How Endo’s and Mallinckrodt’s Expense Control Stacks Up



Expense guidance for fiscal 2019

In its fourth-quarter investor presentation, Endo International (ENDP) guided for its fiscal 2019 adjusted operating expenses as a percentage of revenue being 24.5%–25.0%. In its fourth-quarter conference call, the company attributed this projection to its fiscal 2019 selling and marketing spending for Xiaflex’s commercialization and pre-marketing activities related to the company’s investigational CCH (collagenase clostridium histolyticum) injections for treating cellulite. These expenses are expected to be completely offset by its G&A (general and administrative) spending falling YoY. The company also expects its R&D (research and development) expenses to fall YoY in fiscal 2019, as the Phase 3 trial evaluating CCH for cellulite was completed in fiscal 2018. Endo expects high operating expenses in this year’s first quarter due to corporate spending.

In its fourth-quarter conference call, Mallinckrodt (MNK) guided for fiscal 2019 SG&A (selling, general, and administrative) expenses of ~$844 million, similar to its fiscal 2018 figure. However, the company expects its R&D spending and R&D-to-sales ratio to rise YoY in fiscal 2019.

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Wall Street projections

Analysts expect Endo International’s SG&A expense-to-sales ratios to be 21.16%, 21.26%, and 21.82% in fiscal 2019, fiscal 2020, and fiscal 2021, respectively, and Mallinckrodt’s ratios to be 25.84%, 26.03%, and 27.80%. They expect Endo’s R&D expense-to-sales ratios to be 4.41%, 4.15%, and 4.28% in fiscal 2019, fiscal 2020, and fiscal 2021, respectively, and Mallinckrodt’s to be 11.84%, 12.40%, and 13.33%.

Mallinckrodt is expected to dedicate a higher percentage of its total sales to SG&A and R&D activities than Endo between fiscal 2019 and fiscal 2021. Next, we’ll discuss Endo’s and Mallinckrodt’s gross margins and tax rates in fiscal 2019.


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