On November 8, 2016 Endo International plc (NASDAQ: ENDP) (TSX: ENL) reported third quarter 2016 financial results, including:
Revenues of $884 million including the addition of sales from its 2015 acquisition of Par Pharmaceutical, a 19 percent increase compared to third quarter 2015 revenues of $746 million(Press release, Endo, NOV 8, 2016, View Source;p=RssLanding&cat=news&id=2220454 [SID1234516401]).
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Reported net loss from continuing operations of $191 million compared to third quarter 2015 reported net loss from continuing operations of $804 million.
Reported diluted loss per share from continuing operations of $0.86 compared to third quarter 2015 reported diluted loss per share from continuing operations of $3.84.
Adjusted net income from continuing operations of $226 million, a 5 percent increase compared to third quarter 2015 adjusted net income from continuing operations of $214 million.1
Adjusted diluted EPS from continuing operations of $1.01 compared to third quarter 2015 adjusted diluted EPS from continuing operations of $1.02.1
"During the third quarter 2016, Endo further sharpened its focus on operational execution. We have continued to deliver results across all of our businesses that are on-track or ahead of Company expectations for the quarter. Today we are reaffirming our full year 2016 revenue and adjusted diluted EPS financial guidance," said Paul Campanelli, President and CEO of Endo. "This is an important time for Endo. The leadership team is working closely and collaboratively to build on our strengths and develop a go-forward strategy that best positions the Company to improve the lives of the patients and customers we serve."
FINANCIAL PERFORMANCE
(in thousands, except per share amounts)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2016
2015
Change
2016
2015
Change
Total Revenues
$
884,335
$
745,727
19
%
$
2,768,761
$
2,195,021
26
%
Reported Income (Loss) from
Continuing Operations
$
(191,496)
$
(803,706)
(76)
%
$
109,553
$
(744,108)
NM
Reported Diluted Weighted Average
Shares
222,767
209,274
6
%
223,060
188,085
19
%
Reported Diluted Income (Loss) per
Share from Continuing Operations
$
(0.86)
$
(3.84)
(78)
%
$
0.49
$
(3.96)
NM
Adjusted Income from Continuing
Operations
$
225,519
$
214,110
1
5
%
$
658,591
$
625,805
1
5
%
Adjusted Diluted Weighted Average
Shares
223,139
210,787
6
%
223,060
192,144
16
%
Adjusted Diluted EPS from
Continuing Operations
$
1.01
$
1.02
1
(1)
%
$
2.95
$
3.26
1
(10)
%
(1) Refer to footnote 12 and 14 in the Reconciliation of GAAP and Non-GAAP Financial Measures tables for three and nine months ended September 30, 2015, respectively, for further discussion.
CONSOLIDATED RESULTS
Total revenues increased by 19 percent to $884 million in third quarter 2016 compared to the same period in 2015, primarily attributable to revenues related to the September 2015 Par acquisition. GAAP net loss from continuing operations in third quarter 2016 decreased to $191 million compared to a GAAP net loss from continuing operations of $804 million during the same period in 2015, primarily attributable to the amount of goodwill and intangible asset impairment charges recorded during the third quarter 2015. GAAP net loss per share from continuing operations for the three months ended September 30, 2016 was $0.86, compared to a GAAP net loss from continuing operations of $3.84 in third quarter 2015.
Adjusted net income from continuing operations for third quarter 2016 increased by 5 percent to $226 million compared to third quarter 2015, driven primarily by the contribution of Par, offset partially by an increase in interest expense. Adjusted net income per share from continuing operations for the three months ended September 30, 2016 decreased 1 percent to $1.01 compared to third quarter 2015.
U.S. BRANDED PHARMACEUTICALS
During third quarter 2016, the U.S. Branded Pharmaceuticals business unit continued to focus on supporting demand growth for XIAFLEX in both the Dupuytren’s contracture and Peyronie’s disease indications and the BELBUCA launch continues to progress.
Third quarter 2016 U.S. Branded Pharmaceuticals results include:
Revenues of $280 million, an 8 percent decrease compared to third quarter 2015; this decrease was primarily attributable to a generic entrant for Voltaren Gel in March 2016 and volume contraction across our established pain products.
Net sales of XIAFLEX increased 19 percent compared to third quarter 2015; this increase reflects high single-digit demand growth for the product and expected inventory build in the quarter.
U.S. GENERIC PHARMACEUTICALS
During third quarter 2016, the U.S. Generic Pharmaceuticals business unit continued to execute on its sales and marketing, research and development (R&D), and manufacturing plans for the year.
Third quarter and recent 2016 U.S. Generic Pharmaceuticals results include:
Revenues of $534 million, a 45 percent increase compared to third quarter 2015; this increase was primarily attributable to growth from the addition of sales by Par.
Generics Base business revenues declined approximately 20 percent sequentially compared to the second quarter 2016, due to deepening consortium pricing pressures and additional competitive entrants and product discontinuations as well as discrete factors, including destocking and shifts in purchase timing due to market conditions. The sequential decline would have been approximately 15 percent without these discrete factors and this deeper decline may continue into 2017.
On November 1, 2016, the Company launched the generic form of SEROQUEL XR, for which it has first-to-file status and 180 days of marketing exclusivity.
INTERNATIONAL PHARMACEUTICALS
During third quarter 2016, the International Pharmaceuticals business unit continued to focus on expanding adjusted margins for its emerging markets businesses, while in-licensing new products and managing the expected loss of exclusivity for certain products at Paladin.
Third quarter 2016 International Pharmaceuticals results include:
Revenues of $71 million, a 3 percent decrease compared to third quarter 2015.
Paladin revenues of $28 million, a 10 percent increase compared to third quarter 2015, due primarily to solid performance across the base business, the Canadian launch of Nucynta and the continuing management of the expected loss of exclusivity for two products.
Emerging market revenues from Litha and Somar of $38 million, a 4 percent decrease compared to third quarter 2015, driven primarily by a decrease in Litha revenues as it manages its recent divestiture of non-core assets and integrates its new portfolio of products and pipeline programs acquired from Aspen.
2016 Financial Guidance
For the full twelve months ended December 31, 2016, at current exchange rates, Endo is reaffirming its full year revenue and adjusted diluted EPS financial guidance. The Company estimates:
Total revenues to be between $3.87 billion and $4.03 billion;
Diluted GAAP EPS from continuing operations is now expected to be between $0.98 and $1.28; and
Adjusted diluted EPS from continuing operations to be between $4.50 and $4.80.
The Company’s 2016 financial guidance is based on the following assumptions:
Adjusted gross margin of approximately 60 percent;
Adjusted operating expenses as a percentage of revenues to be approximately 22.5 percent;
Adjusted interest expense of approximately $450 million;
Adjusted effective tax rate of approximately zero to 2 percent; and
Adjusted diluted EPS from continuing operations assumes full year adjusted diluted shares outstanding of approximately 223 million shares.
Balance Sheet, Liquidity and Other Updates
As of September 30, 2016, the Company had $561.6 million in unrestricted cash; net debt of approximately $7.7 billion and a net debt to adjusted EBITDA ratio of 4.9.
Third quarter 2016 cash used in operating activities was $111.3 million, primarily attributable to the funding of mesh payments, offset partially by improved cash collections.
During third quarter 2016, the Company recorded impairment charges of $93.5 million primarily related to unfavorable formulary changes and market conditions impacting its Sumavel DosePro product.