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Mallinckrodt Shares Fall on Guidance

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The share price of Mallinckrodt (MNK - Free Report) continued to fall after it issued its guidance for fiscal 2014 (ending Sep 26, 2014). We note that fiscal 2014 will be the first full year of this specialty pharmaceuticals business company after it was spun off from Covidien earlier this year.

In fiscal 2014, the company expects earnings in the range of $2.45 to $2.65 per share. The Zacks Consensus Estimate for fiscal 2014 currently stands at $2.51 per share, which is within the guidance range.

Mallinckrodt expects net sales (excluding the impact of foreign exchange translation) for fiscal 2014 in the band of $2.15 – $2.25 billion. This includes net sales from the specialty pharmaceuticals segment (guidance: $1.22 – $1.27 billion) and sales generated by the company’s generic version of Johnson and Johnson’s (JNJ - Free Report) Concerta extended-release tablets (guidance: at least $120 million). The net sales guidance also includes net sales from the global medical imaging segment (guidance: $885 – $930 million).

The company expects capital expenditures to be between $140 million and $160 million. While research and development expenses in fiscal 2014 are expected to be 6% to 8% of net sales, selling, general, and administrative (SG&A) expenses will be higher in fiscal 2014. SG&A expenses are expected to be higher due to rising commercialization expenses related to its pipeline candidates MNK-795 and MNK-395. Mallinckrodt is focusing on restructuring in order to control cost.


Mallinckrodt has several late-stage candidates in its pipeline including MNK-795 and MNK-395, which are currently under regulatory review. In Jul 2013, the U.S. Food and Drug Administration (FDA) accepted the marketing application for MNK-795 for treating moderate-to-severe acute pain. The regulatory body is reviewing the marketing application on a priority review. The marketing application for MNK-395 in pain associated with osteoarthritis of the knee was submitted in Aug 2013.

Another pain candidate, MNK-155, is currently being evaluated in phase III trials with regulatory submission expected by the end of fiscal 2014. The company is also looking to boost its pipeline through acquisitions.

Mallinckrodt currently carries a Zacks Rank #1 (Strong Buy). Actelion Ltd. also carries a Zacks Rank #1.

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