Endo Pharmaceuticals (Nasdaq: ENDP) today reported financial results for the fourth quarter of 2011.
Total revenues during the fourth quarter of 2011 increased 57 percent to $803.4 million, compared with $511.2 million in the same quarter of 2010. Net income for the three months ended Dec. 31, 2011, was $36.6 million, compared with $93.0 million in the comparable 2010 period.
Additionally, adjusted net income for the three months ended Dec. 31, 2011, was $168.2 million, up 32 percent, compared with $127.6 million in the same period in 2010. Reported diluted earnings per share for the quarter ended Dec. 31, 2011, were $0.30 compared with $0.77 reported in the fourth quarter of 2010. Adjusted diluted earnings per share for the same period were $1.40, up 32 percent from $1.06 reported in 2010.
"Endo has built a diversified platform of healthcare businesses that span branded pharmaceuticals, generics, medical devices and services, and our 2011 financial performance reinforces the execution of our growth strategy and evolution through acquisition, as well as the organic contributions and strengths of each of our business segments," said Dave Holveck, president and CEO of Endo. "We look forward to updating our investors on the sustainable growth story of our diversified business and how we are exploring new ways to deliver integrated solutions that create value for key constituencies."
Branded pharmaceutical sales of $458 million for the fourth quarter 2011 represented an increase of 16 percent versus the prior year. The fourth quarter performance of OPANA ER, Voltaren Gel and LIDODERM contributed to a strong full year for Endo's branded pharmaceuticals segment, which grew 13 percent versus 2010. In the fourth quarter, OPANA ER net sales grew 46 percent on prescription growth of 40 percent. Voltaren Gel net sales grew 23 percent on prescription growth of 34 percent. Net sales of LIDODERM grew 12 percent on flat prescription growth. The increase in LIDODERM net sales reflects changes as of mid November 2011, with respect to royalty obligations among Endo, Hind Healthcare, Inc., and Teikoku Seiyaku Co., Ltd.; changes which have been previously described in our filings with the U.S. Securities and Exchange Commission.
On Dec. 12, 2011, we announced the receipt of U.S. Food and Drug Administration (FDA) approval of our new formulation of OPANA ER designed to be crush-resistant. The approval represents a significant milestone for Endo's branded pharmaceuticals portfolio. Endo believes that this new formulation of OPANA ER, coupled with our long-term commitment to awareness and education around the appropriate use of opioids, will benefit patients, physicians and payers. Additionally, a new patent was issued during the 4th quarter, (U.S. patent number 8,075,872) covering the new formulation of OPANA ER and is expected to provide protection until November 2023 for the new formulation of Opana ER.
On Jan. 6, 2012, Endo announced the signing of a worldwide license and development agreement with U.S.-based BioDelivery Sciences International for BEMA® Buprenorphine. The addition of BEMA Buprenorphine reflects Endo's continued commitment to its Branded Pharmaceuticals pain franchise and will broaden Endo's portfolio of therapeutics, allowing it to offer an integrated suite of products that currently include OPANA ER, Voltaren Gel and LIDODERM, as well as a broad range of generic pain products.
Generics sales of $151 million for the fourth quarter 2011 represented an increase of 131 percent over last year, reflecting Endo's acquisition of Qualitest Pharmaceuticals in November 2010. For the twelve months ended December 31, 2011, generic sales increased approximately $420 million, an increase of 287 percent, driven by the acquisition of Qualitest Pharmaceuticals. On a pro forma basis, generics sales grew 21 percent in 2011, reflecting the ability to capitalize on new business opportunities in generic pharmaceuticals.
Devices sales, driven by the June 2011 acquisition of American Medical Systems (AMS), were $142 million for the fourth quarter. Men's Health, led by sales of the AMS 800® Artificial Urinary Sphincter, grew 7 percent on a pro forma basis in the fourth quarter of 2011, compared with same period last year. Benign prostatic hyperplasia (BPH), led by the increasing share of procedural volumes for the GreenLight XPS™ console and the accompanying MoXy fiber, grew 1 percent on a pro forma basis in the fourth quarter of 2011. Women's Health continued to experience pressure in the fourth quarter of 2011, following a September FDA Advisory Committee meeting, which met to discuss the use of surgical mesh products in the repair of pelvic organ prolapse and stress urinary incontinence.
Services sales of $52 million for the fourth quarter 2011 represented an increase of 2 percent over last year, as a result of improved access to equipment for patients and physicians. The Company expects improved top-line growth from the Services segment in 2012 and beyond from an expanding set of partnerships in our Endocare® cryoablation therapy as well as our pilot programs involving the sales of this device through the AMS channel. In the fourth quarter of 2011, HealthTronics Inc., completed the strategic acquisitions of Intuitive Medical Software (IMS) and meridianEMR, Inc., two providers of electronic medical records for urologists, that provide access to approximately 1,850 urologists using data platforms that will enhance service offerings in urology practice management.
Balance Sheet Update
During the fourth quarter of 2011, Endo made payments of approximately $140 million to reduce the outstanding principal of term-loan debt associated with the acquisition of AMS. For the full year ending Dec. 31, 2011, Endo made payments of approximately $290 million to reduce the outstanding principal of term-loan debt associated with the acquisition of AMS. At Dec. 31, 2011, the company's debt to adjusted EBITDA ratio is 3.0 times. The company believes that it will achieve its objective of reducing its debt to adjusted EBITDA ratio to 2.0 to 2.5 times in 2013.
2012 FINANCIAL GUIDANCE
Endo's estimates are based on projected results for the twelve months ended Dec. 31, 2012. The company's guidance for reported (GAAP) earnings per share does not include any estimates for the potential future changes in the fair value of contingent consideration, certain separation benefits, asset impairment charges or for potential new corporate development transactions. For the full year ended Dec. 31, 2012, Endo estimates:
- Total revenue between $3.15 billion and $3.30 billion
- Total Branded Pharmaceuticals segment revenue between $1.740 billion and $1.800 billion
- Total Generics segment revenue between $635 million and $675 million
- Total Devices segment revenue between $530 million and $570 million
- Total Services segment revenue between $240 million and $260 million
- Reported (GAAP) diluted earnings per share between $2.60 and $2.80
- Adjusted diluted earnings per share between $5.00 and $5.20
- Cash flow from operations between $750 million and $850 million
- Capital expenditures to be approximately $100 million
Endo's 2012 guidance is based on certain current assumptions including:
- Adjusted gross margin between 68 percent and 69 percent
- Adjusted effective tax rate of between 30.5 percent and 31.5 percent
- Weighted average number of common shares outstanding of 122 million shares for the year ended Dec. 31, 2012
- Manufacturing of the new formulation of Opana ER to be at commercial scale by early Q2
- Manufacturing of Voltaren Gel to an alternate Novartis location with product returning to market in limited capacity in early Q2, and returning to full capacity by end of Q2
- Continued pressure in our AMS female surgical mesh business as a result of 2011 FDA Advisory Committee meeting
- Strong business performance from our branded business portfolio of products and from Generics