— Transaction expected to create two differentiated pharmaceutical companies with scale – One focused on innovative specialty pharmaceutical brands; One with a portfolio of niche specialty generic products, active pharmaceutical ingredients (APIs), and non-promoted brands including the AMITIZA® product —
— Transaction expected to be completed in the second half of 2019 —
— Spun-off company will assume the Mallinckrodt name; Specialty Pharmaceutical Brands company will be renamed —
Mallinckrodt plc (NYSE: MNK), a leading global specialty pharmaceutical company, today announced plans to spin off a new company consisting of Mallinckrodt’s Specialty Generics/Active Pharmaceutical Ingredients (Specialty Generics) business and AMITIZA® (lubiprostone) to Mallinckrodt shareholders, subject to final Board approval. The separation is expected to create two independent, appropriately capitalized, publicly traded companies – one focused on innovative specialty pharmaceutical brands, the other concentrated primarily in niche specialty generic products and API manufacturing – each positioned to optimize future success as they pursue independent growth strategies.
The planned separation is expected to be executed through a pro-rata distribution of common stock to Mallinckrodt’s shareholders that is generally tax-free for U.S. federal income tax purposes. The spin-off is projected to be completed in the second half of 2019 or sooner. It is anticipated that the spun-off company will be listed on the New York Stock Exchange (NYSE) and will assume the Mallinckrodt name and ticker symbol (MNK).
The ‘remaining’ independent Specialty Pharmaceutical Brands company, whose goal is to improve outcomes for underserved patients with severe and critical conditions, will continue to focus on its portfolio of innovative marketed and development products. Mark Trudeau,current President and Chief Executive Officer, will lead the business. The remaining company will be renamed at a later date.
Angus Russell, Mallinckrodt’s Chairman of the Board, said, “Over the past five years, Mallinckrodt has transformed its business through a series of strategic transactions – acquiring a portfolio of marketed and development stage pharmaceutical brands that can drive growth, and divesting non-core assets that could be better maximized by others. In 2016 the Board began to explore a range of strategic alternatives for the company’s Specialty Generics business, and believes there is a strong rationale and opportunity to create two new, appropriately capitalized, independent companies that have the potential to unlock and increase value over the long term. We expect this separation will result in greater strategic focus, allowing each business to more effectively enhance returns by commercializing new and current product offerings; drive innovation by allocating resources to the areas of highest opportunity; and pursue growth and investment strategies more directly aligned with each company’s respective goals.”
Mark Trudeau said, “Today’s announcement is another important step forward in our journey to become an innovation-driven, pure-play, specialty pharmaceutical brands growth company. We believe this separation will further enhance our strategic focus and strengthen our balance sheet. It should also provide us with additional liquidity to support investments in our in-line brands and development portfolio and strategically allocate capital.”
Trudeau added, “The spin-off of the Specialty Generics business creates an exciting new company which we believe will be well positioned to grow. Operating independently will allow this new company to more rapidly capitalize on its growth opportunities to enhance value.”
PROFILE OF THE NEW SPECIALTY GENERICS COMPANY
For the twelve months ended September 28, 2018, the collective net sales from the new Specialty Generics company exceeded $850 million on an as reported basis inclusive of the AMITIZA product since February 14, 2018.
For the twelve months ended September 28, 2018, the collective net sales from the new Specialty Generics company exceeded $850 million on an as reported basis inclusive of the AMITIZA product since February 14, 2018.
With approximately 1,600 employees, the newly spun company will include a leading acetaminophen business, a portfolio of both API and generic finished dose forms of controlled substances and other drugs, a niche specialty generics development portfolio, and a strong U.S. manufacturing footprint. The inclusion of the AMITIZA product in the non-promoted assets to be spun off brings added manufacturing facilities and employees in Japan, and diversifies revenues further. Marketed in the U.S. and Japan by alliance partners, Mallinckrodt recognizes net sales from commercial partnership arrangements in the form of AMITIZA product sales, royalties and milestones. The new Specialty Generics company will be positioned financially to grow its ANDA1 pipeline and expects to launch as many as five new products in 2019. The company will be headquartered in the St. Louis, Missouri area.
Matthew Harbaugh, currently Mallinckrodt’s Executive Vice President and Chief Financial Officer (CFO) and President of the Specialty Generics business, is expected to become President and Chief Executive Officer of the new company upon completion of the spin off.
Harbaugh will step down as Mallinckrodt’s CFO, effective immediately, to focus exclusively on preparing for separation, but will continue to serve as President of the Specialty Generics business and report to Trudeau. A search for Harbaugh’s successor is underway. During this process, George Kegler, Mallinckrodt’s Vice President of Finance, will serve as interim CFO. Announcements of the Board of Directors for the Specialty Generics business are expected at a later date.
Harbaugh said, “Mallinckrodt has a more than 150-year legacy of operations in St. Louis and a proud history of supplying the highest quality products to customers. As an independent, U.S.-based company, I am confident that we will be well positioned to advance our R&D2 capabilities and continue to maintain our category leadership in controlled substances.”
“Matt has been involved in the Specialty Generics business for over a decade,” said Trudeau. “We’re very pleased to have someone with his leadership experience take the helm.”
PROFILE OF THE SPECIALTY PHARMACEUTICAL BRANDS COMPANY
With net sales in excess of $2.3 billion3 (inclusive of a $1 billion hospital portfolio and a robust innovative pipeline), the Specialty Pharmaceutical Brands company is expected to gain additional liquidity and financial flexibility from the transaction to enable continued strategic transformation and growth.
With net sales in excess of $2.3 billion3 (inclusive of a $1 billion hospital portfolio and a robust innovative pipeline), the Specialty Pharmaceutical Brands company is expected to gain additional liquidity and financial flexibility from the transaction to enable continued strategic transformation and growth.
As reported on Nov. 6, Mallinckrodt’s third quarter 2018 results showed strong customer demand for its branded hospital products – including INOmax® (nitric oxide) gas, for inhalation, OFIRMEV® (acetaminophen) injection and the Therakos® immunotherapy platform – and improved performance for H.P. Acthar® Gel (repository corticotropin injection). Solid execution combined with tight expense control helped support increased R&D investments in the company’s innovative pipeline. Operational excellence and continued strong commercial execution throughout 2018 have also been the catalysts for Mallinckrodt to raise its guidance for adjusted diluted earnings per share in each of the last two quarters.
The company expects to achieve a number of key milestones for its pharmaceutical brands in coming quarters. It anticipates top-line results from both the completed rheumatoid arthritis clinical trial and multiple sclerosis registry for H.P. Acthar Gel as early as the first half of 2019. Additionally, in the second half of 2019, the company is targeting completion of enrollment in Phase 4 trials in uveitis and lupus for the drug, and anticipates completing enrollment in the H.P. Acthar Gel Phase 2 trial in amyotrophic lateral sclerosis as well. Top-line results from the company’s development program for CPP-1X/sulindac are anticipated in the first quarter of 2019, and the pivotal trial results for both StrataGraft® viable engineered skin tissue and terlipressin are expected to be available in the second half of the year.
Following the spin-off, ordinary shares of the renamed Specialty Pharmaceutical Brands company will continue to trade on the NYSE. The company will maintain its global headquarters in Staines-upon-Thames, United Kingdom, and its principal U.S. office in Bedminster, N.J. The company also plans to maintain other facilities throughout the United States and in Australia, Canada, Ireland, Japan, Luxembourg and Switzerland.
NEXT STEPS IN THE SEPARATION PROCESS
With the pursuit of strategic alternatives for the Specialty Generics business actively underway for more than two years, important progress has already been made in key areas that the company believes will simplify and support a relatively short separation process. Completion of the separation transaction will be subject to certain conditions, including final Board approval, an opinion from tax counsel regarding the treatment of the spin-off as generally tax-free for U.S. federal income tax purposes to Mallinckrodt shareholders, and the U.S. Securities and Exchange Commission (SEC) declaring the Form 10 registration statement effective. There can be no assurance regarding the final allocation of assets between the two companies, the ultimate timing of the proposed separation, or that the spin-off will be completed.
With the pursuit of strategic alternatives for the Specialty Generics business actively underway for more than two years, important progress has already been made in key areas that the company believes will simplify and support a relatively short separation process. Completion of the separation transaction will be subject to certain conditions, including final Board approval, an opinion from tax counsel regarding the treatment of the spin-off as generally tax-free for U.S. federal income tax purposes to Mallinckrodt shareholders, and the U.S. Securities and Exchange Commission (SEC) declaring the Form 10 registration statement effective. There can be no assurance regarding the final allocation of assets between the two companies, the ultimate timing of the proposed separation, or that the spin-off will be completed.
CONFERENCE CALL AND WEBCAST
Mallinckrodt will hold a conference call on Thursday, Dec. 6, 2018, beginning at 8:00 a.m. U.S. Eastern Time. This call can be accessed in three ways:
Mallinckrodt will hold a conference call on Thursday, Dec. 6, 2018, beginning at 8:00 a.m. U.S. Eastern Time. This call can be accessed in three ways:
- At the Mallinckrodt website: http://www.mallinckrodt.com/investors.
- By telephone: For both listen-only participants and those who wish to take part in the question-and-answer portion of the call, the telephone dial-in number in the U.S. is (877) 359-9508. For participants outside the U.S., the dial-in number is (224) 357-2393. Callers will need to provide the Conference ID of 5349569.
- Through an audio replay: A replay of the call will be available beginning at 11:00 a.m. Eastern Time on Thursday, Dec. 6, 2018, and ending at 11:59 p.m. Eastern Time on Thursday, Dec. 20, 2018. Dial-in numbers for U.S.-based participants are (855) 859-2056 or (800) 585-8367. Participants outside the U.S. should use the replay dial-in number of (404) 537-3406. All callers will be required to provide the Conference ID of 5349569.
ADVISORS
Goldman, Sachs & Co. is acting as financial advisor on the spin-off and Wachtell, Lipton, Rosen & Katz is acting as legal advisor.
Goldman, Sachs & Co. is acting as financial advisor on the spin-off and Wachtell, Lipton, Rosen & Katz is acting as legal advisor.
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