Endo International plc

Thank you for standing by. Welcome to the ENDO International PLC First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that this conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Laurie Park, Senior Vice President of Investor Relations and Corporate Affairs. Please go ahead.

Thank you. Good morning, and thank you for joining us to discuss our first quarter 2021 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, 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 presentation. The reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures are 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?

Thank you, Lori, and good morning, everyone, and thank you for joining us this morning. I'm proud of the way our endo team executed this quarter across all parts of our business. We delivered better than expected first quarter results, continued to make progress against our strategic priorities, including the achievement of an important milestone with the launch of Quo in March. It maintained our relentless focus on transforming our business in order to deliver long-term value for all of our stakeholders. Before moving to further review of the quarter, I want to recognize the ongoing challenges of COVID-19 in many parts of the world, including in India, where many of our team members live and work. To provide for the continued safety of our team members, we've expanded our safety protocols and support services and are working to provide vaccines and treatment services if needed. Additionally, we are making donations to assist with the release efforts in India, including donations to the Indian Red Cross. On behalf of our ENDO team members, I want to express our deepest sympathies to those who have been affected by the ongoing COVID-19 pandemic in India. If we move to the agenda on slide two, I will start with our strategic priorities, followed by a discussion of our first quarter business performance and an update on our pipeline. Then Mark will address our first quarter financial results and provide updates on our financial expectations for 2021. Turning to slide three, our strategic priorities guide all that we do as we work to transform our company. Being a force for good and creating sustainable value that benefits all of our stakeholders is one of our three priorities. and is the foundation around which our environmental, social, and governance strategy is built. Earlier this week, we published our 2020 Corporate Responsibility Report, which serves as an annual accounting of our performance and our progress to adopt more sustainable practices to help people live their best life. While we are early in our ESG journey and have much to do on this front, I'm pleased with our progress to date as reflected in our latest report. Moving to slide four, this is a snapshot of our segment and consolidated revenues and our adjusted EBITDA for the quarter. First quarter revenues of $718 million decreased 12% compared to prior year. This revenue decrease was primarily due to anticipated lower generic pharmaceuticals and sterile injectable segment revenues. Reported first quarter adjusted EBITDA of $365 million decreased by 13% compared to prior year. This decrease was primarily due to lower consolidated revenues, coupled with higher adjusted operating expenses, reflecting our investment in the launch of Quo and our continued strong commercial investment in Zyaflex. First quarter 2021 consolidated revenues and adjusted EBITDA exceeded our previously communicated expectations due to better than expected performance in certain key products across our segments. Higher adjusted gross margin partly due to favorable product mix and lower adjusted operating expenses, mainly due to phasing. Turning to slide five, our branded segment first quarter revenues increased compared to the prior year, driven by specialty products portfolio revenue growth of 7%. Xiflex revenues increased by 7% in the first quarter compared to prior year, driven by strong demand growth for both the Xiflex indications, partially offset by channel inventory destocking, that occurred in the first quarter of 2021 compared to prior year. As we discussed earlier this year, we're investing in a Xiflex commercial strategy that includes increasing patient awareness through expanded promotion to empower patients to seek non-surgical options coupled with physician education and training. We're encouraged by the strong patient interest to seek treatment, which is fueling underlying demand across both indications as measured by consumer traffic to our website and physician locator sites. This is a good early indicator of patient interest and initial consumer activation. Patient office visits for elective procedures in the first quarter continued to be below pre-COVID levels and were fairly in line with our expectations. We're encouraged by the increasing levels of vaccinations nationally and expect patient office visits for elective procedures to steadily increase over the remainder of the year. Based on this, we continue to expect utilization of our physician-administered products, such as Xiflex, to be weighted toward the second half of the year. Revenues from our established products portfolio declined by 9 percent compared to the same period in the prior year, primarily due to ongoing competitive pressures. Revenues from our sterile injectable segment declined by 8 percent compared to the first quarter of 2020. VASER-strict revenue growth of 10 percent in the quarter was more than offset by the decrease in revenue for certain products, such as adrenaline and uropenem, due to the impact of generic competition. Vasostrict first quarter utilization, specifically in the month of March, was higher than we expected. However, as we look forward, we expect vasostrict volumes to begin to decrease toward pre-COVID-19 levels during the second quarter of 2021, as COVID-19-related hospitalizations continue to decline. Moving to slide six, Revenues from our generic segment decreased by 28 percent in the first quarter compared to the prior year. The decrease was primarily due to the impact of anticipated competitive pressures on certain key products, coupled with accelerated prescription fulfillment related to COVID-19 that occurred in the first quarter of 2020. This decline was partially offset by the successful launch of Luby ProStone capsules, the authorized generic for Ametiza, in January of this year. Generic segment first quarter revenues exceeded our expectations primarily due to higher than expected Luby-Proston launch performance, coupled with the delayed impact of anticipated generic competition on certain products. Finally, the expected decrease in international segment revenues for the first quarter was primarily due to ongoing generic competition. Turning to slide seven, we are excited by our entry into the medical aesthetics with the launch of Quo in March. Quo is the first and only injectable approved for the treatment of cellulite and provides a non-surgical option that addresses the underlying causes of cellulite. We believe Quo's unique profile provides the medical aesthetics practitioners an opportunity to create a new vertical and grow their business. We launched Quo through an early experience program that targeted select practices. The program focused on product education, patient selection, managing patient expectations, and building practice success. As we discussed earlier this year, we are taking a deliberate and progressive approach to our launch of Quo and the process we are undertaking for activating and onboarding accounts. During the month of April, after the successful rollout of our early experience program, we began the process of onboarding additional accounts. Activated accounts are being supported with a strong injector training program delivered both virtually and in person. Ongoing education will continue to be important and will be delivered through virtual educational webinars and peer-to-peer programming. We also recognize the need to equip practices with the tools they need to support practice integration and activation. To accomplish this goal, we have launched our Quo healthcare professional portals. Additionally, we announced our launch pricing and believe the price point represents a strong value proposition for practices and consumers who are seeking treatment. To date, we have received positive feedback on Quo from the medical aesthetic community. Activated practices have generated a strong buzz by announcing availability of Quo and posting their own before and after pictures on social media. Additionally, consumer and trade media interest and excitement remain strong, with more than 300,000 unique visitors to the Really Cellulite webpage and greater than 5.3 billion media impressions in the first quarter. including top-tier print and broadcast outlets. While only about one month post-launch, we are on target with our planned account onboarding, purchase and utilization rates. As we progress, we will share more information as it becomes more meaningful. Moving to slide eight and discussing our ongoing branded segment, clinical studies and pipeline. Starting with Quo, our data generation plan and development remains focused on dosing, injection techniques, and responses in target patient populations, as well as rollover studies on durability. For example, our 305 Phase 3b real study looked at co-effectiveness in a real-world population, as well as thigh injection technique and overall investigator experience. At day 90, investigator-perceived improvement scores were greater than 90 percent in cellulite appearance. and 90% of investigators agreed or strongly agreed to incorporate quo into their practice. Results and analysis from these studies are key to our publication and presentation strategies. We continue to make progress on Xiflex development programs. Starting with the treatment of plantar fibromatosis, we are looking forward to the date of publication of our proof of concept study results in the coming months. We plan to progress our plantar fibromatosis program with the initiation of a Phase II study in the second half of this year. In terms of adhesive capsulitis, our Phase IIb study interim analysis is anticipated towards the end of the year. We believe both plantar fibromytosis and adhesive capsulitis represent an opportunity to bring innovative treatment option to address a potential large unmet need for patients who are seeking a non-surgical approach to treatment. Turning to slide nine. We continue to evolve our R&D pipeline and manufacturing capabilities to support the introduction of more sterile products, focusing on the evolving needs of our customers. Almost 80% of our R&D pipeline consists of projects across the sterile injectable product continuum, with approximately two-thirds in ready-to-use and other more differentiated products. Across our sterile injectables and generic segments, we plan to launch approximately 10 products in 2021, which includes the successful launch of the Luby ProStone capsules, the authorized generic of Ametiza, in the first quarter of this year. Now, let me turn the call over to Mark to further discuss the company's financial results and our financial guidance. Mark?