Tuesday, January 31, 2017
Mallinckrodt plc, a leading specialty pharmaceutical company, announced it has entered into an agreement under which it will sell its Intrathecal Therapy business to Piramal Enterprises Limited's subsidiary in the U.K., Piramal Critical Care, for approximately $203 million, including fixed and contingent consideration. Piramal Critical Care is an integral business unit of Piramal Enterprises Limited and a global leader in the field of anesthesia.
Mallinckrodt's Intrathecal Therapy business markets products for the treatment of spasticity via intrathecal (spinal column) drug delivery. The key asset is Gablofen® (baclofen injection), a product approved by the U.S. Food and Drug Administration (FDA) for use in management of severe spasticity of cerebral or spinal origin in adult and pediatric patients age 4 years and above. Gablofen is the only FDA-approved baclofen in prefilled syringes and factory-sealed vials. Mallinckrodt also has a higher Gablofen concentration in late-stage development which, if approved, would help address physicians' demand for more refill options. Both currently marketed intrathecal products and those in development are included in the transaction.
"Mallinckrodt is transforming its portfolio to become a top-performing specialty pharmaceutical company, systematically divesting non-core businesses to build upon our growth platforms in autoimmune and rare diseases and hospital therapies," said Mark Trudeau, President and Chief Executive Officer of Mallinckrodt. "While net sales for our Intrathecal Therapy business have increased approximately 50% since 2012 and it has become significantly more profitable, the products have limited commercial synergy with other parts of our growing Specialty Brands segment. The sale of this business to Piramal is the best solution to meet patient needs and will free resources for us to invest in additional growth."
Fiscal 2016 net sales of Intrathecal Therapy products were $44.6 million and reported as part of Mallinckrodt's Specialty Brands segment within the "Other" line. The sale of the business does not qualify for GAAP1 treatment as a discontinued operation, and therefore historical sales and earnings results will not be recast to reflect the divestiture. Assuming the transaction closes in the first quarter of 2017, the sale is expected to dilute 2017 earnings per share from continuing operations by between $0.20 and $0.25, with anticipated dilution declining in 2018 and beyond. Mallinckrodt believes the majority of the negative earnings impact will be offset by expense management, strength of the continuing businesses and further reduction in share count through ongoing share repurchases.
"This divesture is in line with our ongoing focus on driving return on invested capital decisions we make on behalf of shareholders," said Matt Harbaugh, Executive Vice President and Chief Financial Officer of Mallinckrodt. "The transaction is a perfect example of how we pursue activities that have positive economic outcomes."
The approximately $203 million transaction will consist of $171 million of fixed consideration of which 10%, or $17 million, will be paid at closing, and an additional $154 million will be paid on the first anniversary of the close date. The remaining total consideration of up to $32 million is contingent, based on the gross profit of the Gablofen products in 2018 and 2019. The transaction is subject to customary closing conditions, and Mallinckrodt expects to complete the transaction in the first quarter of 2017.
