How Mallinckrodt’s Specialty Brands Performed in 2Q16

Mallinckrodt’s (MNK) Specialty Brands segment deals with the production and marketing of branded pharmaceutical and biopharmaceutical products and therapies. The segment earned $535 million during fiscal 2Q16 and includes Acthar, the lead drug, as well as Inomax, Ofirmev, Therakos immunotherapy, Hemostatic products, and other drugs. After Acthar, Inomax and Ofirmev are the next biggest contributors. (Mallinckrodt only recently acquired Inomax, Ofirmev, and Therakos.)

As the second-largest contributor in fiscal 2Q16, Inomax earned $115.5 million for Mallinckrodt, accounting for 21.6% of the segment’s net sales. Inomax is a vital treatment in neonatal critical care. Ofirmev, by comparison, added $71.7 million, whereas the contribution from Therakos was $50.2 million during fiscal 2Q16.

MNK’s Specialty Brand segment is a high-margin business. The operating income for the segment stood at $263.1 million in fiscal 2Q16, which is a 49.2% rise compared to the 29.1% rise in 1Q15. Incremental contributions from Inomax and Therakos immunotherapy caused this margin expansion for Mallinckrodt.

Of course, it’s often risky to directly invest in a pharmaceutical or biotechnology company because any news release for the success or failure of a particular drug can result in stock price volatility. To remain on comparatively safer side, investors often choose ETFs like the Vanguard Growth ETF (VUG), which has 0.08% of its total holdings in Mallinckrodt. VUG has 5.5% exposure to the pharmaceutical sector. Gilead Sciences (GILD) and Amgen (AMGN) constitute ~1.5% and ~1.3% of the fund’s total assets, while AbbVie (ABBV) has a weight of ~1.1% VUG.

Now let’s discuss the performance of Acthar, Mallinckrodt’s lead Specialty Brand drug.