Endo International plc

Thank you for standing by. Welcome to the earnings conference call for Endo International PLC presented by Endo, Inc. This call is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the call over to Lori Park, Senior Vice President, Investor Relations and Corporate Affairs. You may begin.

Thank you and good morning. Thank you all for joining us to discuss the first quarter 2024 financial results for Endo International PLC. Joining me on today's call is Mark Bradley, Endo Inc. Executive Vice President and CFO. We have prepared a slide presentation to accompany today's webcast, and that presentation, as well as Endo International's first quarter financial statements and MD&A, are posted online in the investor section at endo.com. This call is required under the terms of Endo, Inc.' 's debt agreement. As such, it is focused on financial results and is more streamlined than a typical earnings call. Substantially, all of Endo International's assets were acquired by Endo, Inc. on April 23, 2024, pursuant to Endo International's plan of reorganization. Endo, Inc. had no assets or liabilities prior to the asset acquisition. Endo International's first quarter financial results do not reflect the effects of the plan of reorganization or the application of Fresh Start Accounting that is expected to apply to Endo, Inc.' 's financial statements beginning in the second quarter of 2024. 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. The reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are contained in the earnings press release issued yesterday, unless otherwise noted therein. We have confidentially submitted a draft registration statement with the SEC to effectuate our previously announced goal of listing our common stock on a national stock exchange. Comments by the SEC on the registration statement may require modification or reformulation of the description of our business, financial, or other information. As a result, information we present in the future may differ in presentation or calculation from the information being presented today. Finally, I would like to remind you that the forward-looking statements in this presentation are subject to changes, risks, and uncertainties that could cause actual results to differ materially from those projected in such statements. Additional information regarding those risk factors can be found in the forward-looking statement section of the earnings release, the slide deck accompanying this presentation, and in other press releases and materials available on our website at endo.com. The forward-looking statements in this presentation speak only as of the date of this presentation, and we undertake no obligation to update or revise any of these statements. I would now like to turn the call over to Mark Bradley to review Endo International's financial results. Mark?

Thank you, Lori. Good morning, everyone, and thank you for joining the call this morning. As Lori mentioned, Endo Inc. acquired substantially all of Endo International's assets on April 23rd. Endo Inc. had no operations, assets, or liabilities prior to the asset acquisition. Accordingly, we will be reviewing Endo International's first quarter financial results. We will also discuss Endo, Inc.' 's full-year financial guidance, which will include Endo International's results through April 22nd. Slide four includes a snapshot of Endo International's GAAP and non-GAAP financial results for the first quarter 2024. Endo International's first quarter 2024 enterprise revenues, adjusted growth margin, adjusted operating expenses, and adjusted EBITDA were generally in line with expectations for the quarter. Endo International's first quarter 2024 total enterprise revenues of approximately $420 million decreased by approximately 19% compared to first quarter 2023, primarily due to decreased revenues from the generic pharmaceutical segments. Endo International's first quarter 2024 adjusted EBITDA of approximately $146 million decreased by approximately 30% compared to first quarter 2023, primarily due to decreased revenue. The decrease in revenues was partially offset by slightly higher adjusted gross margin due to product mix and slightly lower adjusted operating expenses compared with first quarter 2023 due to the impact of certain efficiency initiatives. On a GAAP basis, Endo International's first quarter 2024 net loss was approximately $154 million compared to a net loss of approximately $3 million in the first quarter of 2023. This change was primarily due to decreased revenues and increased expenses incurred in connection with Endo International's Chapter 11 reorganization proceedings, partially offset by a decrease in operating expenses primarily related to a decrease in certain litigation-related and other one-time expenses. On an adjusted basis, Endo International's first quarter 2024 net income was approximately $131 million compared to net income of approximately $194 million in the first quarter of 2023. This change was primarily due to decreased revenue. Turning to slide five, first quarter 2024 revenues from Endo International's branded pharmaceutical segment were approximately $201 million, an increase of approximately 2% compared to first quarter 2023. This increase reflects an approximately 4% increase in revenues from the specialty products portfolio, offset by an approximately 5% decrease in revenues from the established products portfolio. The increase in revenues from the specialty products portfolio was primarily driven by increased revenues from Zyaflex, which were partially offset by decreased revenues from Suprella and LA. The decrease in revenues from the established products portfolio was primarily driven by a product discontinuation and other competitive pressures across the portfolio. On a reported basis, first quarter 2024 revenues from Zyaflex increased by approximately 17% compared to first quarter 2023. On a pro forma basis, revenues from Zyaflex increased by approximately 12%, after excluding the impact of the vile wastage rebate reserves recorded in the first quarter of 2023 that reduced first quarter 2023 reported Ziaflex revenues. These reserves were subsequently reversed in the fourth quarter of 2023 following the final rebate determination. Both the reported and pro forma growth rates were driven by higher volume and higher net selling price in first quarter 2024 compared to first quarter 2023. We are pleased with the Zyaflex performance to date and are focused on achieving additional consumer activation and improving diagnosis rates through our DTC campaigns and personal selling efforts. As expected, first quarter 2024 Zyaflex revenues decreased compared to fourth quarter 2023 on a reported and pro forma basis after excluding the impact of the vial wastage rebate reserve reversal. Revenues from Zyaflex are generally the lowest in the first quarter and highest in the fourth quarter of each year, as many patients tend to wait to fulfill their insurance deductibles toward the end of the year before initiating treatment. With respect to endo-international sterile injectable segment, first quarter 2024 revenues decreased by approximately 3% to approximately $98 million compared to first quarter 2023. This decrease was primarily driven by increased competition on certain products. It was partially offset by increased revenues from vasostrict and adrenaline due to higher sales volumes, as well as revenues from 2023 product launches. Turning to slide six, first quarter 2024 revenues from Endo International's generics portfolio were approximately $103 million, a decrease of approximately 48% compared to first quarter 2023. This decrease was primarily due to increased pricing pressure on varenicline tablets, the generic version of Chantix, and the entry of competition on dexalanzoprazole, the generic version of Dexalan. These decreases were partially offset by increased revenues from the lidocaine patch, the authorized generic of lidoderm, driven by new business opportunities which we expect to continue through the rest of the year. As discussed in prior presentations, VerenaClean enjoyed an unexpected period of market exclusivity from its launch by Endo International in August 2021 until the entry of competition in January 2023. Competition on VerenaClean continued to intensify throughout 2023 and into the first quarter of 2024, which has contributed to a steady decrease in generics revenue since the fourth quarter of 2021. As we exit 2024, we do not expect to have significant individual products like VerenaClean in our generic portfolio of approximately 85 products. Accordingly, we expect much less volatility in the generic segment going forward as our planned new product launches are expected to help offset normal annual erosion. First quarter 2024 revenues from the international pharmaceutical segment were approximately $17 million, essentially comparable to first quarter 2023. With respect to product launches, one generic product was launched by Endo International in the first quarter of 2024. An additional four to six product launches are expected to be launched by Endo Inc. over the remainder of the year. Most of the remaining product launches are expected to be sterile injectable products. Turning to slide seven, Endo International's first quarter 2024 cash flow from operations was approximately $26 million compared to approximately $62 million in first quarter 2023. First quarter 2024 pre-tax unlevered free cash flow was approximately $61 million compared to approximately $113 million in first quarter 2023. The decrease in unlevered free cash flow was primarily due to lower adjusted EBITDA, partially offset by lower first quarter 2024 capital expenditures compared to first quarter 2023 primarily due to the timing of project spend. Advancing to slide eight and wrapping up the financial discussion, full-year 2024 financial expectations for Endo, Inc. remain unchanged from the full-year 2024 financial expectations issued by Endo International earlier this year. As a reminder, full-year financial results will include the results of Endo International from January 1 through April 22 and the results of Endo, Inc. from April 23 to December 31. We still expect total revenues to be between $1.685 billion and $1.77 billion, adjusted EBITDA to be between $615 million and $645 million, and pretax unlevered free cash flow to be between $530 million and $590 million. Expected revenues by segment, adjusted gross margin, and adjusted operating expenses also remain unchanged from the previously provided expectations. EBITDA is expected to be higher in the second half of the year compared to the first half of the year given the historical and anticipated seasonality of Xiflex, the expected impact of new product launches, as well as the expected timing of selling general administrative expenses. Finally, We expect to incur approximately $165 million of interest expense on the $2.5 billion of debt that was issued by Endo, Inc. on April 23rd. We also expect Endo, Inc. to have an effective cash tax rate in the low 20% range. With that, I'll now turn the call back to Laurie to manage the Q&A process. Laurie? Thank you, Mark.