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S&P downgrades Mallinckrodt, revises outlook

S&P Global Ratings lowered Mallinckrodt Plc's corporate credit rating to B+ from BB-.

The outlook was changed to stable from negative.

S&P said the ratings downgrade reflects Mallinckrodt's weaker credit profile as the U.K. drugmaker's lower outlook on EBITDA for 2018 to 2019, along with potentially lower-than-expected proceeds from the sale of the company's generics business used to reduce debt, would likely result in its leverage sustained firmly above 5x during the period.

The rating agency said the downgrade also reflects increasing operational risks for Mallinckrodt, including potential competition for its blockbuster drug H.P. Acthar Gel and its Inomax therapy, the challenging reimbursement environment for Acthar and increasing opioid-related lawsuits against the company.

Acthar treats infant spasms, multiple sclerosis and certain other conditions, while Inomax is intended to boost oxygen levels in the body.

The stable outlook reflects S&P's view that low-single-digit revenue growth of the company's branded products portfolio and EBITDA margins of around 40% will result in solid free cash flow generation of around $500 million from 2018 to 2019 and leverage in the 5x to 5.5x range.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings documents referred to in this news brief can be found here.