Endo to acquire Penwest for $5.00 per share

Endo Pharmaceuticals (Nasdaq: ENDP) today announced actions designed to advance the company's leadership and growth in pain management, including an agreement to acquire all outstanding shares of Penwest Pharmaceuticals (Nasdaq: PPCO) for $5.00 in cash per share, or an estimated enterprise value of approximately $144 million at the time of deal close. Penwest has been working with Endo since 1997 on the development and commercialization of OPANA® ER and receives a royalty stream on net sales of the product.

"Our acquisition of Penwest sets the stage for maximizing the value of the OPANA franchise and for leveraging Penwest's drug delivery technologies and pipeline across our branded and specialty generics businesses for the benefit of patients," said Julie McHugh, chief operating officer, Endo Pharmaceuticals. "This transaction highlights the growth potential of Endo's core Pain Management franchise, enhances our earnings, and creates significant value for shareholders of both organizations."

Under the terms of the merger agreement, Endo will shortly commence an all-cash tender offer to acquire 100 percent of the outstanding common stock of Penwest Pharmaceuticals for $5.00 per Penwest share. The tender offer is expected to be completed in September, 2010. Endo will acquire any Penwest shares that are not purchased in the tender offer in a second-step merger which is expected to be completed during the fourth quarter of 2010 at the same price per share paid in the tender offer. The tender offer will be subject to certain closing conditions, including a minimum condition that not less than a majority of shares of Penwest common stock are tendered into the offer. Tang Capital Partners, LP, and Perceptive Advisors LLC, shareholders of Penwest, and Jennifer Good, Penwest's President and Chief Executive Officer, who collectively own 38.6% of fully diluted common stock of Penwest, have committed to tender their shares in the tender offer. The transaction has been unanimously approved by the boards of directors of both companies.

Financial Guidance

Endo expects the transaction to be immediately accretive to 2010 adjusted earnings per share.  Accretion derives primarily from a reduction in cost of goods sold associated with OPANA ER royalties otherwise payable, as well as certain tax attributes associated with the acquired company.  The Company is reiterating its 2010 revenue guidance of between $1.63 billion and $1.68 billion dollars, but is now raising its 2010 adjusted diluted earnings per share financial guidance, in anticipation of the consummation of the Penwest transaction.  Endo now estimates full year adjusted diluted earnings per share to be between $3.30 to $3.35 per share versus previous guidance of $3.25 to $3.30 per share. The Company now estimates reported (GAAP) diluted earnings per share to be between $1.89 to $1.97 per share, reflecting charges associated with the expected consummation of the Penwest transaction.  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.

Research and Development Milestone

Endo also announced the filing of a New Drug Application (NDA) with the U.S. Food and Drug Administration (FDA) for a new extended-release formulation of oxymorphone for the relief of moderate to severe pain in patients requiring continuous, around-the-clock opioid treatment for an extended period of time. The new formulation was developed in partnership with Grunenthal GmbH.  Grunenthal is an independent, global pharmaceutical company with long-time experience in the development of innovative analgesics. This formulation of oxymorphone is designed to reduce accidental misuse and deter certain methods of intended abuse.

"The level of opioid abuse has risen dramatically over the past decade in the United States and created significant challenges for physicians who prescribe opioids," said Ivan Gergel, MD, executive vice president of research and development, Endo Pharmaceuticals. "As a responsible company with a long-standing history in pain management, Endo is committed to applying our expertise to deliver a new crush-resistant opioid medication to deter non-medical abuse so that patients who experience moderate to severe chronic pain continue to get access to appropriate therapy."

The NDA submission is based on a non-clinical and clinical development program designed to demonstrate that the crush-resistant formulation of oxymorphone addresses attempts to break, crush, extract, powder and pulverize the product.