EX-99.1 2 d830364dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

ENDO REPORTS THIRD-QUARTER 2019 FINANCIAL RESULTS

— Operating Performance Led by Year-over-Year Double-Digit-Percentage Revenue Growth in Sterile Injectables and in Specialty Products Portfolio of Branded Pharmaceuticals —

— Full-Year 2019 Financial Guidance Updated to Narrow Expected Ranges for Revenue, Adjusted Diluted Net Income per Share from Continuing Operations and Adjusted EBITDA —

DUBLIN, November 4, 2019 — Endo International plc (NASDAQ: ENDP) today reported third-quarter 2019 financial results, including:

 

   

Revenues of $729 million decreased 2% compared to third-quarter 2018 revenues of $745 million.

 

   

Branded Pharmaceuticals - Specialty Products revenues increased 18% to $132 million compared to third-quarter 2018 revenues of $112 million.

 

   

Sterile Injectables revenues increased 11% to $264 million compared to third-quarter 2018 revenues of $237 million.

 

   

Reported loss from continuing operations of $41 million compared to third-quarter 2018 reported loss from continuing operations of $146 million.

 

   

Reported diluted net loss per share from continuing operations of $0.18 compared to third-quarter 2018 reported diluted net loss per share from continuing operations of $0.65.

 

   

Adjusted income from continuing operations of $138 million compared to third-quarter 2018 adjusted income from continuing operations of $165 million.

 

   

Adjusted diluted net income per share from continuing operations of $0.60 compared to third-quarter 2018 adjusted diluted net income per share from continuing operations of $0.71.

 

   

Adjusted EBITDA of $321 million compared to third-quarter 2018 adjusted EBITDA of $328 million.

 

1


“Endo generated strong operating performance in the third quarter, which was led by continued year-over-year double-digit percentage revenue growth in our Sterile Injectables segment and in the Specialty Products portfolio of our Branded Pharmaceuticals segment, including 29% growth in our XIAFLEX® franchise,” said Paul Campanelli, President and Chief Executive Officer at Endo. “Additionally, during the quarter, we submitted a Biologics License Application for our CCH for Cellulite product with the FDA and settled the Track 1 opioid litigation cases. We believe that a balanced approach to executing our multi-year strategic plan while being responsive to the current external environment remains appropriate and that we are well-positioned to meet our 2019 financial guidance.”

FINANCIAL PERFORMANCE

(in thousands, except per share amounts)

 

     Three Months Ended September 30,           Nine Months Ended September 30,        
     2019     2018     Change     2019     2018     Change  

Total Revenues, Net

   $ 729,426     $ 745,466       (2 )%    $ 2,149,564     $ 2,160,689       (1 )% 

Reported Loss from Continuing Operations

   $ (41,431   $ (146,071     (72 )%    $ (152,095   $ (696,288     (78 )% 

Reported Diluted Weighted Average Shares

     226,598       224,132       1     225,804       223,829       1

Reported Diluted Net Loss per Share from Continuing Operations

   $ (0.18   $ (0.65     (72 )%    $ (0.67   $ (3.11     (78 )% 

Adjusted Income from Continuing Operations

   $ 138,129     $ 164,845       (16 )%    $ 380,617     $ 487,823       (22 )% 

Adjusted Diluted Weighted Average Shares (1)

     230,907       232,358       (1 )%      231,751       228,195       2

Adjusted Diluted Net Income per Share from Continuing Operations

   $ 0.60     $ 0.71       (15 )%    $ 1.64     $ 2.14       (23 )% 

 

(1)

Reported Diluted Net Loss per Share from continuing operations is computed based on weighted average shares outstanding and, if there is income from continuing operations during the period, the dilutive impact of ordinary share equivalents outstanding during the period. In the case of Adjusted Diluted Weighted Average Shares, Adjusted Income from Continuing Operations is used in determining whether to include such dilutive impact.

CONSOLIDATED RESULTS

Total revenues were $729 million in third-quarter 2019 compared to $745 million during the same period in 2018. This decrease was primarily attributable to competitive pressures in the Generic Pharmaceuticals segment and the Established Products portfolio of the Branded Pharmaceuticals segment, partially offset by continued strong growth in the Sterile Injectables segment and the Specialty Products portfolio of the Branded Pharmaceuticals segment.

 

2


GAAP loss from continuing operations in third-quarter 2019 was $41 million compared to GAAP loss from continuing operations of $146 million during the same period in 2018. This result was primarily attributable to a decrease in asset impairment charges. GAAP diluted net loss per share from continuing operations in third-quarter 2019 was $0.18 compared to GAAP diluted net loss per share from continuing operations of $0.65 in third-quarter 2018.

Adjusted income from continuing operations in third-quarter 2019 was $138 million compared to $165 million in third-quarter 2018. This decrease was primarily attributable to lower adjusted gross margin in the Generic Pharmaceuticals segment due to a decline in revenue and an unfavorable change in product mix. Adjusted diluted net income per share from continuing operations in third-quarter 2019 was $0.60 compared to $0.71 in third-quarter 2018.

BRANDED PHARMACEUTICALS

Third-quarter 2019 Branded Pharmaceuticals revenues were $217 million compared to $220 million in third-quarter 2018. This decrease was primarily attributable to ongoing generic competition in the Established Products portfolio, offset by continued strong growth in the Specialty Products portfolio.

Specialty Products revenues increased 18% to $132 million in third-quarter 2019 compared to $112 million in third-quarter 2018, primarily driven by the continued strong performance of XIAFLEX®. Sales of XIAFLEX® increased 29% to $83 million compared to $64 million in third-quarter 2018, primarily attributable to demand growth in both the Peyronie’s Disease and Dupuytren’s Contracture indications driven by continued commercial execution and investment in promotional activities.

During third-quarter 2019, Endo also submitted a Biologics License Application to the U.S. Food and Drug Administration for its Collagenase Clostridium Histolyticum (CCH) product for the treatment of cellulite.

STERILE INJECTABLES

Third-quarter 2019 Sterile Injectables revenues were $264 million, an increase of 11% compared to $237 million in third-quarter 2018. This increase reflects the continued strong growth of VASOSTRICT® and ADRENALIN®, as well as strong growth of APLISOL®, reflecting wholesalers’ restocking following a temporary supply shortage.

 

3


GENERIC PHARMACEUTICALS

Third-quarter 2019 Generic Pharmaceuticals revenues were $218 million, a decrease of 15% compared to $258 million in third-quarter 2018. This performance was primarily attributable to increased competitive pressure on certain generic products. Partially offsetting the decrease was the contribution of certain product launches including, among others, colchicine tablets, the authorized generic of Colcrys®. During third-quarter 2019, the Generic Pharmaceuticals segment launched four products.

INTERNATIONAL PHARMACEUTICALS

Third-quarter 2019 International Pharmaceuticals revenues were $30 million, which was flat versus third-quarter 2018. This quarter benefited from delayed competition which Endo expects to materialize in the near-term.

2019 FINANCIAL GUIDANCE

Endo is updating its financial guidance for the 12 months ending December 31, 2019, narrowing the expected ranges regarding revenue, adjusted diluted net income per share from continuing operations, and Adjusted EBITDA. The Company now estimates:

 

   

Total revenues to be between $2.86 billion and $2.89 billion compared to previous guidance of $2.76 billion to $2.96 billion;

 

   

Adjusted diluted net income per share from continuing operations to be between $2.10 and $2.25 compared to previous guidance of $2.00 to $2.25; and

 

   

Adjusted EBITDA to be between $1.26 billion and $1.30 billion compared to previous guidance of $1.24 billion to $1.34 billion.

The Company’s 2019 non-GAAP financial guidance is based on the following assumptions:

 

   

Adjusted gross margin of approximately 64.7% to 65.7% compared to previous guidance of 65.0% to 66.0%;

 

   

Adjusted operating expenses as a percentage of revenue to be approximately 25.0% compared to 24.5% to 25.0%;

 

   

Adjusted interest expense of approximately $540 million compared to $550 million to $560 million;

 

4


   

Adjusted effective tax rate of approximately 16.5% compared to 17.5% to 18.5%; and

 

   

Adjusted diluted weighted average shares outstanding of approximately 234 million.

BALANCE SHEET, LIQUIDITY AND OTHER UPDATES

As of September 30, 2019, the Company had approximately $1.5 billion in unrestricted cash; debt of $8.4 billion; net debt of approximately $6.9 billion and a net debt to adjusted EBITDA ratio of 5.3.

Third-quarter 2019 cash provided by operating activities was $33 million, compared to $22 million of net cash used in operating activities during third-quarter 2018.

CONFERENCE CALL INFORMATION

Endo will conduct a conference call with financial analysts to discuss this press release on November 5, 2019 at 7:30 a.m. ET. The dial-in number to access the call is U.S./Canada (866) 497-0462, International (678) 509-7598, and the passcode is 1186004. Please dial in 10 minutes prior to the scheduled start time.

A replay of the call will be available from November 5, 2019 at 10:30 a.m. ET until 10:30 a.m. ET on November 8, 2019 by dialing U.S./Canada (855) 859-2056, International (404) 537-3406, and entering the passcode 1186004.

A simultaneous webcast of the call can be accessed by visiting http://investor.endo.com/events-and-presentations. In addition, a replay of the webcast will be available on the Company website for one year following the event.

 

5


FINANCIAL SCHEDULES

The following table presents Endo’s unaudited Total revenues, net for the three and nine months ended September 30, 2019 and 2018 (dollars in thousands):

 

     Three Months Ended September 30,      Percent
Growth
    Nine Months Ended September 30,      Percent
Growth
 
     2019      2018     2019      2018  

Branded Pharmaceuticals:

                

Specialty Products:

                

XIAFLEX®

   $ 82,756      $ 64,214        29   $ 226,118      $ 184,855        22

SUPPRELIN® LA

     20,772        20,408        2     66,542        60,948        9

Other Specialty (1)

     28,470        27,614        3     78,397        69,226        13
  

 

 

    

 

 

      

 

 

    

 

 

    

Total Specialty Products

   $ 131,998      $ 112,236        18   $ 371,057      $ 315,029        18
  

 

 

    

 

 

      

 

 

    

 

 

    

Established Products:

                

PERCOCET®

   $ 28,561      $ 30,730        (7 )%    $ 88,199      $ 93,539        (6 )% 

TESTOPEL®

     13,236        15,962        (17 )%      40,830        44,976        (9 )% 

Other Established (2)

     43,518        61,172        (29 )%      129,765        179,428        (28 )% 
  

 

 

    

 

 

      

 

 

    

 

 

    

Total Established Products

   $ 85,315      $ 107,864        (21 )%    $ 258,794      $ 317,943        (19 )% 
  

 

 

    

 

 

      

 

 

    

 

 

    

Total Branded Pharmaceuticals (3)

   $ 217,313      $ 220,100        (1 )%    $ 629,851      $ 632,972        —  
  

 

 

    

 

 

      

 

 

    

 

 

    

Sterile Injectables:

                

VASOSTRICT®

   $ 129,691      $ 112,333        15   $ 384,854      $ 332,387        16

ADRENALIN®

     40,311        35,460        14     133,468        101,858        31

APLISOL®

     28,085        15,992        76     55,996        49,064        14

Ertapenem for injection

     21,853        25,798        (15 )%      79,619        25,798        NM  

Other Sterile Injectables (4)

     43,695        47,567        (8 )%      124,026        161,740        (23 )% 
  

 

 

    

 

 

      

 

 

    

 

 

    

Total Sterile Injectables (3)

   $ 263,635      $ 237,150        11   $ 777,963      $ 670,847        16
  

 

 

    

 

 

      

 

 

    

 

 

    

Total Generic Pharmaceuticals

   $ 218,012      $ 257,969        (15 )%    $ 654,322      $ 748,445        (13 )% 
  

 

 

    

 

 

      

 

 

    

 

 

    

Total International Pharmaceuticals

   $ 30,466      $ 30,247        1   $ 87,428      $ 108,425        (19 )% 
  

 

 

    

 

 

      

 

 

    

 

 

    

Total revenues, net

   $ 729,426      $ 745,466        (2 )%    $ 2,149,564      $ 2,160,689        (1 )% 
  

 

 

    

 

 

      

 

 

    

 

 

    

 

(1)

Products included within Other Specialty are NASCOBAL® Nasal Spray and AVEED®. Beginning with our first-quarter 2019 reporting, TESTOPEL®, which was previously included in Other Specialty, has been reclassified and is now included in the Established Products portfolio for all periods presented.

(2)

Products included within Other Established include, but are not limited to, LIDODERM®, VOLTAREN® Gel, EDEX®, FORTESTA® Gel and TESTIM®, including the authorized generics of FORTESTA® Gel and TESTIM®.

(3)

Individual products presented above represent the top two performing products in each product category for either the three or nine months ended September 30, 2019 and/or any product having revenues in excess of $25 million during any quarterly period in 2019 or 2018.

(4)

Products included within Other Sterile Injectables include ephedrine sulfate injection and others.

 

6


The following table presents unaudited Condensed Consolidated Statement of Operations data for the three and nine months ended September 30, 2019 and 2018 (in thousands, except per share data):

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2019     2018     2019     2018  

TOTAL REVENUES, NET

   $ 729,426     $ 745,466     $ 2,149,564     $ 2,160,689  

COSTS AND EXPENSES:

        

Cost of revenues

     389,165       412,965       1,169,282       1,198,468  

Selling, general and administrative

     168,329       163,791       471,749       478,615  

Research and development

     36,519       39,683       96,353       160,431  

Litigation-related and other contingencies, net

     (14,414     (1,750     (4,093     15,370  

Asset impairment charges

     4,766       142,217       258,652       613,400  

Acquisition-related and integration items

     16,025       1,288       (26,983     13,284  

Interest expense, net

     136,903       131,847       404,387       385,896  

Gain on extinguishment of debt

     —         —         (119,828     —    

Other expense (income), net

     16,203       (1,507     20,408       (33,216
  

 

 

   

 

 

   

 

 

   

 

 

 

LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAX

   $ (24,070   $ (143,068   $ (120,363   $ (671,559
  

 

 

   

 

 

   

 

 

   

 

 

 

INCOME TAX EXPENSE

     17,361       3,003       31,732       24,729  
  

 

 

   

 

 

   

 

 

   

 

 

 

LOSS FROM CONTINUING OPERATIONS

   $ (41,431   $ (146,071   $ (152,095   $ (696,288
  

 

 

   

 

 

   

 

 

   

 

 

 

DISCONTINUED OPERATIONS, NET OF TAX

     (37,984     (27,134     (51,898     (43,273
  

 

 

   

 

 

   

 

 

   

 

 

 

NET LOSS

   $ (79,415   $ (173,205   $ (203,993   $ (739,561
  

 

 

   

 

 

   

 

 

   

 

 

 

NET LOSS PER SHARE—BASIC:

        

Continuing operations

   $ (0.18   $ (0.65   $ (0.67   $ (3.11

Discontinued operations

     (0.17     (0.12     (0.23     (0.19
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic

   $ (0.35   $ (0.77   $ (0.90   $ (3.30
  

 

 

   

 

 

   

 

 

   

 

 

 

NET LOSS PER SHARE—DILUTED:

        

Continuing operations

   $ (0.18   $ (0.65   $ (0.67   $ (3.11

Discontinued operations

     (0.17     (0.12     (0.23     (0.19
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ (0.35   $ (0.77   $ (0.90   $ (3.30
  

 

 

   

 

 

   

 

 

   

 

 

 

WEIGHTED AVERAGE SHARES:

        

Basic

     226,598       224,132       225,804       223,829  

Diluted

     226,598       224,132       225,804       223,829  

 

7


The following table presents unaudited Condensed Consolidated Balance Sheet data at September 30, 2019 and December 31, 2018 (in thousands):

 

     September 30,
2019
    December 31,
2018
 

ASSETS

    

CURRENT ASSETS:

    

Cash and cash equivalents

   $ 1,526,250     $ 1,149,113  

Restricted cash and cash equivalents

     222,491       305,368  

Accounts receivable

     420,195       470,570  

Inventories, net

     338,513       322,179  

Other current assets

     141,686       95,920  
  

 

 

   

 

 

 

Total current assets

   $ 2,649,135     $ 2,343,150  
  

 

 

   

 

 

 

TOTAL NON-CURRENT ASSETS

     7,185,731       7,789,243  
  

 

 

   

 

 

 

TOTAL ASSETS

   $ 9,834,866     $ 10,132,393  
  

 

 

   

 

 

 

LIABILITIES AND SHAREHOLDERS’ DEFICIT

    

CURRENT LIABILITIES:

    

Accounts payable and accrued expenses, including legal settlement accruals

   $ 1,612,124     $ 1,914,285  

Other current liabilities

     55,603       35,811  
  

 

 

   

 

 

 

Total current liabilities

   $ 1,667,727     $ 1,950,096  
  

 

 

   

 

 

 

LONG-TERM DEBT, LESS CURRENT PORTION, NET

     8,364,911       8,224,269  

OTHER LIABILITIES

     463,705       456,311  

SHAREHOLDERS’ DEFICIT

     (661,477     (498,283
  

 

 

   

 

 

 

TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT

   $ 9,834,866     $ 10,132,393  
  

 

 

   

 

 

 

 

8


The following table presents unaudited Condensed Consolidated Statement of Cash Flow data for the nine months ended September 30, 2019 and 2018 (in thousands):

 

     Nine Months Ended September 30,  
     2019     2018  

OPERATING ACTIVITIES:

    

Net loss

   $ (203,993   $ (739,561

Adjustments to reconcile Net loss to Net cash provided by operating activities:

    

Depreciation and amortization

     468,409       556,503  

Asset impairment charges

     258,652       613,400  

Other, including cash payments to claimants from Qualified Settlement Funds

     (403,824     (233,350
  

 

 

   

 

 

 

Net cash provided by operating activities

   $ 119,244     $ 196,992  
  

 

 

   

 

 

 

INVESTING ACTIVITIES:

    

Purchases of property, plant and equipment, excluding capitalized interest

   $ (47,812   $ (56,544

Proceeds from sale of business and other assets, net

     4,780       43,753  

Other

     (2,295     (891
  

 

 

   

 

 

 

Net cash used in investing activities

   $ (45,327   $ (13,682
  

 

 

   

 

 

 

FINANCING ACTIVITIES:

    

Proceeds from (payments on) borrowings, net

   $ 247,897     $ (29,535

Other

     (28,333     (33,273
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

   $ 219,564     $ (62,808
  

 

 

   

 

 

 

Effect of foreign exchange rate

     780       (608
  

 

 

   

 

 

 

NET INCREASE IN CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS

   $ 294,261     $ 119,894  
  

 

 

   

 

 

 

CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS, BEGINNING OF PERIOD

     1,476,837       1,311,014  
  

 

 

   

 

 

 

CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS, END OF PERIOD

   $ 1,771,098     $ 1,430,908  
  

 

 

   

 

 

 

 

9


SUPPLEMENTAL FINANCIAL INFORMATION

To supplement the financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), the Company uses certain non-GAAP financial measures. For additional information on the Company’s use of such non-GAAP financial measures, refer to Endo’s Current Report on Form 8-K furnished today to the U.S. Securities and Exchange Commission, which includes an explanation of the Company’s reasons for using non-GAAP measures.

The tables below provide reconciliations of certain of our non-GAAP financial measures to their most directly comparable GAAP amounts. Refer to the “Notes to the Reconciliations of GAAP and Non-GAAP Financial Measures” section below for additional details regarding the adjustments to the non-GAAP financial measures detailed throughout this Supplemental Financial Information section.

Reconciliation of EBITDA and Adjusted EBITDA (non-GAAP)

The following table provides a reconciliation of Net loss (GAAP) to Adjusted EBITDA (non-GAAP) for the three and nine months ended September 30, 2019 and 2018 (in thousands):

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2019     2018     2019     2018  

Net loss (GAAP)

   $ (79,415   $ (173,205   $ (203,993   $ (739,561

Income tax expense

     17,361       3,003       31,732       24,729  

Interest expense, net

     136,903       131,847       404,387       385,896  

Depreciation and amortization (15)

     147,621       176,856       468,409       521,325  
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA (non-GAAP)

   $ 222,470     $ 138,501     $ 700,535     $ 192,389  
  

 

 

   

 

 

   

 

 

   

 

 

 

Inventory step-up and other cost savings (2)

   $ —       $ 71     $ —       $ 261  

Upfront and milestone-related payments (3)

     1,672       4,731       4,055       43,027  

Inventory reserve increase from restructuring (4)

     —         207       —         2,797  

Retention and separation benefits and other restructuring (5)

     11,023       3,794       15,172       79,344  

Certain litigation-related and other contingencies, net (6)

     (14,414     (1,750     (4,093     15,370  

Asset impairment charges (7)

     4,766       142,217       258,652       613,400  

Acquisition-related and integration costs (8)

     —         519       —         1,553  

Fair value of contingent consideration (9)

     16,025       769       (26,983     11,731  

Gain on extinguishment of debt (10)

     —         —         (119,828     —    

Share-based compensation

     11,576       13,736       48,909       43,722  

Other expense (income), net (16)

     16,203       (1,507     20,408       (33,216

Other adjustments

     13,795       (67     13,882       (775

Discontinued operations, net of tax (13)

     37,984       27,134       51,898       43,273  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA (non-GAAP)

   $ 321,100     $ 328,355     $ 962,607     $ 1,012,876  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

10


Reconciliation of Adjusted Income from Continuing Operations (non-GAAP)

The following table provides a reconciliation of our Loss from continuing operations (GAAP) to our Adjusted income from continuing operations (non-GAAP) for the three and nine months ended September 30, 2019 and 2018 (in thousands):

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2019     2018     2019     2018  

Loss from continuing operations (GAAP)

   $ (41,431   $ (146,071   $ (152,095   $ (696,288

Non-GAAP adjustments:

        

Amortization of intangible assets (1)

     131,932       161,275       417,949       471,662  

Inventory step-up and other cost savings (2)

     —         71       —         261  

Upfront and milestone-related payments (3)

     1,672       4,731       4,055       43,027  

Inventory reserve increase from restructuring (4)

     —         207       —         2,797  

Retention and separation benefits and other restructuring (5)

     11,023       3,794       15,172       79,344  

Certain litigation-related and other contingencies, net (6)

     (14,414     (1,750     (4,093     15,370  

Asset impairment charges (7)

     4,766       142,217       258,652       613,400  

Acquisition-related and integration costs (8)

     —         519       —         1,553  

Fair value of contingent consideration (9)

     16,025       769       (26,983     11,731  

Gain on extinguishment of debt (10)

     —         —         (119,828     —    

Other (11)

     28,634       1,353       30,254       (29,908

Tax adjustments (12)

     (78     (2,270     (42,466     (25,126
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted income from continuing operations (non-GAAP)

   $ 138,129     $ 164,845     $ 380,617     $ 487,823  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

11


Reconciliation of Other Adjusted Income Statement Data (non-GAAP)

The following tables provide detailed reconciliations of various other income statement data between the GAAP and non-GAAP amounts for the three and nine months ended September 30, 2019 and 2018 (in thousands, except per share data):

 

Three Months Ended September 30, 2019

 
     Total
revenues,
net
     Cost of
revenues
    Gross
margin
     Gross
margin
%
    Total
operating
expenses
    Operating
expense to
revenue %
    Operating
income
from
continuing
operations
    Operating
margin %
    Other
non-operating
expense,
net
    (Loss)
income
from
continuing
operations
before
income tax
    Income
tax
expense
     Effective
tax rate
    (Loss)
income
from
continuing
operations
    Discontinued
operations,
net of tax
    Net (loss)
income
    Diluted
net (loss)
income
per share
from
continuing
operations
(14)
 

Reported (GAAP)

   $ 729,426      $ 389,165     $ 340,261        46.6   $ 211,225       29.0   $ 129,036       17.7   $ 153,106     $ (24,070   $ 17,361        (72.1 )%    $ (41,431   $ (37,984   $ (79,415   $ (0.18

Items impacting comparability:

                                   

Amortization of intangible assets (1)

     —          (131,932     131,932          —           131,932         —         131,932       —            131,932       —         131,932    

Upfront and milestone-related payments (3)

     —          (542     542          (1,130       1,672         —         1,672       —            1,672       —         1,672    

Retention and separation benefits and other restructuring (5)

     —          (1,004     1,004          (10,019       11,023         —         11,023       —            11,023       —         11,023    

Certain litigation-related and other contingencies, net (6)

     —          —         —            14,414         (14,414       —         (14,414     —            (14,414     —         (14,414  

Asset impairment charges (7)

     —          —         —            (4,766       4,766         —         4,766       —            4,766       —         4,766    

Fair value of contingent consideration (9)

     —          —         —            (16,025       16,025         —         16,025       —            16,025       —         16,025    

Other (11)

     —          —         —            (14,053       14,053         (14,581     28,634       —            28,634       —         28,634    

Tax adjustments (12)

     —          —         —            —           —           —         —         78          (78     —         (78  

Exclude discontinued operations, net of tax (13)

     —          —         —            —           —           —         —         —            —         37,984       37,984    
  

 

 

    

 

 

   

 

 

      

 

 

     

 

 

     

 

 

   

 

 

   

 

 

      

 

 

   

 

 

   

 

 

   

After considering items (non-GAAP)

   $ 729,426      $ 255,687     $ 473,739        64.9   $ 179,646       24.6   $ 294,093       40.3   $ 138,525     $ 155,568     $ 17,439        11.2   $ 138,129     $ —       $ 138,129     $ 0.60  
  

 

 

    

 

 

   

 

 

      

 

 

     

 

 

     

 

 

   

 

 

   

 

 

      

 

 

   

 

 

   

 

 

   

 

12


Three Months Ended September 30, 2018

 
     Total
revenues,
net
     Cost of
revenues
    Gross
margin
     Gross
margin
%
    Total
operating
expenses
    Operating
expense to
revenue %
    Operating
(loss)
income
from
continuing
operations
    Operating
margin %
    Other
non-operating
expense,
net
    (Loss)
income
from
continuing
operations
before
income tax
    Income
tax
expense
     Effective
tax rate
    (Loss)
income
from
continuing
operations
    Discontinued
operations,
net of tax
    Net (loss)
income
    Diluted
net (loss)
income
per share
from
continuing
operations
(14)
 

Reported (GAAP)

   $ 745,466      $ 412,965     $ 332,501        44.6   $ 345,229       46.3   $ (12,728     (1.7 )%    $ 130,340     $ (143,068   $ 3,003        (2.1 )%    $ (146,071   $ (27,134   $ (173,205   $ (0.65

Items impacting comparability:

                                   

Amortization of intangible assets (1)

     —          (161,275     161,275          —           161,275         —         161,275       —            161,275       —         161,275    

Inventory step-up and other cost savings (2)

     —          (71     71          —           71         —         71       —            71       —         71    

Upfront and milestone-related payments (3)

     —          (745     745          (3,986       4,731         —         4,731       —            4,731       —         4,731    

Inventory reserve increase from restructuring (4)

     —          (207     207          —           207         —         207       —            207       —         207    

Retention and separation benefits and other restructuring (5)

     —          (3,626     3,626          (168       3,794         —         3,794       —            3,794       —         3,794    

Certain litigation-

related and other

contingencies, net (6)

     —          —         —            1,750         (1,750       —         (1,750     —            (1,750     —         (1,750  

Asset impairment charges (7)

     —          —         —            (142,217       142,217         —         142,217       —            142,217       —         142,217    

Acquisition-related and integration costs (8)

     —          —         —            (519       519         —         519       —            519       —         519    

Fair value of contingent consideration (9)

     —          —         —            (769       769         —         769       —            769       —         769    

Other (11)

     —          —         —            —           —           (1,353     1,353       —            1,353       —         1,353    

Tax adjustments (12)

     —          —         —            —           —           —         —         2,270          (2,270     —         (2,270  

Exclude discontinued operations, net of tax (13)

     —          —         —            —           —           —         —         —            —         27,134       27,134    
  

 

 

    

 

 

   

 

 

      

 

 

     

 

 

     

 

 

   

 

 

   

 

 

      

 

 

   

 

 

   

 

 

   

After considering items (non-GAAP)

   $ 745,466      $ 247,041     $ 498,425        66.9   $ 199,320       26.7   $ 299,105       40.1   $ 128,987     $ 170,118     $ 5,273        3.1   $ 164,845     $ —       $ 164,845     $ 0.71  
  

 

 

    

 

 

   

 

 

      

 

 

     

 

 

     

 

 

   

 

 

   

 

 

      

 

 

   

 

 

   

 

 

   

 

13


Nine Months Ended September 30, 2019

 
     Total
revenues, net
     Cost of
revenues
    Gross
margin
     Gross
margin
%
    Total
operating
expenses
    Operating
expense to
revenue %
    Operating
income
from
continuing
operations
    Operating
margin %
    Other
non-operating
expense,
net
    (Loss)
income
from
continuing
operations
before
income tax
    Income
tax
expense
     Effective
tax rate
    (Loss)
income
from
continuing
operations
    Discontinued
operations,
net of tax
    Net (loss)
income
    Diluted
net (loss)
income
per share
from
continuing
operations
(14)
 

Reported (GAAP)

   $ 2,149,564      $ 1,169,282     $ 980,282        45.6   $ 795,678       37.0   $ 184,604       8.6   $ 304,967     $ (120,363   $ 31,732        (26.4 )%    $ (152,095   $ (51,898   $ (203,993   $ (0.67

Items impacting comparability:

                                   

Amortization of intangible assets (1)

     —          (417,949     417,949          —           417,949         —         417,949       —            417,949       —         417,949    

Upfront and milestone-related payments (3)

     —          (1,942     1,942          (2,113       4,055         —         4,055       —            4,055       —         4,055    

Retention and separation benefits and other restructuring (5)

     —          (1,004     1,004          (14,168       15,172         —         15,172       —            15,172       —         15,172    

Certain litigation-related and other contingencies, net (6)

     —          —         —            4,093         (4,093       —         (4,093     —            (4,093     —         (4,093  

Asset impairment charges (7)

     —          —         —            (258,652       258,652         —         258,652       —            258,652       —         258,652    

Fair value of contingent consideration (9)

     —          —         —            26,983         (26,983       —         (26,983     —            (26,983     —         (26,983  

Gain on extinguishment of debt (10)

     —          —         —            —           —           119,828       (119,828     —            (119,828     —         (119,828  

Other (11)

     —          —         —            (13,878       13,878         (16,376     30,254       —            30,254       —         30,254    

Tax adjustments (12)

     —          —         —            —           —           —         —         42,466          (42,466     —         (42,466  

Exclude discontinued operations, net of tax (13)

     —          —         —            —           —           —         —         —            —         51,898       51,898    
  

 

 

    

 

 

   

 

 

      

 

 

     

 

 

     

 

 

   

 

 

   

 

 

      

 

 

   

 

 

   

 

 

   

After considering items (non-GAAP)

   $ 2,149,564      $ 748,387     $ 1,401,177        65.2   $ 537,943       25.0   $ 863,234       40.2   $ 408,419     $ 454,815     $ 74,198        16.3   $ 380,617     $ —       $ 380,617     $ 1.64  
  

 

 

    

 

 

   

 

 

      

 

 

     

 

 

     

 

 

   

 

 

   

 

 

      

 

 

   

 

 

   

 

 

   

 

14


Nine Months Ended September 30, 2018

 
     Total
revenues,
net
     Cost of
revenues
    Gross
margin
     Gross
margin
%
    Total
operating
expenses
    Operating
expense to
revenue %
    Operating
(loss)
income
from
continuing
operations
    Operating
margin %
    Other
non-operating
expense,
net
     (Loss)
income
from
continuing
operations
before
income tax
    Income
tax
expense
     Effective
tax rate
    (Loss)
income
from
continuing
operations
    Discontinued
operations,
net of tax
    Net (loss)
income
    Diluted
net (loss)
income
per share
from
continuing
operations
(14)
 

Reported (GAAP)

   $ 2,160,689      $ 1,198,468     $ 962,221        44.5   $ 1,281,100       59.3   $ (318,879     (14.8 )%    $ 352,680      $ (671,559   $ 24,729        (3.7 )%    $ (696,288   $ (43,273   $ (739,561   $ (3.11

Items impacting comparability:

                                    

Amortization of intangible assets (1)

     —          (471,662     471,662          —           471,662         —          471,662       —            471,662       —         471,662    

Inventory step-up and other cost savings (2)

     —          (261     261          —           261         —          261       —            261       —         261    

Upfront and milestone-related payments (3)

     —          (2,095     2,095          (40,932       43,027         —          43,027       —            43,027       —         43,027    

Inventory reserve increase from restructuring (4)

     —        (2,797     2,797          —           2,797         —          2,797       —            2,797       —         2,797    

Retention and separation benefits and other restructuring (5)

     —          (57,457     57,457          (21,887       79,344         —          79,344       —            79,344       —         79,344    

Certain litigation-related and other contingencies, net (6)

     —          —         —            (15,370       15,370         —          15,370       —            15,370       —         15,370    

Asset impairment charges (7)

     —          —         —            (613,400       613,400         —          613,400       —            613,400       —         613,400    

Acquisition-related and integration costs (8)

     —          —         —            (1,553       1,553         —          1,553       —            1,553       —         1,553    

Fair value of contingent consideration (9)

     —          —         —            (11,731       11,731         —          11,731       —            11,731       —         11,731    

Other (11)

     —          —         —            630         (630       29,278        (29,908     —            (29,908     —         (29,908  

Tax adjustments (12)

     —          —         —            —           —           —          —         25,126          (25,126     —         (25,126  

Exclude discontinued operations, net of tax (13)

     —          —         —            —           —           —          —         —            —         43,273       43,273    
  

 

 

    

 

 

   

 

 

      

 

 

     

 

 

     

 

 

    

 

 

   

 

 

      

 

 

   

 

 

   

 

 

   

After considering items (non-GAAP)

   $ 2,160,689      $ 664,196     $ 1,496,493        69.3   $ 576,857       26.7   $ 919,636       42.6   $ 381,958      $ 537,678     $ 49,855        9.3   $ 487,823     $ —       $ 487,823     $ 2.14  
  

 

 

    

 

 

   

 

 

      

 

 

     

 

 

     

 

 

    

 

 

   

 

 

      

 

 

   

 

 

   

 

 

   

 

15


Notes to the Reconciliations of GAAP and Non-GAAP Financial Measures

Notes to certain line items included in the reconciliations of the GAAP financial measures to the Non-GAAP financial measures for the three and nine months ended September 30, 2019 and 2018 are as follows:

 

  (1)

Adjustments for amortization of commercial intangible assets included the following (in thousands):

 

     Three Months Ended September 30,      Nine Months Ended September 30,  
     2019      2018      2019      2018  

Amortization of intangible assets excluding fair value step-up from contingent consideration

   $ 128,865      $ 149,249      $ 400,203      $ 446,015  

Amortization of intangible assets related to fair value step-up from contingent consideration

     3,067        12,026        17,746        25,647  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 131,932      $ 161,275      $ 417,949      $ 471,662  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  (2)

To exclude adjustments for inventory step-up.

 

  (3)

Adjustments for upfront and milestone-related payments to partners included the following (in thousands):

 

     Three Months Ended September 30,  
     2019      2018  
     Cost of revenues      Operating
expenses
     Cost of revenues      Operating
expenses
 

Sales-based

   $ 542      $ —        $ 745      $ —    

Development-based

     —          1,130        —          3,986  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 542      $ 1,130      $ 745      $ 3,986  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Nine Months Ended September 30,  
     2019      2018  
     Cost of revenues      Operating
expenses
     Cost of revenues      Operating
expenses
 

Sales-based

   $ 1,942      $ —        $ 2,095      $ —    

Development-based

     —          2,113        —          40,932  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1,942      $ 2,113      $ 2,095      $ 40,932  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  (4)

To exclude charges reflecting adjustments to excess inventory reserves related to our various restructuring initiatives.

 

  (5)

Adjustments for retention and separation benefits and other restructuring included the following (in thousands):

 

     Three Months Ended September 30,  
     2019      2018  
     Cost of revenues      Operating
expenses
     Cost of revenues      Operating
expenses
 

Retention and separation benefits

   $ 1,004      $ 5,672      $ 1,711      $ 379  

Other

     —          4,347        1,915        (211
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1,004      $ 10,019      $ 3,626      $ 168  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Nine Months Ended September 30,  
     2019      2018  
     Cost of revenues      Operating
expenses
     Cost of revenues      Operating
expenses
 

Retention and separation benefits

   $ 1,004      $ 7,884      $ 15,479      $ 17,215  

Accelerated depreciation and product discontinuation charges

     —          —          35,177        —    

Other

     —          6,284        6,801        4,672  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1,004      $ 14,168      $ 57,457      $ 21,887  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  (6)

To exclude adjustments to our accruals for litigation-related settlement charges and certain settlement proceeds related to suits filed by our subsidiaries.

 

16


  (7)

Adjustments for asset impairment charges included the following (in thousands):

 

     Three Months Ended September 30,      Nine Months Ended September 30,  
     2019      2018      2019      2018  

Goodwill impairment charges

   $ —        $ —        $ 151,108      $ 391,000  

Other intangible asset impairment charges

     4,261        140,609        104,660        217,576  

Property, plant and equipment impairment charges

     505        1,608        2,884        4,824  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total asset impairment charges

   $ 4,766      $ 142,217      $ 258,652      $ 613,400  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  (8)

Adjustments for acquisition and integration items primarily relate to various acquisitions.

 

  (9)

To exclude the impact of changes in the fair value of contingent consideration liabilities resulting from changes to our estimates regarding the timing and amount of the future revenues of the underlying products and changes in other assumptions impacting the probability of incurring, and extent to which we could incur, related contingent obligations.

 

  (10)

To exclude the gain on the extinguishment of debt associated with our March 2019 refinancing.

 

  (11)

Other adjustments included the following (in thousands):

 

     Three Months Ended September 30,  
     2019      2018  
     Operating
expenses
     Other non-
operating
expenses
     Operating
expenses
     Other non-
operating
expenses
 

Foreign currency impact related to the re-measurement of intercompany debt instruments

   $ —        $ (922    $ —        $ 1,528  

(Gain) loss on sale of business and other assets

     —          1        —          (177

Other miscellaneous

     14,053        15,502        —          2  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 14,053      $ 14,581      $ —        $ 1,353  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Nine Months Ended September 30,  
     2019      2018  
     Operating
expenses
     Other non-
operating
expenses
     Operating
expenses
     Other non-
operating
expenses
 

Foreign currency impact related to the re-measurement of intercompany debt instruments

   $ —        $ 2,874      $ —        $ (1,560

(Gain) loss on sale of business and other assets

     —          (2,000      —          (24,014

Other miscellaneous

     13,878        15,502        (630      (3,704
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 13,878      $ 16,376      $ (630    $ (29,278
  

 

 

    

 

 

    

 

 

    

 

 

 

Other miscellaneous during the three and nine months ended September 30, 2019 includes $14.1 million in Operating expenses for a premium associated with an extended reporting period endorsement on an expiring insurance program and $17.5 million in Other non-operating expenses for contract termination costs incurred as a result of certain product discontinuation activities in our International Pharmaceuticals segment.

 

  (12)

Adjusted income taxes are calculated by tax effecting adjusted pre-tax income and permanent book-tax differences at the applicable effective tax rate that will be determined by reference to statutory tax rates in the relevant jurisdictions in which the Company operates. Adjusted income taxes include current and deferred income tax expense commensurate with the non-GAAP measure of profitability.

 

  (13)

To exclude the results of the businesses reported as discontinued operations, net of tax.

 

  (14)

Calculated as Net (loss) income from continuing operations divided by the applicable weighted average share number. The applicable weighted average share numbers are as follows (in thousands):

 

     Three Months Ended September 30,      Nine Months Ended September 30,  
     2019      2018      2019      2018  

GAAP

     226,598        224,132        225,804        223,829  

Non-GAAP Adjusted

     230,907        232,358        231,751        228,195  

 

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  (15)

Depreciation and amortization per the Adjusted EBITDA reconciliations do not include certain depreciation amounts reflected in other lines of the reconciliations, including Acquisition-related and integration costs and Retention and separation benefits and other restructuring.

 

  (16)

To exclude Other expense (income), net per the Condensed Consolidated Statements of Operations.

 

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Reconciliation of Net Debt Leverage Ratio (non-GAAP)

The following table provides a reconciliation of our Net loss (GAAP) to our Adjusted EBITDA (non-GAAP) for the twelve months ended September 30, 2019 (in thousands) and the calculation of our Net Debt Leverage Ratio (non-GAAP):

 

     Twelve Months
Ended
September 30,
2019
 

Net loss (GAAP)

   $ (495,901

Income tax expense

     29,938  

Interest expense, net

     540,147  

Depreciation and amortization (15)

     635,614  
  

 

 

 

EBITDA (non-GAAP)

   $ 709,798  
  

 

 

 

Inventory step-up and other cost savings

   $ —    

Upfront and milestone-related payments

     6,136  

Inventory reserve increase from restructuring

     150  

Retention and separation benefits and other restructuring

     19,176  

Certain litigation-related and other contingencies, net

     (5,654

Asset impairment charges

     562,191  

Acquisition-related and integration costs

     451  

Fair value of contingent consideration

     (18,804

Gain on extinguishment of debt

     (119,828

Share-based compensation

     59,258  

Other expense, net

     1,671  

Other adjustments

     13,920  

Discontinued operations, net of tax

     78,327  
  

 

 

 

Adjusted EBITDA (non-GAAP)

   $ 1,306,792  
  

 

 

 

Calculation of Net Debt:

  

Debt

   $ 8,399,061  

Cash (excluding Restricted Cash)

     1,526,250  
  

 

 

 

Net Debt (non-GAAP)

   $ 6,872,811  
  

 

 

 

Calculation of Net Debt Leverage:

  
  

 

 

 

Net Debt Leverage Ratio (non-GAAP)

     5.3  
  

 

 

 

 

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Non-GAAP Financial Measures

The Company utilizes certain financial measures that are not prescribed by or prepared in accordance with accounting principles generally accepted in the U.S. (GAAP). These Non-GAAP financial measures are not, and should not be viewed as, substitutes for GAAP net income and its components and diluted net income per share amounts. Despite the importance of these measures to management in goal setting and performance measurement, the company stresses that these are Non-GAAP financial measures that have no standardized meaning prescribed by GAAP and, therefore, have limits in their usefulness to investors. Because of the non-standardized definitions, Non-GAAP adjusted EBITDA and Non-GAAP adjusted net income from continuing operations and its components (unlike GAAP net income from continuing operations and its components) may not be comparable to the calculation of similar measures of other companies. These Non-GAAP financial measures are presented solely to permit investors to more fully understand how management assesses performance.

Investors are encouraged to review the reconciliations of the non-GAAP financial measures used in this press release to their most directly comparable GAAP financial measures. However, the Company does not provide reconciliations of projected non-GAAP financial measures to GAAP financial measures, nor does it provide comparable projected GAAP financial measures for such projected non-GAAP financial measures. The Company is unable to provide such reconciliations without unreasonable efforts due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations, including adjustments that could be made for asset impairments, contingent consideration adjustments, legal settlements, gain / loss on extinguishment of debt, adjustments to inventory and other charges reflected in the reconciliation of historic numbers, the amounts of which could be significant.

See Endo’s Current Report on Form 8-K furnished today to the U.S. Securities and Exchange Commission for an explanation of Endo’s non-GAAP financial measures.

About Endo International plc

Endo International plc (NASDAQ: ENDP) is a highly focused generics and specialty branded pharmaceutical company delivering quality medicines to patients in need through excellence in development, manufacturing and commercialization. Endo has global headquarters in Dublin, Ireland, and U.S. headquarters in Malvern, PA. Learn more at www.endo.com.

 

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Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements, including but not limited to the statements by Mr. Campanelli, as well as other statements regarding product development, market potential, corporate strategy, optimization efforts and restructurings, timing, closing and expected benefits and value from any acquisition, expected growth and regulatory approvals, together with Endo’s net income per share from continuing operations amounts, product net sales, revenue forecasts and any other statements that refer to Endo’s expected, estimated or anticipated future results. Because forecasts are inherently estimates that cannot be made with precision, Endo’s performance at times differs materially from its estimates and targets, and Endo often does not know what the actual results will be until after the end of the applicable reporting period. Therefore, Endo will not report or comment on its progress during a current quarter except through public announcement. Any statement made by others with respect to progress during a current quarter cannot be attributed to Endo.

All forward-looking statements in this press release reflect Endo’s current analysis of existing trends and information and represent Endo’s judgment only as of the date of this press release. Actual results may differ materially from current expectations based on a number of factors affecting Endo’s businesses, including, among other things, the following: changing competitive, market and regulatory conditions; changes in legislation; Endo’s ability to obtain and maintain adequate protection for its intellectual property rights; the timing and uncertainty of the results of both the research and development and regulatory processes, including regulatory decisions, product recalls, withdrawals and other unusual items; domestic and foreign health care and cost containment reforms, including government pricing, tax and reimbursement policies; technological advances and patents obtained by competitors; the performance, including the approval, introduction, and consumer and physician acceptance of new products and the continuing acceptance of currently marketed products; the effectiveness of advertising and other promotional campaigns; the timely and successful implementation of strategic initiatives; the timing or results of any pending or future litigation, investigations or claims or actual or contingent liabilities, settlement discussions, negotiations or other adverse proceedings; unfavorable publicity regarding the misuse of opioids; timing and uncertainty of any acquisition, including the possibility that various closing conditions may not be satisfied or waived, uncertainty surrounding the successful integration of any acquired business and failure to achieve the expected financial and commercial results from such

 

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acquisition; the uncertainty associated with the identification of and successful consummation and execution of external corporate development initiatives and strategic partnering transactions; and Endo’s ability to obtain and successfully maintain a sufficient supply of products to meet market demand in a timely manner. In addition, U.S. and international economic conditions, including higher unemployment, political instability, financial hardship, consumer confidence and debt levels, taxation, changes in interest and currency exchange rates, international relations, capital and credit availability, the status of financial markets and institutions, fluctuations or devaluations in the value of sovereign government debt, as well as the general impact of continued economic volatility, can materially affect Endo’s results. Therefore, the reader is cautioned not to rely on these forward-looking statements. Endo expressly disclaims any intent or obligation to update these forward-looking statements except as required to do so by law.

Additional information concerning the above-referenced risk factors and other risk factors can be found in press releases issued by Endo, as well as Endo’s public periodic filings with the U.S. Securities and Exchange Commission and with securities regulators in Canada, including the discussion under the heading “Risk Factors” in Endo’s most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q. Copies of Endo’s press releases and additional information about Endo are available at www.endo.com or you can contact the Endo Investor Relations Department by calling 845-364-4833.

SOURCE Endo International plc

Media: Heather Zoumas-Lubeski, (484) 216-6829; Investors: Pravesh Khandelwal, (845)-364-4833

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