working hard.
Speaker 5: to engage with hospitals to gain formulary inclusion of Therley-Wars, and we have made a good progress in a short amount of time since the approval. As we indicated last quarter, while this process takes time, we have gained formulary approval in vast majority of those hospitals that have reviewed the product.
Speaker 5: What's more, there are over 100 additional review scheduled in the coming months. The significant enthusiasm.
Speaker 5: We have hearing from the key opinion leaders community combined with a protest inclusion in treatment guidelines will be key to gaining formal reactions.
Speaker 5: We expect to have more to share in the coming quarters and remain very optimistic about the future of this product.
Speaker 5: Looking at I know max this product continues to be a market leader by our best in class I know max total scare service offering.
Speaker 5: While we continue to face competition that is expected to persist in 2023, we expect to continue to be the market leader in nitric oxide for this critically ill newborn. Our top focus here is our plant loans of Inaamx evo, the next generation delivery system of Inaamx.
Speaker 5: If approved, we remain on track to launch this year and we are excited to bring this product to market. With enhanced automation and streamlined design, we expect Einmerks Evol to provide a meaningful advancement in the delivery of our products to help improve clinician experiences.
Speaker 5: We have seen a strong level of interest for this new option to come to market under looking forward to adding it to our offering line-up later this year.
Speaker 5: Moving to the Therocost, this is the world's only fully integrated and validated ECP system.
Speaker 5: to enhance the patient's ability to find disease.
Speaker 5: to enhance the patient's ability to find disease. If...
Speaker 5: It represents a platform technology that we believe has the opportunities for geographic and expansion and potential label expansion over time.
Speaker 5: We have historically seen this product as a consistent mid to high single digit grower and we were pleased to see a sequential growth for Therocost in 2022 as we negated the impact of stem cell transplantation due to the pandemic.
Speaker 5: We believe we are entering 2023 on a positive note with a clear pathway to returning this product to its historical growth trajectory.
Speaker 5: For strata cuff, rustic has been well below expectation today. Despite this, now that we can adjust, the Turner??
Speaker 5: We still believe that innovative treatment options for adults with deep, heart-killed fitness burns have an important place for patients and doctors and provide a significant improvement to other proteins. We are continuing our conversation with burn surgeons and physicians to drive adoptions as well as working on improved pathways for reimbursement.
Speaker 5: still believe this innovative treatment option for adults with deep, hard-to-fitness burns has an important place for patients and doctors and provides a significant improvement to orthography. We are continuing our conversation with burn surgeons, amphibians to drive adoptions, as well as working on improved pathways for reimbursement. Turning to Amitisa. All attitudes are beyond real curfew.
Speaker 5: Our focus remains squarely on the Japanese market, the Malacrox expects exclusivity into 2026. I'm strong utilization trends continue. We'll continue to see annual price reduction in the Japan market under loss of exclusivity, but we expect this product to generate a good cash flow in the years ahead. As a reminder, at the beginning of the year,
Speaker 5: The US market became fully denurized with multiple losses. As we stated in the prior quarter, this will result in a roughly $75 million reduction in Amatis Avoyalties for 2023. Now let's turn to our specialty DNA reexpect.
Speaker 5: Special Hityon Erics continued its strong performance and has proven to be an important part of the Barlin Cross business. We expected this to continue into 2023.
Speaker 5: As we discussed in our previous earnings call, we anticipated that our scheduled Acidamin of N or APAP production shutdown in fourth quarter would impact the performance of the product family in the quarter.
Speaker 5: But we have seen improvement in outputs from recent upgrades as it returned to full operation. For the remainder of the portfolio, we have been pleased by the performance of the Finnish Stosis Products with help to offset the A-PAP shutdown and the extra selling week in the prior year.
Speaker 5: Bigger picture, our specialty TNRx business continued to benefit from a wealthy-served reputation for producing high-quality generic medicines and active pharmaceutical ingredients. We are the only manufacturer of APAP in the US and we made important investment in our US manufacturing capabilities.
Speaker 5: These upgrades will benefit us over a long term, our ability to offer customers a stable supply becomes more important than ever. Our efforts in specialty DNA rigs have set us up for what we believe to be a strong 2023.
Speaker 5: We believe this business will stabilize in 2023 and has the potential to grow due to the consistency of supply and quality. We close out 2022 with a strong performance in the fourth quarter and we are confident that we are well positioned as we kick off 2023.
Speaker 5: which will be an important year for Mancourt. We have some real opportunities ahead, namely continued investment in the launches of Terri Wilson's Tratograph to support their future on looking to gain approval and launch the next generation Ina Maks evolved products. At the same time,
Speaker 5: We are prepared to face challenges this year at SON, including the loss of royalty due to generic competition in the US for Ametisa and after competition. While there are some clear challenges to the business, I believe we are taking the right steps to mitigate these opportunities.
Speaker 5: these operational impact. And we are seeing and currently sign across both business segments. We expect there a cost to return to growth this year and believe our strong performance in specialty generics will continue.
Speaker 5: The medical communities and enthusiasm around Telibus exceeds our initial expectation, and we are excited to drive this launch forward as 20-23 progresses.
Speaker 4: With that, I'll turn the call over to Brian . Thank you, Sege. I'll begin by walking through our results for the fourth quarter in fiscal year and more detail before turning dark expectations and guidance for 2023.
Speaker 6: Malancras total net sales in the fourth quarter of 2022 were $480,000,000,000, as compared to $597,000,000 in the fourth quarter of 2021, a decrease of 18% on a constant currency basis.
Speaker 6: Our specialty brand segment retored net sales of $321 million is compared to $397 million, a decrease of 19%.
Speaker 6: primarily due to the impact of competition, reduce utilization of certain products due to the continued impacts of the pandemic, continued scrutiny on overall specially pharmaceutical spending, and the impact of the extra selling we in the prior year.
Speaker 6: During the quarter, Axard Gel contributed $141 million in net sales. And our critical care products, item X generated $80 million in net sales due to the continued impact of competition in the market.
Speaker 6: We look forward to bringing the next generation device to market, which we believe will further differentiate our product from offering from competition.
Speaker 6: Starracos had 62 million in net sales, and as Ziggy mentioned, we expect this product to return to normal growth in 2023.
Speaker 6: Amaties in net sales were 34 million as we experienced continued pressure in the US from an authorized generic introduced last year. As a reminder, we still expect to lose roughly $75 million in US net sales in 2023 due to the loss of the US.
Speaker 6: with Endow, as the market fully converts to a generic marketplace with multiple entries. Turning to our specially generic segment.
Speaker 6: We reported quarterly net sales of $169 million as compared to $200 million last year. A 16% decrease primarily due to a decline in the A-PAC business, which was impacted by the scheduled maintenance shutdown of our facility during the fourth quarter and by the extra selling week in the prior year. The company's net loss for the fourth quarter was $250 million. The company's net loss for the fourth quarter and by the extra selling week in the prior year.
Speaker 6: a decrease of 24 percent for merely due to lower-net sales and growth and investment associated with launches of Turlivaz and Stratagrax, partially all set by reductions in S-GNA and R&D expense as a result of the company's initiatives to improve its overall cost structure and the favorable impact from foreign currency.
Speaker 6: of 24 percent, primarily due to lower net sales and growth in investment associated with launches of Turlivaz and Stratagrax, partially all set by reductions in SGNA and R&D expense as a result of the company's initiatives to improve its overall cost structure and the favorable impact from foreign currency. With respect to operating metrics in the quarter.
Speaker 6: a just a gross profit as a percentage of net sales was 64% driven by MECs. Adjusted SGA as a percentage of net sales was 25.2% reflecting our investment in launches of Tervas and Stratigraph, offset by continued savings from cost containment measures, organizational changes, and favorable FX rates. An R&D as a percentage of net sales was 6.1%. The company ended the quarter with roughly $610 million of liquidity.
Speaker 6: as we maintain cash and cash equivalent of $410 million and then undrawn account receivable credit facility up to $200 million.
Speaker 6: Total for principal debt outstanding at the end of the fourth quarter was $3.534 billion with net debt of $3.125 billion.
Speaker 6: Now and crowd repurchase $48 million, principal amount of its second lien note due in 2025 and 2025 and 2025, below par capturing 21 million of discount during the year.
Speaker 6: Now let me transition to recap the Melanchrops 4-Year 2022 performance. Melanchrops reported 4-Year net sales of 1.914 billion and adjusted e to the off of 675 million Concretes registered from the
Speaker 6: This reflects the meaningful strides we've already made to strengthen our company. To echo SIGGI's comments, we are incredibly proud of how we finished the year. With that in mind, I'd like to give some context on the 2023 guidance shared in our earnings through the this morning.
Speaker 6: As we've mentioned before, we anticipate the next 12 to 18 months to be the trough of the company from an adjusted need of thought and operating cashflow perspective.
Speaker 6: as both of these are expected to decline in 2023. We anticipated reductions or due primarily to the loss of amatisa US royalty stream, expected acts are a decline of roughly 10% from 2022.
Speaker 6: and investments in launches of Tarlivés and Stratagraph and the planned launch of the IMAXE law. Our guidance for 2023 includes total net sales of between $1.7 billion and $1.82 billion. And adjusted EBIDOT of between $510 million.
Speaker 6: and $569. Overall, I'm pleased with the execution of the business in the quarter as we progress into 2023. We mean, shootly focused on our upcoming debt and Madventure will be committed to making vital upgrades that we rise considering the
Speaker 6: and continuing our effort to improve the balance sheet. I'll now hand the call back to SIGI for some closing remarks. SIGI, thank you, Brian . I'm extremely proud of the team's heroes, Malikrot.
Speaker 5: They made a tremendous push in 2022 following our emergence to build a stronger company unpositioned malncrots for the future, all while continuing to deliver high quality therapies to critically ill patients. I know we have more work ahead of us.
Speaker 5: But I am grateful for their efforts. We are all equal to continue the work and to continue the work underway and take aggressive action to stabilize the business.
Speaker 5: a remain confident in all that we can achieve together and the important benefit we can continue to bring to our patients. So with that, we'll now open up the call for Q&A.
Speaker 3: Certainly, as a reminder to ask a question, please press star 1-1 on your telephone. Please wait for your name to be announced.
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Speaker 3: One moment. And our first question will come from Rishi Perrek of JP Morgan, your line is open.
Speaker 7: Morning, thanks for taking my questions. Sorry, John , late, so I apologize if you already addressed some of these questions. One, on Thericose, you expect to return a growth this year. Can you walk us through the drivers behind this growth? Is it mostly unlabeled? But are you also, what are you baking in for the off-label growth? And then can you just give us some context around pricing for this product? Yes, a really big thanks for the question. Let me stop on why we see the growth. So that will be true.
Speaker 5: COVID, we saw that with every wave of COVID, there was a less central consultation and that impacted terracotta approximately six to nine months later and we saw that in the numbers so we now we saw that in fourth quarter we started to rebound on the volume
Speaker 6: That's why we are confident in the growth that we expect to see in 20-23. So maybe on the pricing brine. Not getting this specific pricing, but overall, this historically has been a fairly stable brand. Okay, and then the care stacks might be...
Speaker 6: through all the audits and everything that's required and we expect that to come in at any point. Yeah, Risha, what I would add to that too is this is a current receivable on our balance sheet and has been for the last two quarters at this point. And so obviously hopefully we've received this in relatively short order obviously.
You know, we're working with the government through that process, getting the audit completed as it was a significant step, and we believe it's just an utter time before it's received. If I could squeeze two more in. One, can you just remind me or reiterate what your launch costs were for a stratigraph and Carolavess...
Yeah, we haven't given specifics, but if you look at our financials, you can see that last year probably close to 50 million.
50 million. Yeah, and I think as we move into 2023, obviously, Rishi, I mean, we're full launch on TurboVaz at this point and we want to certainly want to make sure that we invest appropriately in that to be able to get that off of the ground and launch appropriately. So, fair to assume is our level of investment will increase now that we're in the first four year launch. And then, you know, this year is supposed to be your top year in even as you've communicated.
those costs come down like how should we think about the jump off from your trophy but uh... going forward is it and and and you know long term you know when you think about ebada do you expect to see you know you're maxing it out at evaluation of uh... a seven handle in ebada eight handle what do you think ebada is going to go when you start to think about the uh... the ramp up in all these uh... in your in your two main drugs or new to new drugs are right yeah so let me start by by
about it, I think we're getting all the right sign back, but what we have promised investors that hopefully by mid-year or so, we can start to talk about the potential for televerse and what the learned lawns curve will be for that product because the formula is so important in the lawns curve on how quickly we have seven years of exclusivity for this product.
We are excited. We are working as fast as we can to deliver that to the market. But that will be a key and critical point to it. The second thing to keep in mind is the self-delivery device of actor, which we expect to launch in 2024. Rack will help us to stabilize the actor franchise. This is a single delivery device pre-certed by the...
we will see more later this year. Evolve will be the next generation of I know max devices. That I think will again help us to stabilize the I know max franchise. We have the total care which differentiate with the competitors. But we have been open about that. Any competition impacts the pricing of the product. So.
So bringing evolved to the market will even further help us to stabilize. And then last but not least, we are still the curious and illicit out on Stratagra. We are excited about it. We see some take in the product, but this is an amazing opportunity. I think this is a new science and technology to bring to the burn units, onto the burn surgeons.
The key opinion leaders are excited, but it takes a little bit more time than we expected to get us into the practice in the burn unit. So with all these things in place, plus you've seen over the last few quarters the stabilization of the DNRICS, we are excited that 2023, the impact of the decline of actor and the impact of the decline of Amitysa.
launch slope on Tarleavads. I think we'll be able to give you a better kind of jumping off point at the end of the year.
Thanks for receiving any other questions.
Thanks for receiving any other questions. One moment for our next question.
And our next question comes from Brendan Hall of Brain Affet Management. LLC, your line is open. Morning. I just wanted to confirm on the prior version of that 50 million launch for each drug or for both to verify that. No, that'd be key motive. Yeah. Hmm. Hmm. Yeah professional. A professional Tra?OR.
Yeah sure, so it's a little difficult to hear you but I think maybe just to summarize the question was with respect to the O2H Trust and the possibility of pre-payment and really just broadly thinking about capital allocation.
Yeah, I mean, great question. Look, when we negotiated that, we put in an 18-month pair that we could pre-pay that as a significant discount. So clearly, the capital market shifted since then. So we still have that opportunity, but we're looking at the capital structure.
holistically, monitoring the capital markets. So from a capital allocation, if that's the best return on our use of liquidity, we'll do that, but certainly, de-levering in other areas of our cap structure have become very attractive as well, right?
So, but we have 18 months from emergence to capture that discount. And how are those payments? And they are just structured up here. So, for example, the $200 million due in 2020. Okay, there.
Yeah, I think you I think yes, how the payments are structured without a discount that we'd have we had a at Emergence we had a four hundred million dollar payment and then on each the next two anniversaries we had 200 million and 200 million and then one 15 it scaled down from there
Any other questions for the other questions for them? No, yeah. My question was just understand that's scheduled. If you pay above and beyond that, you capture the discount for any amount of the page that that would be in general. Thank you.
Yes, that technically that is how that's how that would work. The extent that we paid more that would apply against the back end of the payment.
Yes, that's how that would work. The extent that we paid more that would apply against the back end of the payment. That's right. Got it. Okay, offering any other questions?
And I'm showing no further questions. I would now like to hand the call back to Dan for closing remarks. Thanks, appreciate it. And thank you all for your interest in Malancrod. We anticipate filing our Form 10K in the coming days. As a reminder, we'll be attending the Cow and Health Care Conference next week for those attending we look forward to seeing y'all. If you have any questions or interested in meeting with us next week, then the conference let us know when we're happy to help. The best way to get a hold of us today will be via email. And Derek and I will work to get back with you all as soon as possible. All the best of you and your families and have a nice day. Ladies and gentlemen, that concludes today's conference. Thank you for participating. You may now disconnect.
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