Endo Pharmaceuticals Reports Strong Second Quarter 2009 Financial Results

Thursday, 30 July 2009 02:01

CHADDS FORD, Pa.--Endo Pharmaceuticals (Nasdaq:ENDP) today reported financial results for the second quarter of 2009, including a full quarter of results of Indevus Pharmaceuticals, Inc., which Endo acquired during the first quarter.

Total revenues during the second quarter of 2009 increased 22 percent to $373.1 million compared with $306.2 million in the second quarter of 2008.Net income for the three months ended June 30, 2009, was $30.0 million, compared with $57.1 million in the comparable 2008 period.As detailed in the supplemental financial information below, adjusted net income for the three months ended June 30, 2009, was $85.9 million, compared with $72.7 million in the same period in 2008. Diluted earnings per share for the three months ended June 30, 2009, were $0.26 compared with $0.46 in the second quarter of 2008. Adjusted diluted earnings per share for the three months ended June 30, 2009, were $0.73, compared with $0.59 in the same period in 2008.

Total revenues for the six months ended June 30, 2009, were $708.4 million, compared with $596.4 million in the comparable 2008 period.Diluted earnings per share for the six months ended June 30, 2009, were $0.59, compared with $0.90 in the comparable 2008 period.Adjusted diluted earnings per share for the six months ended June 30, 2009, were $1.41, compared with $1.09 in the same period in 2008.

($in thousands, except per share amounts) Second Quarter Year-to-Date 20092008 Change 20092008Change Total Revenues$373,108$306,16122% $708,408 $596,432 19% Reported Net Income 30,02957,128 (47%)69,066116,656(41%) Reported Diluted EPS0.260.46 (43%)0.59 0.90(34%) Adjusted Income 85,86772,70818%164,890140,914 17% Adjusted Diluted EPS $0.73 $0.5924%$1.41$1.09 29%

"Our business continues to perform well, with a solid performance for Lidoderm and strong growth in sales of Opana, Voltaren Gel and Supprelin LA," said Dave Holveck, president and CEO of Endo."On the base of this strong foundation, we are continuing to build out our presence in urology and endocrinology, two therapeutic areas that we've entered, with our acquisition of Indevus Pharmaceuticals, Inc. earlier this year.Our new oncology/endocrinology products also performed well during the quarter, and we are very excited about the potential for our long acting testosterone injectable product.We believe that it can have an important place in testosterone replacement therapy, a market with approximately $900 million in sales last year in the US and growing at more than 20% per annum.We continue to work closely with the FDA as their regulatory review moves forward."

2009 Financial Guidance

The company reiterates guidance for 2009 annual total revenues to be between $1.390 billion and $1.440 billion. Adjusted diluted earnings per share are projected to be between $2.59 and $2.67.The company now believes that it is likely to achieve the upper end of the adjusted diluted earnings per share guidance range.We now forecast reported (GAAP) diluted earnings per share to be between $1.26 and $1.34, primarily attributable to the changes in the value of contingent consideration associated with the Indevus transaction and the addition of milestone payments associated with our Bioniche Life Sciences deal.This reported (GAAP) guidance does not include any estimates for future changes in the fair value of contingent consideration, which could have a significant impact to the actual reported (GAAP) diluted earnings per share in the future. Attached in this press release is a reconciliation of GAAP to non-GAAP calculations.

Selected Product Review

PAIN PRODUCTS

LIDODERM((R)):In September, Endo will celebrate the tenth anniversary of the FDA approval of LIDODERM.During the month, we will be highlighting key milestones and patient successes through the past decade through a variety of external channels.

In addition, the Patchwork of Hope Network(TM), an unbranded grass-roots education program on shingles and after-shingles pain in partnership with the National Pain Foundation, The National Council on Aging, and the Visiting Nurse Associations of America, was launched in April 2009 with the unveiling of the campaign website www.AfterShingles.com.

For the quarter ended June 30, 2009, net sales of LIDODERM increased 6 percent to $195.5 million compared with $185.1 million in the same period a year ago. For the six months ended June 30, 2009, net sales of LIDODERM increased to $367.1 million compared with $365.6 million in the same period a year ago.

OPANA((R)) ER and OPANA((R)):Combined net sales for the OPANA franchise increased 19 percent to $55.2 million for the second quarter 2009 compared with $46.4 million in the same period a year ago. For the six months ended June 30, 2009, combined net sales for the OPANA franchise increased 25 percent to $108.0 million compared with $86.7 million in the same period a year ago.

FROVA((R)):Net sales of FROVA were $15.2 million for the three months ended June 30, 2009 compared with $12.9 million for the same period in 2008.Net sales of FROVA were $27.5 million for the six months ended June 30, 2009 compared with $26.9 million for the same period in 2008.

Voltaren((R)) Gel: In April 2009, we launched the Go Ahead Rub It In(TM) patient support program which includes assistance with patient co-pays for therapeutic doses of 3 to 5 tubes of Voltaren Gel.The program has been well received by patients and will continue to be supported by Endo.

Net sales of Voltaren Gel were $25.5 million for the three months ended June 30, 2009 compared with $1.0 million for the same period in 2008. Voltaren Gel was launched in April 2008. Net sales of Voltaren Gel were $37.9 million for the six months ended June 30, 2009 compared with $1.0 million for the same period in 2008.

ONCOLOGY/ENDOCRINOLOGY PRODUCTS

SUPPRELIN((R)) LA:SUPPRELIN LA is indicated for the treatment of central precocious puberty (CPP).Endo recently launched a new web site (www.supplrellinla.com), which contains in-depth information about this condition for parents and healthcare providers from medical specialists and the Magic Foundation, a national nonprofit support organization for parents of children with CPP.

Net Sales of SUPPRELIN((R)) LA for the second quarter were $7.3 million.Net Sales of SUPPRELIN((R)) LA for the six months ended June 30, 2009 were $10.0 million.

VANTAS((R)): Net Sales of VANTAS((R)) for the second quarter were $5.7 million.Net Sales of VANTAS((R)) for the six months ended June 30, 2009 were $7.6 million.

OTHER BRANDED PRODUCTS

For the second quarter of 2009, net sales of other branded products were $3.9 million compared with $3.5 million in the same period in 2008.For the six months ended June 30, 2009, net sales of other branded products were $8.3 million compared with $5.3 million in the same period in 2008.

GENERIC AND NON-PROMOTED PRODUCTS

For the second quarter of 2009, net sales from the company's generic products were $30.3 million compared with $24.0 million in the same period in 2008. Net sales of Percocet((R)) were $32.0 million for the three months ended June 30, 2009 compared with $33.4 million in the same period in 2008.For the six months ended June 30, 2009, net sales from the company's generic products were $72.7 million compared with $45.8 million in the same period in 2008.Net sales of Percocet((R)) were $65.7 million for the six months ended June 30, 2009 compared with $65.2 million in the same period in 2008. During the second quarter of 2009, the company continued to benefit from a market dislocation in the supply for certain generic products.Market conditions have now essentially normalized for these products.

Conference Call Information

Endo will conduct a conference call with financial analysts to discuss this news release today at 9:00 a.m. ET.Investors and other interested parties may call 800-901-5248 (domestic) or 617-786-4512 (international) and enter code 39225165.Please dial in 10 minutes prior to the scheduled start time.

A replay of the call will be available from July 30 at 1:30 p.m. ET until 12:00 a.m. ET on August 7 by dialing 888-286-8010 (domestic) or 617-801-6888 (international) and enter passcode 74683162.

A simultaneous webcast of the call may be accessed by visiting www.endo.com.In addition, a replay of the webcast will be available until 12:00 a.m. ET on August 7.The replay can be accessed by clicking on "Events" in the Investor Relations section of the website.

Supplemental Financial Information

The following tables provide a reconciliation of our reported (GAAP) statements of operations to our adjusted statements of operations for each of the three months ended June 30, 2009 and June 30, 2008 (Certain prior period amounts have been reclassified to conform to the current period presentation) (in thousands, except per share data):

Three Months EndedActual June 30, 2009 Reported (unaudited) (GAAP) AdjustmentsAdjusted Total Revenues $373,108 $- $373,108 Costs and expenses: Cost of revenues 95,069(19,247) (1)75,822 Selling, general and administrative 129,592-129,592 Research and development 48,508(20,964) (2)27,544 Acquisition-related charges35,023(35,023) (3) - Operating income 64,916 75,234140,150 Interest expense (income), net 10,416 (3,188) (4) 7,228 Other (income) expense, net(1,515) 2,131(5) 616 Income before income taxes 56,015 76,291132,306 Income taxes 25,986 20,453(6)46,439 Net income$30,029$55,838$85,867 Diluted earnings per share$0.26 $0.73 Diluted weighted average shares 117,350 117,350

Notes to reconciliation of our GAAP statements of operations to our adjusted statements of operations:

To exclude amortization of commercial intangible assets related to marketed products $15,599 and the impact of an Indevus inventory step-up recorded as part of acquisition accounting $3,648. To exclude upfront and milestone payments to partners. To exclude Indevus transaction and separation costs $9,093 as well as the impact, under purchase accounting, of the change in the future value of contingent consideration associated with the Indevus acquisition $25,930. To exclude additional interest expense as a result of adopting FSP APB 14-1 and to exclude amortization of the premium on debt acquired from Indevus. To exclude changes in fair value of financial instruments, net. To reflect the cash tax savings resulting from the Indevus acquisition as well as the tax effect of the pre-tax adjustments above at applicable tax rates. Three Months EndedActual June 30, 2008 Reported (unaudited)(GAAP)AdjustmentsAdjusted Total Revenues $306,161 $-$306,161 Costs and expenses: Cost of revenues 62,993 (8,877) (1) 54,116 Selling, general and administrative 126,524 (5,620) (2)120,904 Research and development 26,497510(3) 27,007 Impairment of other intangibles 8,083 (8,083) (4)- Operating income 82,064 22,070 104,134 Interest income, net (428)(3,009) (5) (3,437) Other income, net(1,126) -(1,126) Income before income taxes 83,618 25,079 108,697 Income taxes 26,4909,499(6) 35,989 Net income$57,128$15,580 $72,708 Diluted earnings per share$0.46$0.59 Diluted weighted average shares 123,531123,531

Notes to reconciliation of our GAAP statements of operations to our adjusted statements of operations:

To exclude amortization of commercial intangible assets related to marketed products. To exclude separation costs. To exclude upfront and milestone payments to partners of ($4,450), separation costs of $825, and impairment of long lived assets of $3,115 To exclude impairment of other intangibles To exclude additional interest expense as a result of adopting FSP APB 14-1. To reflect the tax effect of the pre-tax adjustments above at the applicable tax rates.

The following tables provide a reconciliation of our reported (GAAP) statements of operations to our adjusted statements of operations for each of the six months ended June 30, 2009 and June 30, 2008 (Certain prior period amounts have been reclassified to conform to the current period presentation) (in thousands, except per share data):

Six Months Ended June 30, 2009Actual (unaudited) Reported (GAAP) AdjustmentsAdjusted Total Revenues$708,408 $-$708,408 Costs and expenses: Cost of revenues 178,078(32,243) (1)145,835 Selling, general and administrative249,598- 249,598 Research and development76,922(30,402) (2) 46,520 Acquisition-related charges 61,428(61,428) (3)- Operating income 142,382124,073 266,455 Interest expense, net 18,009 (6,969) (4) 11,040 Other (income) expense, net (410) 2,303(5)1,893 Income before income taxes 124,783128,739 253,522 Income taxes55,717 32,915(6) 88,632 Net income $69,066$95,824$164,890 Diluted earnings per share $0.59$1.41 Diluted weighted average shares117,279117,279

Notes to reconciliation of our GAAP statements of operations to our adjusted statements of operations:

To exclude amortization of commercial intangible assets related to marketed products $26,976 and the impact of an Indevus inventory step-up recorded as part of acquisition accounting $5,267. To exclude upfront and milestone payments to partners. To exclude Indevus transaction and separation costs $35,498 as well as the impact, under purchase accounting, of the change in the future value of contingent consideration associated with the Indevus acquisition $25,930. To exclude additional interest expense as a result of adopting FSP APB 14-1 and to exclude the amortization of the premium on debt acquired from Indevus. To exclude changes in fair value of financial instruments, net. To reflect the cash tax savings resulting from the Indevus acquisition and the tax effect of the pre-tax adjustments above at applicable tax rates. Six Months EndedActual June 30, 2008Reported (unaudited) (GAAP) AdjustmentsAdjusted Total Revenues $596,432 $-$596,432 Costs and expenses: Cost of revenues119,527(13,066) (1)106,461 Selling, general and administrative 241,526 (8,898) (2)232,628 Research and development 60,079 (5,940) (3) 54,139 Impairment of other intangibles 8,083 (8,083) (4)- Operating income167,217 35,987 203,204 Interest income, net (9,693)(3,009) (5)(12,702) Other income, net(844) -(844) Income before income taxes177,754 38,996 216,750 Income taxes 61,098 14,738(6) 75,836 Net income $116,656$24,258$140,914 Diluted earnings per share$0.90$1.09 Diluted weighted average shares 129,078129,078

Notes to reconciliation of our GAAP statements of operations to our adjusted statements of operations:

To exclude amortization of commercial intangible assets related to marketed products. To exclude separation costs. To exclude upfront and milestone payments to partners of $2,000, separation costs of $825, and impairment of long lived assets of $3,115 To exclude impairment of other intangibles To exclude additional interest expense as a result of adopting FSP APB 14-1 To reflect the tax effect of the pre-tax adjustments above at the applicable tax rates.

For an explanation of Endo's reasons for using non-GAAP measures, see Endo's Current Report on Form 8-K filed today with the Securities and Exchange Commission.

Reconciliation of Projected GAAP Diluted Earnings Per Share to Adjusted Diluted Earnings Per Share Guidance Year Ended December 31, 2009 Projected GAAP diluted income per common share $1.26 to $1.34 Upfront and milestone payments to partners $0.48$0.48 Amortization of commercial intangible assets $0.50$0.50 Indevus transaction and separation costs $0.63$0.63 Interest expense adjustment for APB 14-1 and the amortization of the premium on debt acquired from Indevus$0.13$0.13 Changes in fair value of financial instruments($0.02)($0.02) Tax effect of pre-tax adjustments at the applicable tax rates and certain other expected cash tax savings as a result of the Indevus acquisition ($0.39)($0.39) Diluted adjusted income per common share guidance$2.59 to $2.67

The company's guidance is being issued based on certain assumptions including:

Adjusted effective tax rate of approximately 34% in 2009; Certain of the above amounts are based on preliminary estimates and there can be no assurance that Endo will achieve these results. Includes all completed business development transactions as of July 15, 2009.

About Endo

Endo Pharmaceuticals is a specialty pharmaceutical company engaged in the research, development, sale and marketing of branded and generic prescription pharmaceuticals used to treat and manage pain, overactive bladder, prostate cancer and the early onset of puberty in children, or central precocious puberty (CPP). Its products include LIDODERM(R), a topical patch to relieve the pain of postherpetic neuralgia; Percocet(R) and Percodan(R) tablets for the relief of moderate-to-moderately severe pain; FROVA(R) tablets for the acute treatment of migraine attacks with or without aura in adults; OPANA(R) tablets for the relief of moderate-to-severe acute pain where the use of an opioid is appropriate; OPANA(R) ER tablets for the relief of moderate-to-severe pain in patients requiring continuous, around-the-clock opioid treatment for an extended period of time; and Voltaren(R) Gel, a nonsteroidal anti-inflammatory drug indicated for the relief of the pain of osteoarthritis of joints amenable to topical treatment, such as those of the hands and the knees. Voltaren(R) Gel is owned and licensed by Novartis AG; SANCTURA(R) and its XR version for treatment of overactive bladder, VANTAS(R) for the palliative treatment of advanced prostate cancer, and SUPPRELIN(R) LA for the treatment of early onset puberty in children.The company markets its branded pharmaceutical products to physicians in pain management, neurology, surgery, oncology, endocrinology and primary care. More information, including this and past press releases of Endo Pharmaceuticals, is available at www.endo.com.

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