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Mallinckrodt (MNK) Beats on Q3 Earnings Estimates, Ups View

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Mallinckrodt Public Limited Company (MNK - Free Report) reported adjusted earnings of $2.10 per share in the third quarter of 2018, up from the year-ago quarter’s $1.82. The bottom line also beat the Zacks Consensus Estimate of $1.80.

Net sales in the quarter came in at $640 million, grew 6.5% year over year and surpassed the Zacks Consensus Estimate of $633 million.

Mallinckrodt’s stock has gained 20.3% in the year so far, against the industry’s decline of 6.7%.

Quarter in Detail

Acthar, Mallinckrodt’s largest product, generated sales of $290.1 million, down 6% due to the residual impact of the previously reported patient withdrawal issues.  

Inomax, its second-largest product, generated sales of $133.2 million, up 6%, driven by strong demand. Ofirmev sales increased 15.5% year over year to $87.1 million, owing to strong demand stemming from customers’ focus on non-opioid or multimodal pain management.

Sales of the Therakos immunology platform were $60 million, up 8.5%, driven by increased demand in Europe.

Amitiza sales came in at $48.2 million. The drug was added to Mallinckrodt portfolio as a result of erstwhile Sucampo Pharmaceuticals’ acquisition.

Adjusted selling, general and administrative expenses in the quarter decreased 1.4% to $175.8 million. Meanwhile, research and development expenses increased 67.4% to $78.5 million.

During the quarter, the company reduced total debt by $170.6 million, primarily comprising $150 million in repayments on its revolving credit facility and $15 million decrease in the receivable securitization. The company ended the quarter with net debt less than $6 billion.

2018 Guidance

Propelled by a strong performance in the third quarter of 2018, the company increased its annual guidance. Adjusted diluted earnings per share guidance for fiscal 2018 is expected to be $7.00-$7.20, up from the previous guidance of $6.50-$6.90.

The company did not provide any update on the revenue guidance. Its previous revenue guidance was 4-7% growth.

Our Take

The strong results in the third quarter bode well for Mallinckrodt, which has been in troubled waters for quite some time now. While Acthar sales continue to decline, the hospital portfolio looks solid.

This year is expected to be a transformative year for Mallinckrodt as the company strives hard to revive its product portfolio/pipeline. The company also raised its annual earnings guidance. The Sucampo buyout will diversify the company’s portfolio considering Amitiza’s potential. Mallinckrodtis currently streamlining its business to focus better on its innovative medicines and therapies like terlipressin and StrataGraft. 

Zacks Rank & Other Key Picks

Mallinckrodt carries a Zacks Rank #2 (Buy).

Other top-ranked stocks worth considering are Bristol-Myers Squibb Co. (BMY - Free Report) , Eli Lilly and Co. (LLY - Free Report) and Merck & Co. Inc. (MRK - Free Report) . While Bristol-Myers sports a Zacks Rank #1 (Strong Buy), Lilly and Merck carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Bristol-Myers’ earnings per share estimates have increased from $3.59 to $3.81 for 2018 and from $3.83 to $4.03 for 2019 over the past 60 days. The company delivered a positive earnings surprise in all of the trailing four quarters with an average beat of 11.99%.

Lilly’s earnings per share estimates have increased from $5.42 to $5.47 for 2018 and from $5.69 to $5.78 for 2019 over the past 60 days. The company delivered a positive earnings surprise in all of the trailing four quarters with an average beat of 10.15%.

Merck’s earnings per share estimates have increased from $4.26 to $4.34 for 2018 and from $4.58 to $4.71 for 2019 over the past 60 days. The company delivered a positive earnings surprise in all of the trailing four quarters with an average beat of 3.96%.

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