Endo International plc

Good morning, ladies and gentlemen, and welcome to the Q2 2020 Indo-International PLC Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star, then zero on your touchtone telephone. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Ms. Lori Parks, Senior Vice President of Investor Relations and Corporate Affairs.

Thank you, Crystal. Good morning and thank you for joining us to discuss our second quarter 2020 financial results. Joining me on today's call are Blaise Coleman, President and CEO of Endo, Mark Bradley, Executive Vice President and Chief Financial Officer, and Patrick Berry, President and Global Commercial Operations. We have prepared a slide presentation to accompany today's webcast, and that presentation, as well as other materials, are posted online in the investor section at endo.com. I would like to remind you that any forward-looking statements made by management are covered under the U.S. Private Securities Litigation Reform Act of 1995 and the applicable Canadian securities laws, and are subject to the changes, risks, and uncertainties described in the press release, and in our U.S. and Canadian securities filings. In addition, during the course of this call, we may refer to non-GAAP financial measures that are not prepared in accordance with accounting principles generally accepted in the United States and that may be different from non-GAAP financial measures used by other companies. Investors are encouraged to review Endo's current report on Form 8K furnished with the SEC for Endo's reasons for including those non-GAAP financial measures in our earnings release and presentations. The reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures is contained in our earnings press release issued last night, unless otherwise noted therein. I'd now like to turn the call over to Blaise. Blaise?

Well, good morning, everyone, and thank you for joining us for this early morning call. Let me start by saying in what are truly challenging times for everyone, I'm proud of what our entire endo team delivered in second quarter. I want to thank the team for their tireless efforts in prioritizing the safety of our people and communities, ensuring the resiliency of our supply chain, and supporting our customers. If we move to the agenda on slide two, I'll start with a discussion of our second quarter business performance, followed by an update on our evolved strategic priorities. I'll also provide an update on our pipeline. Then Mark will address our second quarter financial results and provide financial expectations for the third quarter and full year of 2020. Slide three is a snapshot of our segment and consolidated revenues and our adjusted EBITDA for the quarter. Second quarter revenues of $688 million decreased 2% compared to prior year, primarily due to decreased branded segment revenues resulting from a reduction in physician office activity and patient office visits related to the COVID-19 pandemic. This was largely offset by an increase in sterile injectable segment revenues due to significant channel inventory stocking of vasostrict in anticipation of treating certain patients infected with COVID-19. Second quarter consolidated revenues exceeded our previously communicated expectations, mainly due to the performance of our branded and generic segments. Reported adjusted EBITDA in the quarter of $336 million increased compared to prior year due to favorable changes in product mix, as well as lower adjusted operating expenses. Turning to slide four, in the second quarter, branded segment revenues decreased by 38 percent compared to the same period in 2019. The specialty products portfolio in Xiflex's second quarter revenues declined by 45 percent and 55 percent, respectively, compared to the prior year. The decrease in revenue was due to the impact of COVID-19. In terms of the specialty portfolio, demand volumes were greater than previously communicated expectations due to a faster pace of physician office reopenings and a higher level of patient visits. This, in combination with our effective commercial execution, including our combined virtual and in-person approach to physician engagement, resulted in a much stronger recovery in the second quarter. We're very encouraged by the level of underlying demand recovery we've seen to date, and the continued strong interest of patients willing to seek treatment. Our established products portfolio declined by 28% compared to the same period in the prior year, primarily due to competitive pressures and a temporary product supply disruption, which has since been resolved. Our sterile injectable segment revenues grew by 31% compared to the second quarter of 2019, driven by strong growth of vasostrict, which resulted primarily from increased sales volume due to significant channel inventory stocking during the quarter in anticipation of potential treatment needs for certain patients infected with COVID-19. Sterile injectable segment revenues were lower than our previously communicated expectations due to lower vasostrict hospital utilization in the quarter. Moving to slide five, our generic segment revenues decreased by 1% during the second quarter compared to the second quarter of 2019. The underlying performance in the quarter reflects the impact of competitive events, partially offset by the impact of certain recent product launches. Second quarter revenues were better than our previously communicated expectations due to stronger second quarter prescription fulfillment trends following accelerated first quarter 2020 prescription fulfillment. The decrease in international segment revenues for the second quarter was primarily due to competitive pressures in certain international markets, as well as the impact of certain product discontinuations. Turning to slide six, we want to spend a few minutes providing an update on our company's strategic priorities going forward. As you know, Endo has a long history of evolving as a company in order to develop and deliver different types of high-quality products in its constant pursuit to address the many needs of patients. With the recent FDA approval of Quo and our impending entry into the U.S. aesthetics market, we proudly continue our evolution as a company. As we are now preparing for this next cycle of evolution, it is only natural our strategic priorities evolve too. Our strategic priorities serve to guide every decision we make in our quest to create long-term sustainable value for our stakeholders. Let's take a moment to walk through our evolved strategic priorities. Our first priority is to expand and enhance our portfolio. we are investing to build a more differentiated and durable portfolio that benefits our customers and creates sustainable long-term value. This shift to a more differentiated and durable portfolio is not new, given our investments to date in the development and approval of Quo, our investments in our sterile injectables pipeline, and our investments in our Xiflex lifecycle management opportunities. What is new is our increased focus on identifying ways to accelerate this portfolio transformation through a combination of internal and external investments. We look forward to fully capitalizing on our current portfolio opportunities and adding additional opportunities aligned with this strategic priority. Our second priority is to reinvent how we work. We are embracing the future by accelerating new ways of working to better serve our customers, promote innovation, and further improve our productivity. This is a strategic priority because the rate of change in the world is accelerating every day. and we need to change with it. Whether it be how we engage with our customers, how we conduct our clinical development studies, how we manufacture our products, or how we move from a physical to more virtual work environment, reinventing how we work will be critical to our future success. This drives us to increase our effectiveness in all we do and opens up exciting opportunities for us to create meaningful value for all of our stakeholders. Our third strategic priority is be a force for good. In driving our ambitions around our first two priorities, we will deliver on those priorities in a way that benefits all of our stakeholders, from our customers to our end-of-team members to the communities we work and live in. We deeply believe operating this priority in place is essential to our goal to create long-term, sustainable value for all of our stakeholders. We're excited to continue our evolution as a company and believe our successful execution against these strategic priorities will drive our future success. Turning to slide seven, as we work to expand and enhance our portfolio, we're excited by the recent FDA approval of Quo and our impending entry into the medical aesthetics. Quo is the first and only injectable approved for the treatment of cellulite and provides a non-invasive option that addresses the underlying cause of cellulite. We are very encouraged by the medical aesthetics and beauty industry response to the approval of Quo to date and look forward to bringing this innovative treatment option to market. If we turn to slide eight, we see a sizable U.S. market opportunity awaiting Kuo as we enter the widely accepted and growing injectable market. Kuo also has the potential to address an unmet need in the growing body contouring market. We believe the potential target population for treatment with Kuo exceeds 6 million women aged 25 to 54 and could reach as high as 11 million aged 21 to 59. We continue to actively prepare for our spring 2021 launch and the long-term success of Quell. We've already begun our Salesforce recruitment with the hiring of our sales management team. As we move into the fall, we'll be launching consumer activation plans, inclusive of social media channels and an unbranded condition awareness campaign. We are finalizing a physician early experience program and preparing for robust physician injector training, which will begin in early 2021. Product pricing is still being finalized and will be announced closer to Quo's launch date. Moving to slide nine and discussing our ongoing clinical studies and pipeline. Starting with Quo, our data generation plan and development remains focused on dosing, injection technique, and responses in target patient populations, as well as rollover studies on durability. Results and analysis from these studies are key to our publication and presentation strategies. We're currently running a phase one label expansion TK study on plasma clearance of vasopressin in healthy volunteers, which we believe may further advance our clinical understanding of vasostrict and health physicians. The study is progressing, and final results are expected in the fourth quarter of this year. We continue to make progress on the Zyaflex development programs for the treatment of plantar fibromytosis and adhesive capsulitis, with the first patient dose milestones achieved for both indications over the last month. Turning to slide 10, as we invest to build a more differentiated and durable portfolio, we believe both plantar fibromytosis and adhesive capsulitis represent an opportunity to bring an innovative treatment option to address a potential large unmet need for patients who are seeking a non-surgical approach to treatment. Plantar fibromytosis presents as nodules on the plantar fascia in the feet. and in the majority of cases, patients have pain associated with the condition. U.S. patient claims data suggest there are over 400,000 surgeries for plantar performed annually. From a patient population standpoint, the majority are symptomatic and nearly all have pain, and currently the only treatment option is a potential complication-prone surgery. In the case of frozen shoulder or adhesive capsulitis, a thickening in fibrosis of the shoulder capsule results in shoulder motion restriction and can be painful. With a 2% to 5% prevalence rate in the U.S. and over 200,000 surgeries performed annually, adhesive capsulitis also represents an attractive market opportunity. We're proud to advance our clinical studies in these indications with the ultimate goal of improving patient care. Turning to slide 11, as we've said before, you can see that our pipeline is increasingly reflective of our sterile injectables growth strategy. We believe our sterile injectables opportunities have a higher level of differentiation and a more durable revenue profile. We are pursuing opportunities that we believe can help to meet the evolving needs of our customers and potentially improve patient care. Almost 60% of our R&D pipeline is in differentiated sterile injectable products, and for 2020, we estimate 50% or more of our new product regulatory filings will be for sterile injectable products. Our pipeline is supplemented by strategic relationships with third-party partners, such as Nevicar, which we potentially provide five differentiated 505 hospital and critical care-based products. We anticipate launching the first Nevicar product in late 2020. We plan to launch approximately 15 products in 2020. During the second quarter, we received a major complete response letter from the FDA on our generic Ciprodex A&D application. We are currently developing our response to the FDA. Now, let me turn the call over to Mark to further discuss the company's financial results and provide an update on our financial guidance.