EUR 850.00 For Business Accounts Only

Morningstar | MNK Updated Forecasts and Estimates from 12 Feb 2019

We may boost our fair value estimate for no-moat Mallinckrodt as we review our assumptions. Despite a nearly 70-basis-point decline in adjusted gross margin from last year from product mix, the company’s selling and administrative expenses continue to come in better than our forecast, and management raised its year-end adjusted EPS outlook to $7.10 at the midpoint. Meanwhile, the company’s top line continues to mostly meet our expectations. Acthar Gel sales were down 6% from last year, and we remain skeptical that management’s efforts to boost clinical evidence behind the drug’s efficacy--which should surface over the coming quarters--can dramatically improve sales. The performance of Mallinckrodt’s other product lines was consistent with previous quarters, as well. Besides the uncertainty around Acthar Gel’s growth trajectory, we still consider most of Mallinckrodt’s remaining portfolio as limited-competition products, except for Ofirmev, that should support some stability in the firm’s future cash flow. Lastly, management has not found a buyer for its generics segment, which continues to be reported in discontinued operations. We imagine performance has continued to erode in this division, likely making attracting a buyer difficult.