Mallinckrodt PLC (NYSE:MNK) 37th Annual J.P. Morgan Healthcare Conference Call January 7, 2019 10:30 AM ET
Company Participants
Mark Trudeau – President & CEO
Mark Trudeau
Good morning, everyone. I’d like to start by thanking JPMorgan for hosting here. I’m happy to have them talk about Mallinckrodt story. I think we want to start it out with just recognition of our Safe Harbor statement, recognize that I’m likely to be making some forward-looking statements. And of course, we’re under no obligation to correct or update those statements, and actual results could differ materially from what we’re presenting today. And I would just refer you to our website for the forward-looking statements and our Safe Harbor statement.
So to start off, I’d like to reflect a little bit on 2018 before we get into 2019, and how we see the company evolving. Mallinckrodt has been on a transformational journey to develop a company that is focused on driving innovation and focused on underserved patients with severe and critical conditions. And over the last five years since we’ve spun out, we have made significant strides towards that long-term objective.
Longer term we expect to be a company that can drive growth on an organic basis in the mid-single-digit level. We think we’ve taken some significant strides certainly in 2018 towards that goal. I’d like to highlight just a couple of those things for you.
At the beginning of the year we spoke about a number of things that we wanted to focus on in 2018. We spoke about focusing on driving our in line portfolio, developing our products and our pipeline, focusing on cost management and capital allocation. And we think we’ve had a very strong operational year in 2018. Just to reflect back, we gave guidance in the early part of the year and throughout the course of 2018 we beat-and-raise that guidance twice.
We certainly have had a strong momentum in our overall business and our operational business, commercial business. We’ve seen good recovery of Acthar. We’re pleased with the trajectory that we see for Acthar going forward. We’ve also started to report on some clinical data and we’re quite excited about the prospects for clinical data generation and reporting for Acthar that started really in the third and fourth quarter of 2018, which will continue over the next 12 to 24 months. We have seven clinical trials running for Acthar and those seven trials we will be reporting out over the next several quarters.
Our hospital business continues to operate in a very strong fashion. The business grew collectively in the high-single-digits through the first three quarters of 2018 and we continue to have good strong momentum behind that business across the portfolio, which really comprises three separate products: INOmax, OFIRMEV and Therakos. The business is over $1 billion, again going in the high-single-digit range and has a significant number of pipeline assets behind that business as well and we see our hospital business being a true strength and driver of Mallinckrodt going forward.
We also focus quite a bit on cost management. We stated that our longer term objective for SG&A expenses was to take $100 million out of our 2017 base and we made a significant progress against that already in 2018.
As we look forward in 2019 and in the years to follow that, our SG&A is going to be a little bit lumpy, because we’re looking forward to launching as many as a half a dozen new products or new product presentations over the next couple of years. But long-term, we expect our SG&A to be at $100 million or more below our 2017 run rate. And from a capital allocation standpoint, we’re focused significantly on debt reduction. And through the first three quarters of 2018, we’ve reduced debt approximately $700 million. That’s due to strong operating cash flow and we would expect that trend to continue in the future. …
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