Q3 2024 Mallinckrodt PLC Earnings Call
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Speaker Change: Be advised that today's conference is being recorded I would now like to hand conference over to your speaker today, Derek Bell Vice President Investor Relations. Please go ahead.
Derek Bell: Thank you operator and welcome everyone with me. This morning are Mallinckrodt, CEO, Vicki orphan and CFO Brian.
Derek Bell: Before we begin let me remind you that we will make forward looking statements on this call.
Derek Bell: And it's possible that actual results could be materially different from our stated expectations.
Derek Bell: Please note. These forward looking statements are made as of today and we assume no obligation to update them.
Even in the event of new information or actual results or future expectations change materially. We encourage you to refer to the cautionary statements contained in our SEC filings for a more in depth explanation of the inherent limitations of such forward looking.
Speaker Change: Looking statements. We will also provide select non-GAAP adjusted measures related to our financial performance on this call. A reconciliation of these non-GAAP measures is included in our earnings release, which can be found on our website Mallinckrodt dot com.
Speaker Change: Use our website as a channel to distribute time critical company information and you should look to the Investor Relations page of our website for this information.
Derek Bell: As noted in our earnings release, our third quarter ended on September 27, 2024. Additionally, unless otherwise specified the net sales percentage changes, we discussed will be on a constant currency basis with that I will now turn the call over to Steve.
Steve: Thanks, David.
Steve: Good morning, everyone. We are pleased to share that we achieved another quarter of net sales growth building on our strong execution in the first half of the year.
Derek Bell: We have been intensely focused on stabilizing our base business.
Speaker Change: Assuming modeling for long term growth.
Speaker Change: Results for the third quarter reflects our successful execution of this strategy.
Speaker Change: Specialty deleverage Hudson remains a consistent growth driver due to our ability to continually deliver a reliable high quality products.
Speaker Change: In specialty brands.
Speaker Change: Especially excited to share that we delivered our fifth consecutive quarter of growth in <unk> and now expect the.
Speaker Change: Brand to grow approximately 10% year over year in 'twenty 'twenty four.
In light of our continued momentum we are reaffirming our full year net sales guidance range.
Speaker Change: The raising our adjusted EBITDA guidance range.
Speaker Change: Importantly, this is after adjusting for the <unk> transaction, which we expect will impact adjusted EBITDA by approximately $28 million.
Speaker Change: Brian will go into more detail later in the call.
Speaker Change: This would not be possible without the tireless efforts of our teams and I. Thank all of our employees for the hard work. It has taken to get us where we are today.
Speaker Change: Now I'd like to provide an update on our business segments, starting with specialty brands.
Speaker Change: For <unk>, we delivered our third consecutive quarter of year over year growth.
Speaker Change: This was again driven by an increase in prescriber referrals on patient demand.
Speaker Change: We launched after our self test in early August and have seen a positive momentum to date.
Speaker Change: As a reminder, this is <unk>.
Speaker Change: New way to administer after that requires fewer steps and reflects our commitment to modernize this important therapy for our patient community.
Speaker Change: We have received encouraging feedback from patients caregivers and medical professionals underscoring the meaningful demand for this user friendly administration option for managing chronic and acute inflammatory and autoimmune conditions.
Speaker Change: I'm also pleased to share that Celsius received we are trying to as foundations ease of use certification in September which is awarded based on testing by an independent third party.
Speaker Change: Additionally in September we published findings from nine self cure human factor studies in the peer reviewed journal expert opinion on drug delivery.
Speaker Change: Our actual results and the successful launch of self gift demonstrates that we have returned this brand to sustained growth.
Speaker Change: We are proud of the turnaround we have achieved in this important part of our business.
Speaker Change: Given the positive momentum we now believe after net sales will grow approximately 10% in 2024.
Speaker Change: Moving into IMAX following successful IMAX evolves DFS pilot program in the first half of the year.
Speaker Change: We expanded our rollout to U S hospitals nation rate nationwide late in the third quarter.
Speaker Change: At quarter end, we had 100 devices in nearly a dozen hospitals on the feedback we are receiving continues to highlight the benefits. This systems enhanced automation and streamline design delivers to neonatal intensive care patients.
Speaker Change: While IMAX IR continued to be impacted by competitive pressures.
Speaker Change: In U S from alternative nitric oxide product in the third quarter. We are pleased with the progress of <unk> and are continuing to work closely with hospitals and provides us to drive adoption.
Speaker Change: Next please turn to US we delivered a double digit year over year net sales growth and 37, 7% sequential growth in net sales.
Speaker Change: We continue to expand adoption through provider outreach emphasizing the importance of early patient identification and treatment initiation.
Speaker Change: Our focus remains on establishing <unk> as the preferred first line treatment for H R. S patients with rapid reduction in kidney function.
Speaker Change: Turning to fair across we reported another quarter of net sales growth with particularly strong performance outside of the U S.
Speaker Change: As you know in August we announced.
Speaker Change: This agreement to sell the setup cost business to CVC capital partners for approximately $925 million before customary adjustments.
Speaker Change: We continue to believe that this transaction is a positive outcome for all <unk> stakeholders, including patients providers and healthcare partners.
Speaker Change: As our business has a bright future and the Cdc's ownership.
Speaker Change: We will use net proceeds from the sale to pay down debt and we expect this will reduce the company's net debt by more than 60% following transaction close.
Speaker Change: We expect the closing to occur in the coming weeks subject to customary closing conditions.
Speaker Change: Now I'd like to turn now turn to our specialty generics business segments.
Speaker Change: Growth in specialty generics this quarter was driven by a strong performance in the finished dosage products business and increased demand in the controlled substances API business at the same time, we saw some softening demand in the APAC business driven by excess supply.
Speaker Change: In the broader market.
Speaker Change: I want to highlight that this was the seventh consecutive quarter of net sales growth in the specialty generics segment.
Speaker Change: This segment continues to be differentiated by leading product quality and consistency of supply and we remain on track for another year of double digit net sales growth in 2024.
Speaker Change: With that I'll turn the call over to Brian to discuss our financial performance and updated full year outlook in more detail.
Speaker Change: Yeah.
Speaker Change: Ziggy <unk> total net sales in the third quarter of 2024 or $506 million as compared to $497 million in the third quarter of 2023, an increase of one 7%.
Speaker Change: For the nine months ended September 27, 2024 total net sales were 1.4 dollars $9 billion.
Speaker Change: Up six 5% compared to the same period in 2023.
Speaker Change: Net loss for the third quarter was $26 two.
Speaker Change: As compared to net loss of $1 72 billion in the prior year period for.
Speaker Change: For the nine months ended September 27, 2024, net loss was $135 million as compared to $2 72 billion in the same period in 2023.
Speaker Change: Adjusted EBITDA in the third quarter of 2024 was $161 million as compared to $181 million in the prior year period.
Speaker Change: This 11, 1% decrease was primarily driven by transaction expenses for the cell therapy.
Speaker Change: <unk> $7 3 million of transaction related compensation expenses.
Speaker Change: As well as incremental commercial investment for Acthar gel and <unk> and continued competition in the U S nitric oxide market.
Speaker Change: These were partially offset by continued strength in the specialty generic segment as well as growth in the specialty brands segment, driven by Acthar gel and therapy.
Speaker Change: For the nine months ended September 27, 2024, adjusted EBITDA was $480 million.
Speaker Change: 7%.
Speaker Change: The specialty brand segment reported net sales of $286 million in the third quarter of 2024 flat as compared to the prior year.
Speaker Change: Growth in Acthar gel expanded launch of <unk> and growth in therapists offset the continued competition for IMAX from alternative nitric oxide products in the U S.
Speaker Change: Acthar gel net sales were $126 million.
Speaker Change: Up three 5% compared to the prior year as Siggi mentioned, we again saw increases prescriber referrals and patient demand. We're also pleased with the momentum and self check following our August launch, we now expect Acthar net sales to grow approximately 10% in 2000.
Speaker Change: 24.
Speaker Change: In our critical care products IMAX generated net sales of 64 million a decline of 12, 2% compared to prior year.
Speaker Change: <unk> generated net sales of $7 million, an increase of 65, 9%.
Speaker Change: <unk> generated net sales of $68 million, an increase of two 4% on a reported basis and two 2% on a constant currency.
Speaker Change: The specialty generics segment reported net sales of $220 million as compared to $211 million in the prior year.
Speaker Change: This four 1% growth was due to rising demand for our finished dose products as the market continue to experience constraints and shortages.
Speaker Change: Our performance was notable this quarter given the strong comparable quarter, we had in 2023 due to the launch of our generic buyback.
Speaker Change: With respect to operating metrics in the quarter adjusted gross profit as a percentage of net sales was 65, 4% as compared to 66, 3% in the third quarter of 2023.
Speaker Change: Adjusted SG&A as a percentage of net sales was 27, 9% as compared to 25, 3% in the prior year.
Speaker Change: And adjusted R&D as a percentage of net sales was five 6% as compared to five 1% in the prior year.
Speaker Change: Turning to our balance sheet, we ended the quarter with cash and cash equivalents of $411 million up from $291 million at the end of the second quarter.
Speaker Change: This continues to reflect our high cash conversion and strong adjusted EBITDA.
Speaker Change: We ended the quarter with outstanding total principal debt of $1 64 billion and outstanding net debt of 123 billion.
Speaker Change: As <unk> noted the proceeds from <unk> sales are expected to reduce our net debt by more than 60% when the transaction closes.
Speaker Change: On guidance.
Speaker Change: We continue to expect total net sales between $1 9 billion and $2 billion and now expect to generate adjusted EBITDA of between $590 million and $620 million.
Speaker Change: Our updated guidance adjusts for the therapist transaction, which were assuming will close by the end of November.
Speaker Change: Accordingly, our guidance removes approximately $25 million in net sales and approximately $12 million adjusted EBITDA.
Speaker Change: Were previously expected to be contributed by therapist in the month of December.
Speaker Change: In addition, our new adjusted EBITDA guidance.
Speaker Change: Reflects approximately $16 million of transaction related compensation expense for the cell therapy.
Speaker Change: In other words without roughly without roughly $28 million impact from therapist, we'd be raising our 2024 adjusted EBITDA guidance by five 5% at the midpoint, which underscores the strong performance of both our specialty brands and specialty.
Speaker Change: Eric segments.
Speaker Change: I'll often.
Speaker Change: For the full year 2024, there is expected to generate approximately $270 million net sales and approximately $135 million and adjusted EBITDA.
Speaker Change: I'll now hand, the call back to <unk> for closing remarks Siggi. Thank you Brian This past quarter has been exceptional and it's a testament to the hard work and dedication of our entire team.
Speaker Change: Our sustained momentum and continued innovation a clear indication that our strategic initiatives are paying off.
Speaker Change: The commitment of our employees has been instrumental in driving our success.
Speaker Change: I'm incredibly proud of what we have accomplished together.
Speaker Change: I am confident that we will continue to build on our momentum through the end of the year and beyond.
Speaker Change: With that we open the call up for Q&A.
Speaker Change: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, one moment for our questions.
Speaker Change: Yeah.
Speaker Change: I'm showing no questions at this time, so I would like to hand, the conference back to Derek <unk> for closing remarks.
Derek Bell: Thanks, Michelle and thank you all again for joining US today, we look forward to engaging with you in the coming days and weeks ahead. If you have any questions. The best way to get a hold of vessels via email and I'll work quickly to get back with you. Thanks, again and have a great day.
Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.