PPCO Penwest Pharmaceuticals CO. (MM)

CHADDS FORD, Pa., Nov. 1, 2010 /PRNewswire-FirstCall/ --

• Total quarterly revenues increase 23 percent versus prior year; branded drug sales up 8 percent.
• Reported diluted EPS of $0.46, up 10 percent from prior year; adjusted diluted EPS of $0.86, reflecting growth of 37 percent from 2009.
• Company reaffirms 2010 guidance for revenue of $1.63 to $1.68 billion and adjusted diluted EPS of $3.30 to $3.35. Increases 2010 GAAP EPS to $1.91 to $1.99.
• Company issues 2011 guidance for revenue of $2.2 to $2.3 billion, GAAP EPS of $2.05 to $2.15 and  adjusted diluted EPS of $4.15 to $4.25, reflecting diversified growth in core operations and the expected close of the acquisition of Qualitest Pharmaceuticals.  

Endo Pharmaceuticals (Nasdaq: ENDP) today reported financial results for the third quarter 2010.

Total revenues during the third quarter of 2010 increased 23 percent to $444.1 million, compared with $361.0 million in the same quarter of 2009.  Net income for the three months ended September 30, 2010 was $54.2 million, compared with $49.4 million in the comparable 2009 period.  As detailed in the supplemental financial information below, adjusted net income for the three months ended September 30, 2010, was $100.8 million, compared with $74.3 million in the same period in 2009.  Reported diluted earnings per share for the quarter ended September 30, 2010, were $0.46 compared with $0.42 in the third quarter of 2009. Adjusted diluted earnings per share for the same period were $0.86 compared with $0.63 reported in 2009.

"Endo had another strong quarter, with record revenues and adjusted earnings," said Dave Holveck, president and CEO of Endo. "I'm excited that we achieved these results while completing important steps in our ongoing transformation of Endo into a leading provider of healthcare solutions."

2011 Financial Guidance

Endo estimates 2011 revenues to be between $2.2 billion and $2.3 billion, Reported (GAAP) diluted earnings per share to be between $2.05 and $2.15 and adjusted diluted earnings per share to be between $4.15 and $4.25.  A detailed reconciliation of projected 2011 adjusted diluted earnings per share to 2011 reported diluted earnings per share is provided below, and is subject to certain assumptions as set forth below, which could have a significant impact on the actual reported diluted earnings per share in the future.  The company's guidance for reported (GAAP) earnings per share does not include any estimates for potential future changes in the fair value of contingent consideration or for potential new business development transactions. Our guidance also assumes that the company's previously announced acquisition of Qualitest Pharmaceuticals will close by late fourth quarter 2010 or in early 2011.

Third quarter 2010 Financial Results and 2010 Financial Guidance

The third quarter benefitted from very good contributions from across our business. Branded drug sales rose 8 percent year-over-year, reflecting strong growth by key products in pain, urology and oncology and revenues from our generics business increased 20 percent. The third quarter also benefits from the performance of the devices and services of our HealthTronics urology business.

Endo also reiterates its 2010 revenue guidance of between $1.63 billion and $1.68 billion dollars and full-year adjusted diluted earnings per share to be between $3.30 to $3.35 per share. The company also estimates reported (GAAP) diluted earnings per share to be between $1.91 to $1.99 per share. 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. A reconciliation of GAAP to non-GAAP results is attached to this press release.

Selected Operating Highlights

Acquisition of Qualitest Pharmaceuticals

On September 28, 2010, Endo Pharmaceuticals announced that it had entered into a definitive agreement to acquire Qualitest Pharmaceuticals, a leading, privately-held generics company in the U.S., in exchange for total consideration of approximately $1.2 billion. The combined company will deliver more comprehensive healthcare solutions across its diversified businesses in Branded Pharmaceuticals, Generics, Devices & Services as well as in key therapeutic areas of focus, including pain and urology.

Endo believes that this acquisition diversifies the company's revenue streams and creates scale in its existing generics business while strengthening its core pain franchise. The transaction is expected to be immediately accretive to adjusted diluted earnings per share in the first full year after close.

Acquisition of Penwest Pharmaceuticals

On August 9, 2010, Endo Pharmaceuticals announced that it had entered into 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 $147 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.

Penwest Pharmaceuticals (Nasdaq: PPCO) will hold a special meeting of its shareholders at 10:00 a.m., local time, on Thursday, Nov. 4, 2010 at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, Four Times Square, New York, NY 10036, to vote on the proposal to approve the merger of West Acquisition Corp.

The approval of the Merger Agreement requires the affirmative vote of the holders of a majority of all the outstanding shares of Penwest common stock entitled to vote at the special meeting. As of November 1, Endo Pharmaceuticals and their affiliates announced that they had acquired approximately 91%  of the outstanding Penwest common stock equivalents, par value $0.001 per share.  These share equivalents represent a quorum and sufficient votes to approve the merger and the Merger Agreement.

NDA Submission for new formulation of long-acting oxymorphone designed to be crush-resistant

On August 9, 2010, Endo Pharmaceuticals 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, which is designed to be crush resistant, was developed in partnership with Grunenthal GmbH.  This formulation of oxymorphone is designed to reduce accidental misuse and deter certain methods of intended abuse.

On September 22, 2010, the company announced that it had received notification from the FDA that its NDA had been granted priority review status.  The FDA set the action date under the Prescription Drug User Fee Act (PDUFA) for Jan. 7, 2011.

Endo Pharmaceuticals launches generic version of immediate release OPANA

Endo Pharmaceuticals recently launched an authorized generic version of the immediate release formulation of OPANA (Oxymorphone HCl).  The new product will be distributed in 5 mg and 10 mg tablets.  OPANA is indicated for the relief of moderate to severe acute pain where the use of an opioid is appropriate.

Selected Product Review

PAIN PRODUCTS

LIDODERM®: For the quarter ended September 30, 2010, net sales of LIDODERM increased 2 percent to $196.3 million, compared wit h$192.7 million in the same period a year ago.  For the nine months ended September 30, 2010, net sales of LIDODERM increased 3 percent to $575.0 million, compared with $559.8  million reported in the same period a year ago. The company continues to expect low single-digit growth for Lidoderm in 2010.  

OPANA® ER and OPANA®:  Combined net sales for the OPANA franchise increased 29 percent to $76.0 million for the third quarter 2010, compared with $58.9 million in the same period a year ago.  Combined net sales for the OPANA franchise increased 29 percent to $215.9 million for the nine months ended September 30, 2010, compared with $166.9 million in the same period a year ago.

FROVA®: Net sales of FROVA were $14.1 million for the three months ended September 30, 2010, compared with $15.0 million for the same period in 2009.  Net sales of FROVA were $43.9 million for the nine months ended September 30, 2010, compared with $42.5 million for the same period in 2009.

Voltaren® Gel: Third quarter 2010 net sales of Voltaren Gel increased 38 percent to $26.9 million, compared with $19.6 million for the same period in 2009.  Net sales of Voltaren Gel for the nine months ended September 30, 2010 increased 28 percent to $73.6 million, compared with $57.4 million for the same period in 2009. 

ONCOLOGY/ENDOCRINOLOGY PRODUCTS

SUPPRELIN® LA:  Net sales of SUPPRELIN LA for the third quarter were $11.0 million compared with $8.1 million for the same period in 2009.  Net sales of SUPPRELIN LA for the nine months ended September 30, 2010 were $33.8 million compared with $18.1 million for the same period in 2009.  

VANTAS®:  Net sales of VANTAS for the third quarter were $3.6 million compared with $6.5 million for the same period in 2009.  Net sales of VANTAS for the nine months ended September 30, 2010 were $13.0 million compared with $14.0 million for the same period in 2009.  

VALSTAR™:  Net sales of VALSTAR for the third quarter were $1.6 million.  Net sales of VALSTAR for the nine months ended September 30, 2010 were $9.4 million.

OTHER BRANDED PRODUCTS

For the third quarter of 2010, net sales of other branded products were $2.3 million, compared with $3.9 million in the same period in 2009.  For the nine months ended September 30, 2010, net sales of other branded products were $7.7 million, compared with $12.2 million in the same period in 2009.

GENERIC AND NON-PROMOTED PRODUCTS

For the third quarter of 2010, net sales from the company's generic products were $27.4 million, compared with $22.9 million in the same period in 2009.  For the nine months ended September 30, 2010, net sales from the company's generic products were $81.0 million, compared with $95.6 million in the same period in 2009.  Net sales of Percocet® were $30.0 million for the three months ended September 30, 2010, compared with net sales of Percocet® in the same period in 2009 of $30.7 million.  For the nine months ended September 30, 2010, net sales of Percocet® were $90.4 million, compared with $96.4 million in the same period in 2009.

DEVICES AND SERVICES

On July 12, 2010, Endo Pharmaceuticals completed its merger with HealthTronics, as a result of which HealthTronics has been acquired by, and is a wholly owned subsidiary of, Endo. Revenues from the HealthTronics subsidiary for the third quarter were $51.7 million.

Conference Call Information

Endo will conduct a conference call with financial analysts to discuss this news release today at 10:00 a.m. ET.  Investors and other interested parties may call 866-788-0543 (domestic) or 857-350-1681 (international) and enter passcode 81013739.  Please dial in 10 minutes prior to the scheduled start time.

A replay of the call will be available from November 1 at 1:00 p.m. ET until 12:00 a.m. ET on November 9 by dialing 888-286-8010 (domestic) or 617-801-6888 (international) and entering passcode 88788586.

A simultaneous webcast of the call may be accessed by visiting www.endo.com.  In addition, a replay of the webcast will be available until 12:00 a.m. ET on November 9.  The replay can be accessed by clicking on "Events" in the Investor Relations section of the website.

Supplemental Financial Information

The following tables provide a reconciliation of our reported (GAAP) statements of operations to our adjusted statements of operations for each of the three months ended September 30, 2010 and September 30, 2009:

The following tables provide a reconciliation of our reported (GAAP) statements of operations to our adjusted statements of operations for each of the nine months ended September 30, 2010 and September 30, 2009 (in thousands, except per share data):

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.

About Endo

Endo Pharmaceuticals is a U.S.-based, specialty healthcare solutions company, focused on high-value branded products and specialty generics. Endo is redefining its position in the healthcare marketplace by anticipating and embracing the evolution of health decisions based on the need for high-quality and cost-effective care. We aim to be the premier partner to healthcare professionals and payment providers, delivering an innovative suite of complementary diagnostics, drugs, devices and clinical data to meet the needs of patients in areas such as pain, urology, oncology and endocrinology. For more information about Endo Pharmaceuticals, and its wholly owned subsidiary HealthTronics, Inc., please visit www.endo.com.

(Tables Attached)

The following tables present Endo's unaudited Total Revenues for the three months ended September 30, 2010 and September 30, 2009:

The following tables present Endo's unaudited Total Revenues for the nine months ended September 30, 2010 and September 30, 2009:

The following table presents Endo's unaudited condensed consolidated cash flow data for the nine months ended September 30, 2010 and September 30, 2009:

Safe Harbor Statement

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding, among other things, the company's financial position, results of operations, market position, product development and business strategy, as well as estimates of future net sales, future expenses, future net income and future earnings per share.  Statements including words such as "believes," "expects," "anticipates," "intends," "estimates," "plan," "will," "may," "intend," "guidance" or similar expressions are forward-looking statements.  Because these statements reflect our current views, expectations and beliefs concerning future events, these forward-looking statements involve risks and uncertainties. Investors should note that many factors, as more fully described under the caption "Risk Factors" in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2009 and as otherwise enumerated herein or therein, could affect our future financial results and could cause our actual results to differ materially from those expressed in forward-looking statements contained in our Annual Report on Form 10-K. Important factors that could cause our actual results to differ materially from the expectations reflected in the forward-looking statements in our Annual Report on Form 10-K include those factors described herein under the caption "Risk Factors" and in documents incorporated by reference, including, among others: our ability to successfully develop, commercialize and market new products; timing and results of pre-clinical or clinical trials on new products; our ability to obtain regulatory approval of any of our pipeline products; competition for the business of our branded and generic products, and in connection with our acquisition of rights to intellectual property assets; market acceptance of our future products; government regulation of the pharmaceutical industry; our dependence on a small number of products; our dependence on outside manufacturers for the manufacture of most of our products; our dependence on third parties to supply raw materials and to provide services for certain core aspects of our business; new regulatory action or lawsuits relating to our use of narcotics in most of our core products; our exposure to product liability claims and product recalls and the possibility that we may not be able to adequately insure ourselves; our ability to protect our proprietary technology; the successful efforts of manufacturers of branded pharmaceuticals to use litigation and legislative and regulatory efforts to limit the use of generics and certain other products; our ability to successfully implement our acquisition and in-licensing strategy; regulatory or other limits on the availability of controlled substances that constitute the active ingredients of some of our products and products in development; the availability of third-party reimbursement for our products; the outcome of any pending or future litigation or claims by third parties or the government, and the performance of indemnitors with respect to claims for which we have the right to be indemnified; our dependence on sales to a limited number of large pharmacy chains and wholesale drug distributors for a large portion of our total revenues; significant litigation expenses to defend or assert patent infringement claims; any interruption or failure by our suppliers, distributors and collaboration partners to meet their obligations pursuant to various agreements with us; a determination by a regulatory agency that we are engaging or have engaged in inappropriate sales or marketing activities, including promoting the "off-label" use of our products; existing suppliers become unavailable or lose their regulatory status as an approved source, causing an inability to obtain required components, raw materials or products on a timely basis or at commercially reasonable prices; the loss of branded product exclusivity periods and related intellectual property.

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.

SOURCE Endo Pharmaceuticals