Endo International plc

Good day and welcome to the first quarter 2022 Endo International PLC earnings conference call. At this time, all participants are in 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 then one on your touchtone telephone. If anyone should require assistance during the call, please press star then zero to reach an operator. As a reminder, this call is being recorded. I would like to turn the call over to Lori Park, Senior Vice President, Investment Relations and Corporate Affairs. You may begin.

Thank you. Good morning and thank you all for joining us to discuss our first quarter 2022 financial results. Joining me on today's call are Blaise Coleman, Endo's President and CEO, Mark Bradley, Executive Vice President and CFO, and Patrick Berry, our President, Global Commercial Operations. We have prepared a slide presentation to accompany today's webcast, and that presentation is as well as other materials are posted online in the investor section at endo.com. Additionally, later this morning, a copy of our prepared comments will also be 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 its earnings release and presentations. The reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are contained in our earnings press release issued yesterday, unless otherwise noted therein. I would now like to turn the call over to Blaze. Blaze?

Thank you, Laurie. Good morning, everyone, and thank you for joining us. Turning to slide three, as we've previously discussed, our strategic priorities guide all that we do as we work to transform our company. Our first strategic priority, to expand and enhance our portfolio, is essential to fueling our company's future growth and will be achieved through a combination of internal and external investments. This week, we announced advancements for our sterile injectables and medical aesthetics portfolios. Starting with sterile injectables, on Monday, we announced the acquisition of a portfolio of six product candidates from Nevicar. These products are in various stages of development, with the first launch expected in 2025. Endo will control all remaining development, regulatory, manufacturing, commercialization activities for these assets. This acquisition further bolsters and expands our pipeline of differentiated, ready-to-use sterile injectables. Additionally, yesterday, we announced that later this quarter, we plan to launch a new multi-cohort, open-label study, referred to as Aphrodite 1, focused on reducing bruising associated with the utilization of Quo. The study will test different interventions to assess their potential impact on the reduction of bruising and is part of our investment to achieve Quo's full potential. Our second strategic priority, to reinvent how we work, permeates our entire organization and everything we do. A key element of this priority is to optimize our manufacturing network, invest in new capabilities in support of our future portfolio, and maximize supply chain flexibility and resiliency. Last month, the U.S. FDA completed its first inspection of our new manufacturing facility in Indore, India, resulting in no major Form 483 inspection observations. We've already received FDA approvals for several solid oral dose products that will be manufactured at the new site. Additionally, we continue to identify actions to simplify our ways of working across our business. We expect these actions to generate cost savings in the second half of 2022, with a portion of the savings expected to be utilized to fund certain high priority new initiatives, such as our new quo clinical study. Our third strategic priority, to be a force for good, embodies our commitment to create sustainable value that benefits all of our stakeholders. It also drives our environmental, social, and governance strategy. Last week, we published our 2021 corporate responsibility report, which serves as an annual accounting of our performance and our progress to integrate ESG into our company. I'm pleased with our progress, which includes the measurement of Scope 1 and Scope 2 greenhouse gas emissions data. I want to thank all of our team members for their continued commitment to our vision and for their efforts to advance our strategic priorities. Moving to slide four, This is a snapshot of our segmented consolidated revenues and our adjusted EBITDA for the quarter. First quarter enterprise revenues of $652 million were better than expected due to slightly higher revenues across each of our business segments. Compared to prior year, revenues decreased by approximately 9%, primarily due to decreased revenues from our sterile injectable segment, partially offset by increased revenues from our generic pharmaceutical segment. First quarter of 2022, adjusted EBITDA of $311 million was better than expected due to higher revenue, favorable product mix, and lower adjusted operating expenses. Compared to prior year, adjusted EBITDA decreased by approximately 15 percent, primarily due to lower total VASA strict revenues, lower adjusted gross margin, and higher adjusted operating expenses due to increased commercial investments. Turning to slide five, first quarter revenues from our branded pharmaceutical segment were better than expected, primarily driven by higher growth in Xiflex and other office-administered products. Compared to prior year, segment revenues decreased by approximately 1%. This reflects a 12% decrease in our established products portfolio and a 4% increase from our specialty products portfolio. Although Xiflex's performance in January and February was unfavorably impacted by ongoing medical administrative staff shortages in physician offices and lower numbers of in-person patient office visits, we saw improving market conditions and a recovery in demand starting in March. We remain optimistic that market conditions will continue to steadily improve throughout the rest of the second quarter and the second half of the year. First quarter revenues from our sterile injectable segment were consistent with our expectations. Compared to prior year, segment revenues decreased by approximately 22% due to decreased vasostrict revenues, primarily related to generic competition, as well as lower overall market demand as COVID-19 related hospitalization utilization declined. Turning to slide six, the vasopressin market is currently very dynamic and evolving. beginning late last year and continuing early into the first quarter of this year, hospital purchasing of vasostrict vials continue to be elevated, driven by COVID-19-related hospitalization utilization and projected future needs. This was followed by the entry of multiple generic vasopressin vial competitors, triggered by Eagle's January launch at risk, which substantially reduced market pricing in our vasostrict vial market share. As we move through the first quarter and COVID-19-related hospital utilization began to decline, overall vasopressin market volumes also began to significantly decline. The convergence of aggressive competition and overall declining market volumes on vasostrict vial demand has resulted in a current high level of vasostrict vial channel inventory in terms of week on hand. Based on this, we anticipate experiencing a prolonged period of vasostrict vial destocking through the remainder of the second quarter. Accordingly, we expect to see a material unfavorable impact on revenues from VASER strict in the second quarter, inclusive of a one-time negative destocking impact of approximately $25 million. Additionally, as we approach the end of EGLE's 180-day exclusivity period in mid-July, we are preparing for potential additional market entrants. With regards to our vasostrict ready-to-use bottle, while early in the launch, we are encouraged by the market conversion to the bottle and the positive feedback we have received from our customers to date. Many of our customers have noted the potential for efficiency and convenience, particularly as it relates to room temperature storage of the bottle, as well as the flexibility of having the bottle at the site of care. Moving to slide seven, first quarter revenues from our generic pharmaceutical segment exceeded expectations due to better than planned Vereniclean revenues. Compared to prior year, first quarter segment revenues increased by 3%, mainly due to revenues from Vereniclean, partially offset by competitive pressure on certain other generic products. I'll share more about the Vereniclean opportunity on the next slide. Finally, international segment revenues for the first quarter were in line with expectations and essentially flat compared to prior year. Moving to our Varenicline product opportunity on slide eight, we're extremely proud of our team members' efforts to successfully expand our capacity during the quarter, which now is fully equipped to supply the market pre-Chantix withdrawal levels. This is critical to our ability to fulfill the current unmet product demand. Based on recent IQVIA data, we have approximately 85 percent share of the current market for the molecule. We believe Varenicline has the potential to be a significant opportunity for us this year. However, we currently have no visibility into when competition might materialize for this product. Therefore, it's difficult to estimate the full-year outlook at this time. What we can say with confidence is that we are working to fully capitalize on the opportunity. This includes investments in omnichannel marketing to create awareness of generic Veret & Clean availability in support of increasing overall Veret & Clean market volumes. Moving to slide nine, maximizing Xiflex for long-term growth is a critical element of our strategic priority to expand and enhance our portfolio. We believe that Xiflex has the potential to satisfy the large unmet needs that continue to exist for non-surgical options to treat both Peyronie's disease and Dupuytren's contracture. We're encouraged by the strong interest by patients seeking treatment which is fueling underlying demand across both indications. as measured by consumer traffic to our website and physician locator sites. It's a good early indicator of patient interest and initial consumer activation. To realize the potential of these indications and drive meaningful adoption and sustainable long-term growth, we are committed to consistent investment in condition awareness and consumer activation. For Peyronie's disease, our branded campaign is intended to motivate men to visit a specially trained urologist, and to request Diaflex. To help assist with diagnosis, we are also developing a digital app to give men who have a curvature the ability to screen themselves for Peyronie's disease and securely share that information with a urologic professional, all from the privacy of their own homes. We plan to launch this app later this year. For Dupuytren's contracture, we're very encouraged by the consumer response from our new condition awareness campaign featuring real patients. Our Watching Education Unfold commercials are driving strong digital traffic from patients searching for information regarding their condition. In addition to optimizing our on-market indications, our Xiflex maximization plan also includes continued investment in the development of potential future new indications. The current Xiflex indications in clinical development include plantar fibromatosis, and adhesive capsulitis. We believe these potential orthopedic-focused indications represent the opportunity to potentially bring an innovative treatment option to address a large unmet need for patients who are seeking a non-surgical approach. In addition, these potential indications represent attractive market opportunities, are highly synergistic with our current orthopedic selling footprint and commercial capabilities, and represent highly efficient adjacencies for our Xyoflex franchise. From a timeline perspective, we anticipate last patient to be enrolled in the phase two study for plantar fibromatosis by the end of the year. For adhesive capsulitis study, we expect final phase two results early in the third quarter of this year. Turning to slide 10, as we indicated last quarter, as a company, we are very focused on listening and learning from the medical aesthetics community. and becoming a trusted and enduring partner in the space. In response to their feedback, we are committed to identifying potential solutions that prevent and or mitigate bruising and potential subsequent skin discoloration following the use of Quo. Accordingly, we are advancing a multi-cohort, open-label, self-controlled study referred to as Aphrodite 1 later this quarter. Taking into account real-world learnings, observations, and historical clinical study findings, Aphrodite 1 will test different interventions to assess the potential impact on the reduction of bruising following the treatment with Quill, as we believe bruising is the likely precursor to the occasional incidence of skin discoloration. Additionally, the study has been created with the flexibility to add cohorts in order to test additional interventions over time if desired. Next week, we will be presenting a poster on the study designed at the Symposium for Cosmetic Advances and Laser Education in Nashville, Tennessee. Currently, we're estimating completion of the study in mid-2023. On the commercial side, we have adjusted our commercial resource levels, and we'll have a focused approach on HCP outreach, successful practice integration, and our targeted consumer activation. We believe this approach continues to give us a meaningful commercial presence in the medical aesthetic space and better meets today's needs. It also enables us to redeploy funding to the Quo Aphrodite study. Turning to slide 11, we continue to evolve our R&D pipeline and manufacturing capabilities to support the introduction of an increasing number of sterile products that focus on our customers' evolving needs. With the recent acquisition of the sixth ready-to-use development stage product candidates from Nevicar, we have approximately 40 projects in our pipeline, with sterile injectable products now representing approximately 90%. Year-to-date, across our sterile injectables and generic segments, we've launched five products and expect to launch approximately 10 new products during 2022. In addition to our organic efforts to expand and enhance our portfolio, we intend to remain active on the business development front, We continue to be focused on opportunities such as the recent NevaCar acquisition, which are in our core areas of growth and which we believe will enable us to further leverage our existing capabilities. We've taken and will continue to take a disciplined approach to deploying capital on business development opportunities that align with our strategy. With that, let me now turn the call over to Mark to further discuss the company's financial results and our financial guidance. Mark.