Mallinckrodt plc

Good day and thank you for standing by. Welcome to the Millicroup first quarter 2025 results conference call. 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 this session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference may be recorded. I would now like to hand the conference over to your speaker today, Gerard Muechner. Please go ahead.

Thank you, operator, and welcome, everyone. With me this morning are Mallin Cross CEO, Siggy Olofsson, and CFO, Brian Reasons. Before we begin, let me remind you that we 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 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 if actual results or future expectations change materially. We encourage you to refer to the cautionary statements contained in our SEC findings 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 call. A reconciliation of these non-GAAP measures is included in our earnings release, which can be found on our website, mallincrot.com. We use our website as a channel to distribute important and time-critical company information, and you should look to the investor relations page of our website for this information. This call does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any securities or solicitation of any vote or approval. In connection with the potential combination between Mallinckrodt and Endo, Mallinckrodt has filed with the SEC a registration statement that includes a joint proxy statement of Mallinckrodt and Endo and a prospectus for Mallinckrodt shares. the joint proxy statement, prospectus, and other relevant documents filed by Mallinckrodt and Endo with the SEC will be available free of charge at the respective company's investor relations webpage or at the SEC's website. You should review such materials filed or to be filed with the SEC carefully because they contain or will contain important information about Endo, Mallinckrodt, the business combination, and related matters, including information about certain of their respective directors, executive officers, and other employees who may be deemed to be participants in the solicitation proxies in connection with the business combination and about their interest in the solicitation. As noted in our earnings release, our first quarter ended on March 28, 2025. Additionally, unless otherwise specified, the net sales percentage changes we discussed will be on a constant currency basis. I'll now turn the call over to Sigi.

Thanks, Gerard, and good morning, everyone. I'm pleased to report that Malincrot had a great start to the year, and we continued to build on our positive momentum from 2024. Our teams delivered another quarter of strong performance that kept us on track to achieve our full-year guidance, a sign of our confidence in the business. In the first quarter, we achieved a top-line growth when adjusting for the Theracos divestiture last year, demonstrating the meaningful progress we have made on our key strategic priorities. After gel sales grew for the fifth consecutive quarter, and the launch of our Celtic device has been tracking well ahead of our initial expectations as we continue to see a strong physician and patient demand. In light of this, we are increasing our marketing investments behind ACTA, which is reflected in our decision to reaffirm full-year guidance. In addition, our rollout of the INOMAX Evolve DS delivery system continued to hospital nationwide, and the ongoing efforts to expand adoption of Turlevas remains underway. On the specialty generic side, of the business, overall performance was strong, and we continue to see the benefits of the high-quality product and stable supply we offer customers. Our positive momentum also reinforces our excitement for the planned combination with ENTO that we announced in March. The merger will create a global scale diversified pharmaceutical leader, and we see even greater potential ahead for our business through the combination. I'll speak more on that shortly, but I want to highlight up front how proud I am of our teams for continuing to execute at a high level and deliver for our patients while doing the significant planning work to bring our two companies together. I turn now to the detailed update on our business sector. Starting with specialty brands and ACT-RGL, as I mentioned, we are pleased to deliver our fifth consecutive quarter of year-over-year growth with 12.3% increase in net sales in the first quarter. This was driven by growth in the overall market and the successful launch of Self-Gift, where the team has done a really outstanding work. Feedback from the healthcare providers and patients on Celljet has been overwhelmingly positive, and this innovative device now accounts for over 70% of all new ACT-R brand prescriptions, a number that is even higher for certain therapeutic areas and reflects the great momentum we have with both new and returning healthcare providers. We expect positive momentum in the self-debt rollout and patient demand growth to continue. As a result, we are raising our 2025 net sales guidance for ACTAR from a low single-digit range to a high single-digit range. Moving to INOMAX, our multi-year rollout of the evolved DS delivery system into U.S. hospital remains underway. As of the end of March, more than 400 devices were placed in over 50 hospitals nationwide, and we continue to benefit from customer interest in the portability and new features offered by the product, reflecting the importance of the system for the appropriate patients. As a reminder, we expect this rollout to continue throughout the end of next year, and we will be working closely with hospitals and providers to drive further adoption throughout this period and beyond. While INAMAX sales continue to be impacted by competition in the U.S. market, we were encouraged to see a stronger performance and growth outside of the U.S., particularly in Japan, where sales grew 12% as compared to the first quarter of 2024. Next, with Turlevas, we delivered a 23.3% net sales growth as compared to the first quarter of 2024. As a reminder, Turlevas is the first and only FDA-approved product indicated to improve kidney function in adults with hepatorenal syndrome with rapid reduction in kidney function. While hospitals demand growth has not been as strong as we would like, we continue to believe in the opportunities ahead for this treatment, as well as the meaningful benefit it can deliver to patients and their caregivers. Turning to specialty generics, we continue to build on our track record of consistent growth in the segment, delivering our ninth consecutive quarter of net sales growth. Strong performance in the ADHD finished product business was offset primarily by a global competitive pressure on the ATI business, particularly our APAP products. In a period of supply chain uncertainty, Malenkrot's generics business benefits from both leading product quality and consistency of supply, and we continue to expect a flat to low single digit sales growth for the segment in full year 2025. Before I hand it over to Brian, I'd like to give a brief update on our previously announced combination with Endo. Over the last month, we have spoken extensively with our stakeholders about the combination and are pleased with the positive feedback we have received to date. We remain confident in the bright future ahead of our companies as a one combined organization, which will benefit from increased scale to develop new therapies to address unmet patient needs. Our team has already hit the ground running in our work to complete the transaction, which we continue to expect will occur in the second half of 2025. In April, we filed our Form S4 registration statement with the SEC to begin the SEC process, a key milestone towards holding the shareholder meetings to consider and vote on the transaction. We have also formed a dedicated transaction planning team to support our integration efforts post-close. I look forward to sharing additional details in the coming months as we continue to work to bring our two companies together. With that, I'll turn the call over to Brian to discuss our financial performance and expectation for the balance of fiscal 2025 in more detail.

Thank you, Siggy. Ballancroft's net sales in the first quarter of 2025 were $419.9 million, as compared to $457.8 million in the first quarter of 2024, reflecting a 10.2% decrease on a reported and constant currency basis. Excluding the impact of the Theracos divestiture, total net sales grew by 2.5%. Net loss for the first quarter of 2025 was $27.7 million, compared to a net loss of $65.4 million in the prior year period. Adjusted EBITDA in the first quarter of 2025 was $102.3 million as compared to $144.9 million in the prior year period. This was driven by strength in both the specially generic segment and Axar Gel, largely offset by the impact of the Theracose divestiture, incremental commercial investments for Axar Gel, and the impact of nitric oxide competition in the US. The specially brand segment reported net sales of $207.3 million as compared to $257.3 million in the prior year period. This 19.4% decrease includes the impact of the Theracose divestiture. Excluding Theracose, specialty brands' net sales grew by 4.1%, driven primarily by growth in Axar gel and the uptake in self-gel. ACT-R gel net sales were $115.4 million in the first quarter, an increase of 12.3% compared to the prior year period. As Siggy mentioned, we are raising our full-year sales guidance for ACT-R and now expect high single-digit ACT-R net sales growth in 2025. InaMax generated net sales of $62.5 million in the first quarter a decrease of 11% compared to the prior year period. Terms of ads generated net sales of $7.4 million in the first quarter, an increase of 23.3% compared to the prior year period. The specially generic segment reported net sales of $212.6 million as compared to $210.5 million in the first quarter of 2024. This growth of 1% was driven by continued strong ADHD product sales offset by decline in the API business, particularly APAP products driven primarily by global competition. With respect to operating matrix in the quarter, adjusted gross profit as a percentage of net sales was 61.3% as compared to 64% for the first quarter of 2024. Adjusted SG&A as a percentage of net sales was 32.9% as compared to 27.3% in the prior year. And adjusted R&D as a percentage of net sales was 4.7% as compared to 5.9% in the prior year. Turning to our balance sheet, we ended the first quarter with a cash balance of $422.2 million, total outstanding principal debt was $864.6 million, a reduction of 47.5% compared to the first quarter of 2024. And outstanding net debt was $451.4 million, a reduction of 67.6% compared to the first quarter of 2024. Our net debt leverage ratio was 0.8 times at quarter end. For the full year fiscal 2025, we are reiterating our previous guidance ranges and expect total net sales of between 1.7 billion and 1.8 billion and adjusted EBITDA between 480 million and 520 million. Our decision to reaffirm our previously stated guidance reflects our strong performance, partially offset by elevated SG&A levels due to incremental commercial investments related to AXAR. I'll now hand the call back to Siggy for closing remarks.

Thank you, Brian. To wrap up, I'm incredibly proud of the way our entire team has delivered on the strategic priorities for the ultimate goal of improving the lives of our patients. As we look ahead to close the merger with Endo later this year, I am more confident than ever in the value we can deliver to our shareholders, customers, and patients. We will now open the call for Q&A. Operator.

Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. One moment while we compile our Q&A roster. Our first question is going to come from the line of Hamid Khorsan with BWS Financial. Your line is open. Please go ahead.

Good morning. Thanks for taking my questions. First, could you just elaborate on the marketing strategy behind Actargel and what you're hoping to achieve? Is it more from the patient standpoint or is it from the physician standpoint as far as demand is concerned?

Yeah, so a very good question. I think overall the two things that are playing in is that the overall market is growing. There is a competition for corticotropin out there. So we can see the overall market is growing for corticotropin today. And we are clearly benefiting from that. We have a strong sales support on it, but we also have a big patient support system to support the patients through the experience of going on ACTA, which is very important. I think that's number one. Number two, we have seen a huge benefit on the launch of CELTIA. CELTIA makes it so much easier to use it. And what we call new prescriptions, those are prescriptions for patients that haven't been on prescription for a long time or are totally new to ACTA at all. over 70% of those patients are going on Celsius. And then some other indication I will call out, even though I didn't do it in the script, in ophthalmology, it's closer to 80% of all new prescriptions are on Celsius. So these two things together are benefiting, and we have used, as I mentioned in the script, we are putting more marketing emphasis now behind the product when you see the growth the obviously actor was a challenging story declining from 2018 up until beginning of last year and then in the last five quarters we have shown uh every quarter of growth of this product um pay the the the doctors the physicians are seeing the benefit of it i think patients are getting more comfortable and self-check was a piece of that that was missing in the person so so We are very pleased, but it's both on the patient side we are seeing the benefits, but also on the physician side.

Okay. And then is this taking away any resources from the rest of the business at all?

No, it's not.

And given the timing of when you're expecting the merger and the close, do you have any new intentions with the cash or will the cash balances continue to increase?

No, so we obviously are limited with the merger agreement with Endo, what to do with the cash. So there's a limitation of what to do with the cash until the merger will close in second half of this year.

Okay, great. Thank you. Thank you.

Thank you. And one moment for our next question, please. Our next question is going to come from the line of Madison Aran with JP Morgan. Your line is open. Please go ahead.

Hi, thanks for taking my questions. Just starting with, can you quantify the marketing support that you're putting behind the drug? And then you noted that the market is growing for the drug. Can you just walk us through which indications are you seeing that growth? And then maybe define it a little further. Is it more just new patients that they're staying, that adherence has improved? And then just lastly on ACT-R, you talked about the patient support system that you have for Subject. Can you quantify or just walk us through how that support system differs from the vial?

Yeah, so if I start on the marketing, so we haven't broken out the marketing cost per product. But what we have said is for Akhtar is our largest marketing support in the brand business. We have a sales force, we have marketing, but we also have the patient support system in place. So clearly a great support for this product. In terms of the indications, which are the growing indications, so we are roughly in six to seven, even though I think after it's approved for 19 indication in the FDA label. But there's really four indications that are growing the most. It's rheumatology, pulmonology, Nephrology, and I mentioned ophthalmology, which is growing faster. And especially we have seen that with the benefit on rheumatology and ophthalmology. Those are two indications where the Celsius device has changed the delivery system and experience for the patients of this drug. This drug has been approved for many, many years. It has a lot of experience. Many patients have been using it through the years. but continues to be a very important drug for patients out there going forward. The third part of the questions, if you could repeat that again.

The patient support that you have for self-ject, how does that differ from the vial? Assuming that you're trying to drive more patients towards that.

Yeah, so we don't differentiate. We support all the patients, whether they are on vial or on self-ject. But it's mainly around the nursing support when patients start. When a patient starts on a vial, there is a little bit more involvement in teaching them how to draw the drug from the vial and inject them to themselves. Where on Celsius, that is so much significantly easier. We still have the nurse support around that. But that's probably the single most differentiated issue between the vial and the Celsius. It is simpler to treat with Celsius than it is with a vial going forward.

Okay, great. There's a lot of commentary out there about tariffs and Ireland and, I guess, attacking the tax system that is coming out of Ireland. We'd love to just get your thoughts on what you're seeing. I know it's early. We don't have a lot of details, but I'd love to hear your thoughts on what you're trying to do to circumvent any of these challenges.

Yeah, it's Brian. I'll jump in there and Siggy add on. As far as the tariffs, when we kind of looked at it, you know, we feel like we're in pretty good shape and don't have a ton of exposure. You know, we have some inputs into our APAP business coming from XUS. We manufacture the bulk API for AXR, but not a lot of exposure. I think your question hinted at the IP structure. Our IP is largely held offshore, but we're an Irish company. We have significant substance in Ireland, including a plant where we manufacture the API for our largest product. This is my view. For them to eliminate that type, it's probably... That type of structure, it would take probably more of an act of Congress, but we don't necessarily see a lot of tariff exposure for us right now. Obviously, we aren't sure exactly where the tariffs are going to find the land either, so there's a lot of uncertainty there.

Yeah, the difference, I think, between us and many other companies here in the U.S. is we have most of our manufacturing in the U.S., So the generic finished-dose manufacturing is in the U.S. The API, more than 50% of the API we manufacture ourselves for our generics business, which is in St. Louis, in North Carolina, and Greenville. So that changes the pictures on the tariffs. Yes, some of the staffing material for our API, we might have to bear tariffs on that, but overall... we feel the company is in a good shape if the tariffs come through.

If I could just squeeze one in. So just given the fact that you have a lot going on in the U.S., can you just walk us through or quantify the tariff tailwind as it relates to the APAP and API business?

Yeah, it's difficult to do the tailwind. But, you know, I think how we position things is, you know, like with all our generics, our manufacturer up in Hobart, New York, where with most of our competitors, although not on controlled substances, in the generic industry, a majority of the volume is manufactured outside of the U.S. So I think overall we are in well-decision from that point of view more than anything else, but to go further than that is probably not wise because there's so, as you started your question, there's so many uncertainty around what the administration will do going forward, but we feel With the infrastructure that we have, we are well-positioned whatever comes down the road.

Great. Thank you.

Thank you. And I would now like to hand the conference back over to Gerard Muechner for closing remarks.

Yeah. Thanks, Operator. And thanks again for joining us all today. We look forward to engage with you in the coming days a week ahead. If you have any questions, the best way to get a hold of us is via email at and we will work with you to get back to you and set up investor meetings. But thanks a lot for all of you to join us today. Thank you.

This concludes today's conference. Thank you for participating. You may now disconnect. Everyone have a great day.