Here's the latest on the latest pharma spinoff. Covidien unveiled its forecast for Mallinckrodt, the drug unit it plans to set free later this year. Percentage-wise, the expectations are strong: For the fiscal year ending on September 27, Covidien predicts sales growth of 7% to 11% compared with 2012.
Already, Mallinckrodt has made progress toward that growth level, with first-quarter revenue up 13% year over year, to $573 million. Covidien ($COV) has been doing its best to fatten up the pharma unit in anticipation of the spinoff, partly via acquisition.
Last year, Mallinckrodt agreed to buy CNS Therapeutics for $100 million with its sole marketed product, the spasticity treatment Gablofen. It also snapped up rights to the pain drug Roxicodone from Xanodyne Pharmaceuticals. Mallinckrodt's latest quarterly sales also benefited from the launch of new generic drugs and growth in its API business.
Mark Trudeau, who'll be president and CEO of the newly spun-off company, says challenges remain, however. He recited a list of them in the press release announcing the company's 2013 forecast: loss of marketing exclusivity for branded and generic products; a pipeline in need of investment, and the shutdown of its high-flux reactor in the Netherlands. "But overall," Trudeau said, "we are optimistic that we are well positioned for the spin and for a positive future as a stand-alone company."
Covidien's rationale for the Mallinckrodt spinoff is similar to that of Abbott Laboratories ($ABT) and its decision to hive off its pharma unit as an independent, publicly traded company, now trading as AbbVie ($ABBV). By separating devices from drugs, Covidien can better focus on its core operations, and Mallinckrodt can do the same with its drug trade. Pfizer ($PFE) has made similar moves, but in reverse, by selling off its nutrition business and spinning off its animal health unit, Zoetis.
- read the release from Covidien
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