Q3 2024 Mallinckrodt PLC Earnings Call
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Operator: Please be advised that today's conference is being recorded.
Speaker Change: Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Derek Bell Vice President Investor Relations. Please go ahead.
Derek Belz: I would now like to hand the conference over to your speaker today, Derek Belz, Vice President Investor Relations. Please go ahead.
Derek Belz: Thank you, operator.
Ziggy Olsson: And welcome, everyone. With me this morning are Mallinckrodt's CEO, Ziggy Olsson, and CFO, Bryan Reasons.
Derek Bell: Thank you operator and welcome everyone with me. This morning are Mallinckrodt CEO Vicki often.
Speaker Change: I agree.
Ziggy Olsson: Before we begin, let me remind you that we will make four looking statements on this call, and it's possible that actual results could be materially different from our stated expectations. Please note these forward-looking statements are made as of today, and we assume no obligation to update. Even in the event of new information or of actual results, our future expectations change maturely.
Derek Bell: Before we begin let me remind you that they will make forward looking statements on this call.
And it's possible that actual results could be materially different from our stated expectations.
Please note each 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 venture. 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.
Ziggy Olsson: 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 statements. We will also provide select non-GAAP-adjusted measures related to our financial performance on this. A reconciliation of these non-GAAP measures is included in our earnings release, which can be found on our website, mallinckrodt.com.
Such forward 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.
Ziggy Olsson: We 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: 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.
Ziggy Olsson: 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.
Speaker Change: 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.
Derek Belz: With that, I will now turn the call over to Siggy.
Ziggy Olsson: Thanks, Derek, and good morning, everyone. We are pleased to share that we achieved another quarter of net sales growth, building on a strong execution in the first half of the year. We have been intensely focused on stabilizing our base business and positioning Mallinckrodt for long-term growth. And our results for the third quarter reflect our successful execution of this strategy. Specialty Generics has remained a consistent growth driver due to our ability to continually deliver reliable and high quality products. In specialty brands, I'm especially excited to share that we delivered our third consecutive quarter of growth in ActaGel and now expect the brand to grow approximately 10% year-over-year in 2024.
Steve: Thanks, David.
Steve: Good morning, everyone.
Steve: 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.
Steve: We have been intensely focused on stabilizing our base business and persistently modeling for long term growth and our results for the third quarter reflects our successful execution of this strategy.
Steve: Specialty tier leverage has remained a consistent growth driver due to our ability to continually deliver reliable and high quality products.
Steve: In specialty brands I'm, especially excited to see that we delivered our fifth consecutive quarter of growth in Africa, and now expect the brand to grow approximately 10% year over year in 2024.
Ziggy Olsson: In light of our continued momentum, we are reaffirming our full-year net sales guidance range and raising our adjusted EBITDA guidance. Importantly, this is after adjusting for the zero-cost transaction, which we expect will impact adjustability by approximately $28 million. Bryan will go into more detail later in the quote.
Steve: In light of our continued momentum we are reaffirming our full year net sales guidance range and raising our adjusted EBITDA guidance range.
Steve: 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.
Ziggy Olsson: This would not be possible without the tireless effort 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: 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.
Ziggy Olsson: Now I'd like to provide an update on our business segment, starting with specialty brands. For After Jail, we delivered our third consecutive quarter of year-over-year growth. This was again driven by an increase in prescriber referrals on patient demand. We launched after a self-gift in early August and have seen a positive momentum today. As a reminder, this is a new way to administer ACTA that requires fewer steps and reflects our commitment to modernize this important therapy for our patient community. 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: Now I'd like to provide an update on our business segments, starting with specialty brands.
Speaker Change: For after Bill we delivered our third consecutive quarter of year over year growth.
Speaker Change: This was again driven by an increase in prescriber referrals pay.
Speaker Change: <unk> demand.
Speaker Change: We launched the Astral Celtics in early August and that seeing a positive momentum to date.
Speaker Change: As a reminder, this is new.
Speaker Change: New way to administer Africa 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.
Ziggy Olsson: I'm also pleased to share that CELTI has received the Arthritis Foundation's Ease of Use certification in September, which is awarded based on testing by an independent third party. Additionally, in September, we published findings from nine self-diagnosed human factor studies in the peer-reviewed journal Expert Opinion on Drug Delivery. Our active results and the successful ones of SelfGift demonstrate that we have returned this brand to sustained growth, and we are proud of the turnaround we have achieved in this important part of our business. Given the positive momentum, we now believe after-net sales will grow approximately 10% in 2024.
Speaker Change: I'm also pleased to share that Celsius received via these 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 Selkirk 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 net sales will grow approximately 10% in 2024.
Ziggy Olsson: Moving into INOMAX, following successful INOMAX EvolveDS pilot program in the first half of the year, we expanded our rollout to U.S. hospitals nationwide late in the third quarter. At Quarter End, we have 100 devices in nearly a dozen hospitals, and the feedback we are receiving continues to highlight the benefits the system's enhanced automation and streamlined design delivers to neonatal intensive care patients. While Inomax DS-IR continued to be impacted by competitive pressures in the U.S. from alternative nitric oxide products in the third quarter, we are pleased with the progress of Evolve DS and are continuing to work closely with hospitals and providers to drive adoption.
Speaker Change: Moving into IMAX following successful IMAX evolves DFS pilot program in the first half of the year, we expanded our rollout to use hospitalization rate nationwide late in the third quarter.
Speaker Change: At quarter end, we had 100 devices and nearly a dozen hospitals and the feedback we are receiving continues to highlight the benefits.
Speaker Change: 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> royalties on that continuing to work closely with hospitals and providers to drive adoption.
Ziggy Olsson: Next, we delivered a double-digit year-over-year net sales growth on 37.7% sequential growth in net sales. We continue to expand adoption through provider outreach, emphasizing the importance of early patient identification and treatment initiation. Our focus remains on establishing deliverables of the preferred first-line treatment for HRS patients with rapid reduction in kidney function. Turning to Ferrocross, we reported another quarter of net sales growth with particularly strong performance outside of the U.S.
Speaker Change: Next please turn to US we delivered a double digit year over year net sales growth on 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 eight Rs 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.
Ziggy Olsson: As you know, in August, we announced a definitive agreement to sell the Theracos business to CVC Capital Partners for approximately $925 million before customer reaction. We continue to believe that this transaction is a positive outcome for all Theracore stakeholders, including patients, providers, and healthcare partners, and that the business has a bright future under CDC's ownership. 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. We expect the closing to occur in the coming weeks, subject to customary closing conditions.
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 it.
Speaker Change: Positive outcome for all thorough cost stakeholders, including patients providers and healthcare partners.
Speaker Change: The 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.
Ziggy Olsson: Now I'd like to turn to our specialty, generics business sector. Growth in specialty generics this quarter was driven by a strong performance in the finished doses products business and increased demand in the controlled substances API business. At the same time, we saw some softening demand in the APAP business driven by excess supply in the broader market. I want to highlight that this was the seventh consecutive quarter of net sales growth in the Specialty Generic sector. This segment continues to be differentiated by leading product quality and consistency of supply and we remain on track for another year of a double-digit net sales growth in 2024.
Speaker Change: Now I'd like to turn now turn to our specialty generics business segment.
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.
Bryan Reasons: With that, I'll turn the call over to Bryan to discuss our financial performance and updated full-year outlook in more detail.
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.
Bryan Reasons: Thanks, Ziggy. Mallinckrodt's total net sales in the third quarter of 2024 were $506 million. compared to $497 million in the third quarter of 2023, an increase of $1.7%.
Speaker Change: Thanks, 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%.
Bryan Reasons: For the nine months ended September 27, 2024, total net sales were $1.49 billion, up 6.5 percent. compared to the same period in 2023.
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.
Bryan Reasons: Net loss of the third quarter was $26.2 million as compared to net loss of $1.72 billion in the prior year period. For the nine months ended September 27, 2024, net loss was $135 million, as compared to $2.72 billion in the same period in 2020. adjusted EBITDA in the third quarter of 2024 was $161 million. This compared to $181 million in the prior year period. This 11.1% decrease was primarily driven by transaction expenses for the sale of Theracos, including $7.3 million of transaction-related compensation expenses. as well as incremental commercial investment for Axar Gel and Turlavaz and continued competition in the U.S.
Speaker Change: Net loss for the third quarter with $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.
Bryan Reasons: Nitrogox. These were partially offset by continued strength in the specialty generic segment, as well as growth in the specialty brand segment, driven by Axar-Gal and Theracor.
Speaker Change: These were partially offset by continued strength in the.
Speaker Change: Specialty generic segment as well as growth in the specialty brands segment, driven by Acthar Gal and therapy.
Bryan Reasons: For the nine months ended September 27, 2024, adjusted EBITDA was $480 million, up 7%. especially brand segment reported net sales of $286 million in the third quarter of 2020. flat as compared to the prior year. Growth in Axar Gel, the expanded launch of Turlavaz, and growth in Theracos offset the continued competition for Inomax from alternative nitric oxide products in the U.S. AXAR GelNet sales were $126 million, up 3.5% compared to the prior year. As Siggy mentioned, we again saw increases in prescriber referrals and patient demand. We're also pleased with the momentum in self-check following our August sales.
Speaker Change: For the nine months ended September 27, 2024, adjusted EBITDA was $480 million up 7%.
Speaker Change: The specialty brands 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 up three 5% compared to the prior year as Siggi mentioned, we again saw increases in prescriber referrals and patient demand. We're also pleased with our momentum in South Tech following our August launch we now.
Bryan Reasons: We now expect Axar net sales to grow approximately 10% in 2020. In our critical care products, Iodomax generated net sales of $64 million, a decline of 12.2% compared to prior years. TurlaVaz generated net sales of $7 million, an increase of $65.9%. Theracodes generated net sales of $68 million, an increase of 2.4% on a reported basis, and 2.2% on a constant current. especially generic segments reported net sales at $220 million as compared to $211 million in the prior year. This 4.1% growth was due to rising demand for our finished dose products as the market continued to experience constraints and shortages.
Speaker Change: Acthar net sales to grow approximately 10% in 2024.
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: Derek generated net sales of $68 million, an increase of two 4% on a reported basis and two 2% on a constant currency basis.
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 continued to experience and strength and shortages.
Bryan Reasons: Our performance is notable this quarter, given the strong comparable quarter we had in 2023 due to the launch of our generic virus. With respect to operating metrics in the quarter, adjusted gross profit as a percentage of net sales was 65.4%. compared to 56.3% in the third quarter of 2020. adjusted SG&A's percentage of net sales was 27.9% as compared to 25.3% in the prior year.
Speaker Change: Our performance is notable this quarter given the strong comparable quarter, we had in 2023 due to a 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 56, 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 and adjusted R&D as a percentage of net sales was five 6% as compared to five 1% in the prior year.
Bryan Reasons: And adjusted R&D as a percentage of net sales was 5.6% as compared to 5.1% in the prior Turning to our balance sheet, we ended the quarter with cash and cash equivalent of $411 million. up from $291 million at the end of the second quarter. This continues to reflect our high-task conversion and strong adjustment. We ended the quarter with outstanding total principal debt of $1.64 billion and outstanding net debt of $1.23 billion. As Siggy noted, the proceeds from Theracote sales are expected to reduce our net debt by more than 60% when the transaction closes.
Speaker Change: Turning to our balance sheet, we ended the quarter with cash and cash equivalent 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 4 billion in outstanding net debt of $1 $2 3 billion.
Speaker Change: It's taking noted the proceeds from <unk> sales are expected to reduce our net debt by more than 60% when the transaction closes.
Bryan Reasons: on guiding We continue to expect total net sales between $1.9 billion and $2 billion, and now expect to generate adjusted EDADOT of between $590 million and $620 million. Our updated guidance adjusts for the THERACOS transaction, which we are assuming will close by the end of November. Accordingly, our guidance removes approximately $25 million in net sales and approximately $12 million in adjusted EBITDA that were previously expected to be contributed by THERACOST in the month of December. In addition, our new adjusted EBITDA guidance reflects approximately $16 million of transaction-related compensation expense for the self-serve. In other words, without roughly 28 million impact from Theracos, we'd be raising our 2024 adjusted EBITDA guidance by 5.5% at the mid-term.
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 we are 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 that were previously expected to be contributed by therapist in the month of December.
Speaker Change: In addition, our new adjusted EBITDA guidance.
Speaker Change: Reflect approximately $16 million of transaction related compensation expense.
Speaker Change: Eric.
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.
Bryan Reasons: which underscores the strong performance of both our specialty brand and specialty generic I'll also note that for the full year 2024, Theracos is expected to generate approximately $270 million in net sales and approximately $135 million in adjusted even.
Speaker Change: And Eric Stang.
Speaker Change: I'll also note that for the full year 2024, there because its expected to generate approximately $270 million and net sales and approximately $135 million and adjusted EBITDA.
Ziggy Olsson: I'll now hand the call back to Siggy for closing remarks.
Speaker Change: I'll now hand, the call back to <unk> for closing remarks. Thank.
Ziggy Olsson: Siggy? Thank you, Bryan. This past quarter has been exceptional, and it's a testament to the hard work and dedication of our entire team. Our sustained momentum and continued innovation are clear indications that our strategic initiatives are paying off. The commitment of our employees has been instrumental in driving our success, and I'm incredibly proud of what we have accomplished together. I am confident that we will continue to build on our momentum through the end of the year and beyond.
Speaker Change: Thank you Brian this past quarter has been exceptional.
Speaker Change: As a testament to the op 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: Incredibly proud of what we have accomplished together.
Speaker Change: I am confident that we will.
Speaker Change: We'll continue to build on our momentum through the end of the year and beyond.
Ziggy Olsson: And with that, we open the call for Q&A.
Speaker Change: And with that we open the call for Q&A.
Ziggy Olsson: Thank you.
Operator: As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment for our question.
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.
Derek Belz: I'm showing no questions at this time, so I would like to hand the conference back to Derek Belz for closing remarks.
Speaker Change: I'm showing no questions at this time, so I would like to hand, the conference back to Derek Bell for closing remarks.
Derek Belz: 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.
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 versus via E Mail and I'll work quickly to get back with you. Thanks, again and have a great day.
Derek Belz: If you have any questions, the best way to get a hold of us is via email and I'll work quickly to get back with you. Thanks again and have a great day.
Derek Belz: This concludes today's conference call. Thank you for participating. You may now disconnect.
Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.
Operator: Thanks for watching!
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