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SEGMENT RESULTS
 9 Months Ended
Sep. 30, 2022
Segment Reporting [Abstract]  
SEGMENT RESULTS
NOTE 6. SEGMENT RESULTS
The Company’s four reportable business segments are Branded Pharmaceuticals, Sterile Injectables, Generic Pharmaceuticals and International Pharmaceuticals. These segments reflect the level at which the chief operating decision maker regularly reviews financial information to assess performance and to make decisions about resources to be allocated. Each segment derives revenue from the sales or licensing of its respective products and is discussed in more detail below.
We evaluate segment performance based on Segment adjusted income from continuing operations before income tax, which we define as (Loss) income from continuing operations before income tax and before acquired in-process research and development charges; acquisition-related and integration items, including transaction costs and changes in the fair value of contingent consideration; cost reduction and integration-related initiatives such as separation benefits, continuity payments, other exit costs and certain costs associated with integrating an acquired company’s operations; certain amounts related to strategic review initiatives; asset impairment charges; amortization of intangible assets; inventory step-up recorded as part of our acquisitions; litigation-related and other contingent matters; certain legal costs; gains or losses from early termination of debt; debt modification costs; gains or losses from the sales of businesses and other assets; foreign currency gains or losses on intercompany financing arrangements; reorganization items, net; and certain other items.
Certain corporate expenses incurred by the Company are not directly attributable to any specific segment. Accordingly, these costs are not allocated to any of the Company’s segments and are included in the results below as “Corporate unallocated costs.” Interest income and expense are also considered corporate items and not allocated to any of the Company’s segments. The Company’s Total segment adjusted income from continuing operations before income tax is equal to the combined results of each of its segments.
Branded Pharmaceuticals
Our Branded Pharmaceuticals segment includes a variety of branded products in the areas of urology, orthopedics, endocrinology, medical aesthetics and bariatrics, among others. Products in this segment include XIAFLEX®, SUPPRELIN® LA, AVEED®, NASCOBAL® Nasal Spray, QWO®, PERCOCET®, TESTOPEL® and EDEX®, among others.
Sterile Injectables
Our Sterile Injectables segment consists primarily of branded sterile injectable products such as VASOSTRICT®, ADRENALIN® and APLISOL®, among others, and certain generic sterile injectable products, including ertapenem for injection (the authorized generic of Merck Sharp & Dohme Corp.’s (Merck) Invanz®) and ephedrine sulfate injection, among others.
Generic Pharmaceuticals
Our Generic Pharmaceuticals segment consists of a product portfolio including solid oral extended-release products, solid oral immediate-release products, liquids, semi-solids, patches, powders, ophthalmics and sprays and includes products that treat and manage a wide variety of medical conditions.
International Pharmaceuticals
Our International Pharmaceuticals segment includes a variety of specialty pharmaceutical products sold outside the U.S., primarily in Canada through our operating company Paladin Labs Inc. (Paladin). The key products of this segment serve various therapeutic areas, including attention deficit hyperactivity disorder, pain, women’s health, oncology and transplantation.
The following represents selected information for the Company’s reportable segments for the three and nine months ended September 30, 2022 and 2021 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Net revenues from external customers:
Branded Pharmaceuticals$203,501 $230,977 $627,314 $665,652 
Sterile Injectables118,693 343,653 481,892 946,998 
Generic Pharmaceuticals201,435 174,306 590,756 522,451 
International Pharmaceuticals (1)18,061 23,092 63,101 68,676 
Total net revenues from external customers$541,690 $772,028 $1,763,063 $2,203,777 
Segment adjusted income from continuing operations before income tax:
Branded Pharmaceuticals$84,940 $105,849 $251,219 $301,277 
Sterile Injectables58,633 282,300 318,284 751,922 
Generic Pharmaceuticals87,675 34,010 237,394 89,036 
International Pharmaceuticals4,296 6,764 17,149 24,337 
Total segment adjusted income from continuing operations before income tax$235,544 $428,923 $824,046 $1,166,572 
__________
(1)Revenues generated by our International Pharmaceuticals segment are primarily attributable to external customers located in Canada.
There were no material revenues from external customers attributed to an individual country outside of the U.S. during any of the periods presented.
The table below provides reconciliations of our Total consolidated (loss) income from continuing operations before income tax, which is determined in accordance with U.S. GAAP, to our Total segment adjusted income from continuing operations before income tax for the three and nine months ended September 30, 2022 and 2021 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Total consolidated (loss) income from continuing operations before income tax$(707,592)$(47,741)$(2,648,439)$958 
Interest expense, net74,753 142,958 349,486 418,852 
Corporate unallocated costs (1)44,182 65,317 125,851 141,291 
Amortization of intangible assets84,042 91,901 261,844 281,101 
Acquired in-process research and development charges800 — 68,700 5,000 
Amounts related to continuity and separation benefits, cost reductions and strategic review initiatives (2)44,029 19,829 139,025 58,632 
Certain litigation-related and other contingencies, net (3)419,376 83,495 444,738 119,327 
Certain legal costs (4)8,052 38,842 31,322 82,961 
Asset impairment charges (5)150,200 42,155 1,951,216 50,393 
Acquisition-related and integration items, net (6)(1,399)(1,432)(951)(6,357)
Loss on extinguishment of debt— — — 13,753 
Foreign currency impact related to the remeasurement of intercompany debt instruments(6,220)(2,036)(7,114)466 
Reorganization items, net (7)124,212 — 124,212 — 
Other, net (8)1,109 (4,365)(15,844)195 
Total segment adjusted income from continuing operations before income tax$235,544 $428,923 $824,046 $1,166,572 
__________
(1)Amounts include certain corporate overhead costs, such as headcount, facility and corporate litigation expenses and certain other income and expenses.
(2)Amounts for the three months ended September 30, 2022 include net employee separation, continuity and other benefit-related charges of $14.1 million and other net charges, including those related to strategic review initiatives, of $30.0 million. Amounts for the nine months ended September 30, 2022 include net employee separation, continuity and other benefit-related charges of $58.1 million, accelerated depreciation charges of $3.8 million and other net charges, including those related to strategic review initiatives, of $77.1 million. Amounts for the three months ended September 30, 2021 include net employee separation, continuity and other benefit-related charge reversals of $11.3 million, accelerated depreciation charges of $6.4 million and other net charges, including those related to strategic review initiatives, of $24.8 million. Amounts for the nine months ended September 30, 2021 include net employee separation, continuity and other benefit-related charge reversals of $1.2 million, accelerated depreciation charges of $22.3 million and other net charges, including those related to strategic review initiatives, of $37.5 million. These amounts relate primarily to our restructuring activities as further described in Note 5. Restructuring, certain continuity and transitional compensation arrangements, certain other cost reduction initiatives and certain strategic review initiatives, including costs incurred in connection with our bankruptcy proceedings, which are included in this row until the Petition Date and in the Reorganization items, net row thereafter.
(3)Amounts include adjustments to our accruals for litigation-related settlement charges. Our material legal proceedings and other contingent matters are described in more detail in Note 15. Commitments and Contingencies.
(4)Amounts relate to opioid-related legal expenses. The amount during the nine months ended September 30, 2022 reflects the recovery of certain previously-incurred opioid-related legal expenses.
(5)Amounts primarily relate to charges to impair goodwill and intangible assets as further described in Note 10. Goodwill and Other Intangibles as well as certain disposal group impairment charges as further described in Note 4. Discontinued Operations.
(6)Amounts primarily relate to changes in the fair value of contingent consideration.
(7)Amounts relate to the net expense or income recognized during our bankruptcy proceedings required to be presented as Reorganization items, net under ASC 852. Refer to Note 2. Bankruptcy Proceedings for further details.
(8)Amounts for the three and nine months ended September 30, 2021 primarily relate to a gain of $4.9 million associated with the resolution of a prior contract dispute. For the nine months ended September 30, 2021, this gain was partially offset by $3.9 million of third-party fees incurred in connection with the March 2021 Refinancing Transactions, which were accounted for as debt modification costs. Refer to Note 14. Debt for additional information. Other amounts in this row relate to gains and losses on sales of businesses and other assets and certain other items.
Asset information is not reviewed or included within our internal management reporting. Therefore, the Company has not disclosed asset information for each reportable segment.
During the three and nine months ended September 30, 2022 and 2021, the Company disaggregated its revenue from contracts with customers into the categories included in the table below (in thousands). The Company believes these categories depict how the nature, timing and uncertainty of revenue and cash flows are affected by economic factors.
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Branded Pharmaceuticals:
Specialty Products:
XIAFLEX®$104,014 $105,509 $324,376 $312,266 
SUPPRELIN® LA31,283 30,069 84,852 85,665 
Other Specialty (1)11,033 26,339 50,023 74,407 
Total Specialty Products$146,330 $161,917 $459,251 $472,338 
Established Products:
PERCOCET®$25,052 $26,914 $77,483 $78,695 
TESTOPEL®9,430 11,686 28,331 32,314 
Other Established (2)22,689 30,460 62,249 82,305 
Total Established Products$57,171 $69,060 $168,063 $193,314 
Total Branded Pharmaceuticals (3)$203,501 $230,977 $627,314 $665,652 
Sterile Injectables:
VASOSTRICT®$33,697 $255,697 $225,217 $676,764 
ADRENALIN®24,917 28,722 85,514 88,136 
Other Sterile Injectables (4)60,079 59,234 171,161 182,098 
Total Sterile Injectables (3)$118,693 $343,653 $481,892 $946,998 
Total Generic Pharmaceuticals (5)$201,435 $174,306 $590,756 $522,451 
Total International Pharmaceuticals (6)$18,061 $23,092 $63,101 $68,676 
Total revenues, net$541,690 $772,028 $1,763,063 $2,203,777 
__________
(1)Products included within Other Specialty include AVEED®, NASCOBAL® Nasal Spray and QWO®.
(2)Products included within Other Established include, but are not limited to, EDEX®.
(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, 2022, and/or any product having revenues in excess of $25 million during any completed quarterly period in 2022 or 2021.
(4)Products included within Other Sterile Injectables include ertapenem for injection, APLISOL® and others.
(5)The Generic Pharmaceuticals segment is comprised of a portfolio of products that are generic versions of branded products, are distributed primarily through the same wholesalers, generally have no intellectual property protection and are sold within the U.S. During the three and nine months ended September 30, 2022, varenicline tablets (Endo’s generic version of Pfizer Inc.’s Chantix®), which launched in September 2021, made up 15% and 13%, respectively, of consolidated total revenues. During the three months ended September 30, 2022, lubiprostone capsules (the authorized generic of Mallinckrodt plc’s Amitiza®), which launched in January 2021, made up 5% of consolidated total revenues. No other individual product within this segment has exceeded 5% of consolidated total revenues for the periods presented.
(6)The International Pharmaceuticals segment, which accounted for less than 5% of consolidated total revenues for each of the periods presented, includes a variety of specialty pharmaceutical products sold outside the U.S., primarily in Canada through Endo’s operating company Paladin.