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| 8-K - FORM 8-K - ENDO HEALTH SOLUTIONS INC. | d8k.htm |
| EX-99.1 - PRESS RELEASE - ENDO HEALTH SOLUTIONS INC. | dex991.htm |
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collaborate. innovate. thrive.
ENDO PHARMACEUTICALS
Endo to Acquire Qualitest
Pharmaceuticals
September 28, 2010
Exhibit
99.2 |
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collaborate. innovate. thrive. 2
FORWARD LOOKING STATEMENT
This
presentation
contains
forward-looking
statements
regarding,
among
other
things,
the
proposed
business
combination
between
Endo
and Qualitest,
Endo’s and Qualitest’s
financial position, results of operations, market position, product development and business
strategy, as well as estimates of Endo’s future
total
revenues,
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
could
affect
the
proposed
business
combination
of
the
companies,
future financial
results and could cause actual results to differ materially from
those expressed in forward-looking statements contained in this presentation.
These
factors
include,
but
are
not
limited
to:
the
risk
that
the
acquisition
will
not
close,
the
risk
that
Endo’s
business
and/or
Qualitest’s
business
will
be
a
dversely
impacted
during
the
pendency
of
the
acquisition,
the
risk
that
the
operations
of
the
two
companies
will
not
be
integrated
successfully, Endo’s
ability to successfully develop, commercialize and market new products; timing and results of
pre-clinical or clinical trials on new products; Endo’s ability to obtain
regulatory approval of any of Endo’s pipeline products; competition for the business of Endo’s branded and generic products,
and
in
connection
with
its
acquisition
of
rights
to
intellectual
property
assets;
market
acceptance
of
our
future
products;
government
regulation
of
the
pharmaceutical industry; Endo’s dependence on a small number of products; Endo’s
dependence on outside manufacturers for the manufacture of a majority of its
products; Endo’s dependence on third parties to supply raw materials and to provide services for certain core aspects of its business; new
regulatory
action or lawsuits relating to Endo’s use of narcotics in most of its core products;
Endo’s exposure to product liability claims and product
recalls
and
the
possibility
that
Endo
may
not
be
able
to
adequately
insure
itself;
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;
Endo’s
ability
to successfully
implement its acquisition and in-licensing strategy; regulatory or other limits on the
availability of controlled substances that constitute the active ingredients of some of
its products and products in development; the
availability of third-party reimbursement for Endo’s 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 Endo has been indemnified; Endo’s dependence on sales to a limited number of large
pharmacy chains and wholesale drug distributors for a large portion of its total
revenues; a determination by a regulatory agency that Endo is engaging or has engaged in inappropriate sales or marketing
activities,
including
promoting
the
“off-label”
use
of
its
products,
the
risk
that
demand
for
and
acceptance
of
Endo’s
products
or
services
may
be reduced;
the risk of changes in governmental regulations; the impact of economic conditions; the impact
of competition and pricing and other risks and
uncertainties,
including
those
detailed
from
time
to
time
in
the
companies’
periodic
reports
filed
with
the
Securities
and
Exchange
Commission,
including current reports on Form 8-K, quarterly reports on Form 10-Q and annual reports
on Form 10-K, particularly the discussion under the caption “RISK FACTORS"
in their annual reports on Form 10-K for the year ended December 31, 2009, which were filed with the Securities and Exchange Commission. The
forward-looking statements in this presentation are qualified by these risk factors. These
are factors that, individually or in the aggregate,
could
cause
our
actual
results
to
differ
materially
from
expected
and
historical
results.
The
companies’
assume
no
obligation
to
publicly update
any forward-looking statements, whether as a result of new information, future developments
or otherwise. |
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•
Strategic
Rationale
–
David
Holveck
•
Qualitest
Pharmaceuticals
Overview
–
Marvin
Samson
•
Operational
Overview
–
Julie
McHugh
•
Financial
Review
–
Alan
Levin
3
AGENDA |
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collaborate. innovate. thrive. 4
4
David P. Holveck
President and Chief Executive Officer |
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QUALITEST PHARMACEUTICALS –
A PERFECT STRATEGIC FIT
Furthers strategy to respond to the changing
economics that drive the U.S. healthcare
environment
•
Healthcare reform puts a premium on providing cost-
effective health solutions
•
Evolving from a product-driven company to a
healthcare solutions provider
•
Integrated business model
Strengthens Endo’s core pain franchise
•
Over 40% of Qualitest’s
sales come from pain
products
•
In the $15BN pain market, more than 90% of all pain
scripts and just less than 50% of sales are being
filled by generic drugs
•
Qualitest
strengthens Endo’s ability to provide
products at multiple value points
Brings critical mass to generics business
•
Combined generics business will be the 6
th
largest
U.S. generics manufacturer by prescriptions filled
•
Focused in categories that have high barriers to
entry
•
Brings a robust ANDA pipeline, seasoned
management team & solid assets
By acquiring a high-growth asset, will
diversify and boost revenue and
earnings’
streams
•
Advances growth on several metrics
•
Further diversifies Endo across Branded
Pharmaceuticals, Generic and Devices & Services
segments
•
Combined company has robust number of ANDAs
on
file and near-term pipeline projects |
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6
KEY TRANSACTION TERMS
Purchase Price
•
$1.2 billion
Cash/Share Mix
•
All cash
Funding Mix
•
Combination of cash and fully-committed term loans &
revolver borrowings
Time to Accretion
•
Immediately accretive by $0.40 to adjusted diluted EPS in
first full year after close
•
Dilutive by $0.51 to GAAP EPS
Closing Conditions
•
Subject to customary closing conditions and regulatory
approval
Transaction Close
•
Expected in late 4Q10 / early 1Q11 |
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Through Organic Growth
•
Diversified business lines to maximize growth
•
Enhanced commercial model driving growth via
strategic resource deployment
•
Invested in R&D portfolio yielding a diversified
pipeline of products with two branded products
pending FDA approval
•
Bolstered management team by adding
expertise and experience in managing and
growing a larger enterprise
7
ENDO’S TRANSFORMATION
Through Strategic Growth
•
With Indevus, we secured a position in urology
•
HealthTronics gave us an established presence
in Devices & Services and critical mass in
urology
•
Penwest strengthened our pain business
enhancing profitability & flexibility in the opioid
franchise
•
Qualitest brings critical mass to our generics
business & strengthens our pain portfolio |
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collaborate. innovate. thrive. 8
ENDO’S GEOGRAPHIC FOOTPRINT
Chadds Ford, PA
Cranbury, NJ
Westbury, NY
Charlotte, NC
Huntsville, AL
Austin, TX
Headquarters
Generics
Qualitest
Branded Pharma
Devices & Services |
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ENDO’S INTEGRATED BUSINESS MODEL
Devices
& Services
Generics
Branded
Pharmaceuticals
Pain
Urology
Oncology
Endocrinology |
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10
Marvin Samson
Chairman
and
Chief
Executive
Officer
–
Qualitest
Pharmaceuticals |
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Sixth Largest U.S. Generics Company
•
A cost competitive producer of products in categories with high barriers to entry
(controlled substances, liquids)
•
175 product families covering multiple therapeutic areas
Strong History of Growth Supported by Robust Future Pipeline
•
2010E Sales of approximately $350MM, which has grown at a three-year CAGR of 21%
and an EBITDA three-year CAGR of 23%
•
Poised for strong growth with 30 ANDAs under active review, a robust pipeline of ANDAs
expected to be filed and new product launches
Seasoned Management Team and High Quality Assets
•
Team has significant experience running a growing generics business
•
Four manufacturing/distribution facilities –
three in Huntsville, AL and one in Charlotte,
NC
11
QUALITEST COMPANY PROFILE |
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collaborate. innovate. thrive. 12
12
David P. Holveck
President and Chief Executive Officer |
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13
BUILDS ON PROGRESS IN ENDO GENERICS
Focused Investment to Accelerate Growth
•
Reinvestment program in generics R&D portfolio initiated two years ago
•
Solid results –
a strong pipeline with 16 ANDAs, which covers multiple therapeutic
categories
•
Developed deep institutional experience in pain with controlled substances
•
Secured a variety of drug delivery technologies including hydrogel implants
|
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14
BUILDING A SUSTAINABLE GROWTH COMPANY
Endo is positioning itself to best respond to the changing drivers of the U.S.
healthcare environment to create sustainable, long-term growth
•
Driven by diversification: Focused growth in core Branded Pharmaceuticals, Generics
and Devices & Services segments, while boosting revenue, earnings and cash flow
streams
•
Outcomes: Provide better patient outcomes through an integrated product offering
•
Access: Broaden access to solutions across multiple value points
•
Economics: Offer cost-effective products to consumers, payers and physicians
|
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15
Julie H. McHugh
Chief Operating Officer |
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QUALITEST –
HIGHLY COMPLEMENTARY,
ATTRACTIVE ASSET
Provides cost competitive manufacturing capabilities
•
Commercial-scale dosage form manufacturing
•
Capabilities in range of dosage forms including liquids, suspensions, creams, ointments,
suppositories, tablets and capsules
Deep institutional knowledge in controlled substances
Experienced management team and employee base
Extensive commercial portfolio
•
175 product families in multiple therapeutic areas including pain, CNS, hypertension and
women’s health |
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Ensures that Endo remains at the forefront of providing pain solutions
•
In the $15BN pain market, more than 90% of all pain prescriptions are filled by generic drugs
which accounts for just under 50% of sales
•
Combined portfolio will have products that cover the vast majority of all pain prescriptions
written
–
25 product offerings with 16% share of pain product sales
•
Provides critical mass enabling Endo to provide a breadth of products at multiple value
points allowing for market share gains
Aligned with existing strategy of targeting high barriers to entry
•
Endo’s existing generics business focuses on niche products that are difficult to
formulate •
Approximately 40% of Qualitest’s product portfolio is comprised of controlled
substances, which cannot be imported into the U.S.
•
In addition, roughly 17% of Qualitest’s product portfolio is made up of liquids, which
are less profitable to ship into the U.S.
17
ENHANCES ENDO’S CORE PAIN FRANCHISE |
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A STRONGER GENERICS BUSINESS WITH ROBUST
PIPELINE
Qualitest is a High-Growth Asset
•
Expect revenue to be approx. $350MM in
2010
•
30 ANDAs under active review by FDA
•
Expects to file 16 ANDAs in 2011-12
•
16 products launches in 2011-12
Enhances Endo’s Generics Business
•
16 ANDAs under active review by FDA
•
Expects to file 8 ANDAs in 2011-12
•
9 products launches in 2011-12
16
8
30
16
0
10
20
30
40
50
Under Active Review
Expected Filings in 2011-12
Qualitest
Endo
Pipeline
2
7
15
1
0
4
8
12
16
20
2011
2012
Qualitest
Endo
Combined Business has 25 projected
launches in 2011-2012
Combined Endo/Qualitest portfolio will grow 15% over 2010-12 period
driven by 25 product launches over 2011-12 |
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Strong R&D
•
Successfully deliver new products through development and FDA approval
Manufacturing Flexibility
•
Better able to balance third party and in-house manufacturing
•
Ensure availability of supply to opportunistically capture orders
Distribution Capability
•
Bring efficiencies to existing supply chain
•
Develop innovative distribution strategies
Product Line Rationalization & Optimization
•
Rationalize low volume and slow-turning SKUs to improve margins
•
Optimize strategic procurement practices
19
SUBSTANTIAL GROWTH OPPORTUNITIES |
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Blend the Best of Both Companies
•
Qualitest brings a seasoned management team with significant experience running an
established generics business
•
The current CEO of Qualitest, Marvin Samson, will be working together with Endo to
plan for the integration of the generics business
•
Upon the signing of this transaction, Endo plans to assemble an integration team
comprised of members of management from both companies to develop and implement
a detailed transition plan
•
Following the close of the transaction, we plan to combine Qualitest with Endo’s
existing generics business into a single business unit
20
INTEGRATION OF QUALITEST INTO ENDO |
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21
Alan G. Levin
Executive Vice President and Chief Financial Officer |
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22
KEY TRANSACTION TERMS
Purchase Price
•
$1.2 billion
Cash/Share Mix
•
All cash
Funding Mix
•
Combination of cash and fully-committed term loans &
revolver borrowings
Time to Accretion
•
Immediately accretive by $0.40 to adjusted diluted EPS in
first full year after close
•
Dilutive by $0.51 to GAAP EPS
Closing Conditions
•
Subject to customary closing conditions and regulatory
approval
Transaction Close
•
Expected in late 4Q10 / early 1Q11 |
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DIVERSIFICATION OF BUSINESS
Lidoderm
Generics
Other
Brands
2008
2008
Pro-forma 2011
Pro-forma 2011
Lidoderm currently contributes 50% of revenue to the business and following closing,
Lidoderm will now represent less than 40%
Lidoderm
Generics
Devices &
Services
Other Brands |
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GROWTH PROSPECTS
Qualitest Business Growth Prospects
•
Qualitest stand-alone sales expected to grow at a double-digit CAGR over
2010-2012 –
16 product launches expected in 2011-12
•
Qualitest stand-alone revenue is estimated to be roughly $400MM in 2011
Combined Company Growth Prospects
•
Pro forma generics sales CAGR of at least 15% over 2010-2012
–
25 product launches expected in 2011-12
•
Generics revenue is forecast to be more than $500MM for 2011
•
Consolidated pro forma gross margin of approximately 70%
•
Qualitest EPS accretion is approximately $0.40 for first full-year after
close 24 |
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Transaction is Primarily About Growth
•
Given the scale of Endo’s existing generics business, there is minimal operating
overlap, but synergies were identified
•
Deal was driven by an enhancement to our revenue and earnings growth
Cost Synergies Achieving a $30MM Annualized Run-Rate in 2013
•
Savings expected in procurement, supply chain and manufacturing efficiencies
Expect Revenue Synergies with Strategic Benefits of the Acquisition Post
Integration Including
•
Broader portfolio and scale in generics marketplace
•
Greater contracting opportunity
•
Opens door to multiple distribution channels
•
Enhanced preferred buying arrangements with key customers
25
SYNERGIES |
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2010 ENDO GUIDANCE AFFIRMED
Guidance
Revenue range
$1.63BN -
$1.68BN
Adjusted diluted EPS range
$3.30 -
$3.35
Reported (GAAP) diluted EPS range
$1.88 -
$1.96
Expect
to
generate
more
than
$400M
in
annual
Operating
Cash
Flow
this
year |
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27
David P. Holveck
President and Chief Executive Officer |
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A PERFECT STRATEGIC FIT
Furthers our stated strategy to build a healthcare company better able to
respond to the changing economics that drive the U.S. healthcare
environment
Enhances our core pain franchise
Questions?
Adds critical mass to our current generics business, alongside Branded
Pharmaceuticals and Devices & Services
As a high-growth asset, will significantly diversify and accelerate the growth of
Endo’s revenue and earnings’
streams |
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29
RECONCILIATION OF NON-GAAP MEASURES
29
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
Reconciliation of Projected GAAP Diluted Earnings Per Share to Adjusted Diluted Earnings Per
Share Guidance for the Year Ending December 31, 2010 Lower End of Range
Upper End of Range
Projected GAAP diluted income per common share
$1.88
$1.96
Upfront and milestone-related payments to partners
$0.38
$0.33
Amortization of commercial intangible assets
$0.59
$0.59
Costs incurred in connection with continued efforts to enhance the
cost structure of the Company
$0.08
$0.08
Indevus related costs and change in fair value of contingent
consideration
$0.01
$0.01
Impairment of indefinite-lived intangibles
$0.11
$0.11
Costs related to the acquisition of HealthTronics, Inc.
$0.30
$0.30
Costs related to the acquisition of Penwest Pharmaceuticals Co.
$0.22
$0.22
Costs related to the acquisition of Qualitest Pharmaceuticals
$0.02
$0.02
Interest expense adjustment for ASC 470-20
and the amortization of
the premium on debt acquired from Indevus
$0.15
$0.15
Tax effect of pre-tax adjustments at the applicable tax rates
and
certain other expected cash tax savings as a result of the Indevus,
HealthTronics, Penwest and Qualitest acquisitions
($0.44)
($0.42)
Diluted adjusted income per common share guidance
$3.30
$3.35
The company's guidance is being issued based on certain assumptions including:
•Certain of the above amounts are based on estimates and there ca
n be no assurance that Endo will achieve these results
•Includes all completed business development transactions as of S
eptember 28, 2010 and the acquisitions of Penwest Pharmaceuticals Co. and Qualitest
Pharmaceuticals. |
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ENDO PHARMACEUTICALS
Endo to Acquire Qualitest
Pharmaceuticals
September 28, 2010 |