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Endo Pharmaceuticals Holdings Inc. (



Q4 2011 Earnings Call

February 24, 2012 8:30 am ET


David Holveck – President, Chief Executive Officer

Alan Levin – Executive Vice President, Chief Financial Officer

Julie McHugh – Chief Operating Officer

Dr. Ivan Gergel – Chief Scientific Officer

Blaine Davis – Vice President, Corporate Affairs


Gregg Gilbert – Bank of America Merrill Lynch

John Boris – Citigroup

Shibani Malhotra – RBC Capital Markets

Corey Davis – Jefferies

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Good day ladies and gentlemen and welcome to the Fourth Quarter 2011 Endo Pharmaceuticals Holdings Inc. Earnings conference call. My name is Lacey and I’ll be your coordinator for today. At this time, all participants are in listen-only mode. We will facilitate a question and answer session towards the end of the presentation. If at any time during the call you require assistance, please press star followed by zero and a coordinator will be happy to assist you. As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today’s call, Mr. Blaine Davis, Vice President of Corporate Affairs. Please proceed.

Blaine Davis

Great, thanks Lacey. Good morning everybody and thank you for joining us. With me on this morning’s call are Dave Holveck, President and CEO of Endo; Julie McHugh, Chief Operating Officer; Dr. Ivan Gergel, Chief Scientific Officer, and Alan Levin, Chief Financial Officer. After our prepared remarks, we’ll open the call to your questions.

I would like to remind you that any forward-looking statements by management are covered under the Private Securities Litigation Reform Act of 1995 and subject to change, risks and uncertainties described in today’s press release and in our filings with the SEC. In addition, during the course of the 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 8-K filed with the SEC for Endo’s reason for including those non-GAAP financial measures in its earnings announcement. The reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures is contained in our sales and earnings press release issued earlier this morning.

Now I’d like to turn the call over to Dave.

David Holveck

Thank you, Blaine. Endo had a great fourth quarter and another record year in 2011 with strong performance across every segment of our business. We had revenues of 803 million and adjusted earnings of $1.40 per share during the fourth quarter, and revenues of 2.73 billion and adjusted earnings per share of $4.69 for the full year. Earnings exceeded our guidance, reflecting our control of expenses, the strength of our core branded pharmaceutical business, and the contributions of our expanding generics, devices and services businesses.

Our 2011 financial performance reflects the successful execution of our growth strategy as well as the contributions and strengths of each of our business segments. For example, Endo’s branded pharmaceutical business has been growing at double digit rates as a result of strong demand for pain products, favorable formulary access, and successful promotional programs. Today it represents not only a portfolio of successful drugs such as Lidoderm and Opana but also a promising growth platform in which we continue to invest. We are addressing some of the short-term challenges in branded product supply and are confident that the focus of investors will soon return to the positive sustainable growth story of our diversified business with multiple drivers for growth in 2012.

The recent approval of the new formulation of Opana ER was an important milestone for our pain franchise and will contribute meaningfully to our revenues this year. We have expedited our plan to convert our Opana ER franchise to the new crush-resistant formulation. We are on track to complete this effort shortly; and importantly, we are excited about the opportunity to invest for growth in Opana ER. It is a product that now, with the addition of a second patent this week, has exclusivity through 2024.

Regarding Lidoderm and the current litigation with Watson, I’ll reiterate comments I made earlier this year. We understand the value of this franchise and the maximization of its value for our current and potential investors, and we believe that there is value in resolving the market uncertainties with respect to the anticipated cash flows from this product. If we find that there is an opportunity to fairly value the interest of all parties in achieving certainty, then we look to do so.

We value innovation throughout our business and acquisitions have diversified our revenue and cash flow, and believe we have positioned the company for continued long-term growth. Our focus in the year ahead will be to complete the integration of all of our businesses, build on our leadership in pain management, and strengthen our emerging leadership position in urology. To better reflect how we operate our diversified company, we now intend to report four segments going forward: branded pharmaceuticals, generics, medical devices, and services.

As we pursue this plan, we anticipate continued solid revenue growth across our business segments, and combined we project 2012 revenues of 3.15 to 3.30 billion and adjusted diluted earnings per share of $5.00 to $5.20. Our guidance reflects the temporary impact of the Novartis plant shutdown on our 2012 performance, and Alan and Julie will dive deeper into the details of the Novartis effect, the actions we’re taking, and how we’re setting expectations for the remainder of 2012.

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