Q3 2019 Earnings Call
Sure.
Ladies and gentlemen, thank you for standing by welcome to the Q3 2019 Endo International Plc earnings Conference call.
At this time, all participants' lines are in listen only mode. After the speakers presentation. There will be a question answer session to ask a question Glenn just fishing you would need to press star one good telephone.
Please be advised that today's conference is being recorded if he'd be quite any further assistance. Please press star zero.
Now I'd like to hand to conference over to your Speaker today like Park Senior Vice President Investor Relations and corporate Affairs, you may begin.
Good morning, and thank you for joining us to discuss our third quarter 2019 financial results.
Joining me on today's call or Paul can finale, Chairman, President and CEO of Endo, Blaise Coleman Executive Vice President and CFO .
Cadbury Executive Vice President and Chief commercial officer of our branded business and dominant Cherico executive Vice President and Chief commercial officer of our sterile in generics business.
We have prepared a slide presentation to accompany today's webcast and that presentation as well as other materials are posted online in the investor section at Endo Dotcom.
I'd like to remind you that any forward looking statements made by management are covered under the U.S. Private Securities Litigation Reform Act of 1995, and the applicable Canadian Securities laws and are subject to the changes risks and uncertainties described in yesterday's press release in are you asking Canadian Securities filings.
In addition, during the course of this 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 measure used by other companies.
Investors are urged to review Sandoz current report on form 8-K furnished with the FCC yesterday for Endos reasons, including those non-GAAP financial measures in Yesterdays earnings release, and today's presentation. The reconciliation of non-GAAP financial measure the most directly comparable GAAP financial measure is contained in our earnings press release issued yeah.
Yesterday, unless otherwise noted I would now like to turn the call over to Paul.
Thank you Laurie good morning, and thank you for joining us for today's call I Hope you've had a chance to review the company's announcements rose last evening.
As announced yesterday.
I notified the board of my attention to retire as President and Chief Executive Officer up and do as soon as a successor is named it Accordingly, the board has implemented its CEO succession plan.
Additionally, I am honored to be Tom the chairman of the board in Rhodri Kimmel has been appointed senior independent director.
I will continue as president and CEO until my successor is appointed and will then continue to serve as the chairman of the board following the appointment of Endos next CEO .
Along with the entire board I would like to thank Roger Kimball for services, Chairman and his ongoing service to the company.
Over the last three years, we've been laser focused on executing our strategy to simplify our business drive productivity improvements and leverage our culture as a differentiator, which is long which has led to strong operating performance. Despite the challenging external environment.
Building from this position of strength.
No I was the time to transition to new leadership, who will look to build on the momentum.
I am proud of what the Endo team has accomplished and I'm confident that we're positioned the company for long term growth and success.
I'm thrilled to remain a part of Endo for its next chapter.
Now, let's turn our attention to the third quarter 2019 earnings presentation.
Beginning on slide two here's a brief agenda for todays call.
Moving to slide three.
I'm pleased to report that Endos third quarter financial results further demonstrate the continued execution of our multiyear strategic plan.
Led by XIAFLEX in Vasostrict.
Third quarter revenues for both the specialty products portfolio of our branded pharmaceutical segment in the sterile injectable segment continued there year over year double digit growth momentum.
We reported third quarter 2019, total enterprise revenues of $729 million in adjusted EBITDA of $321 million, which were both inline with our expectations.
We are updating full year 2019 guidance narrowing the expected ranges for revenue.
Adjusted diluted net income per share who continuing operations.
In adjusted EBITDA.
Believes will walk you through our financial performance later in our presentation.
Additionally, we are pleased that during the third quarter, we settled what Cuyahoga in Suffolk counties in the track one multi district opioid litigation for a total of $10 million in cash and up to $1 billion a free product.
We continue to be open to identifying and executing on a constructive path forward to resolve the pending opioid litigation, but there could be no assurances that resolution will be achieved.
And it is important to note that while settlement remains our goal we are prepared to litigate if necessary.
I understand that there were many questions on this topic. However, as I'm sure you can appreciate we're limited in what we can say and I have no additional comments to at this time.
Moving to slide for.
You will see a snapshot of our segment revenues and our consolidated adjusted EBITDA for the third quarter.
Now moving to slide five the specialty products portfolio of our branded pharmaceutical segment continued to advance in the third quarter with year over year revenue growth of 18%.
This performance was driven by strong execution across all products with our specialty products portfolio.
Our XIAFLEX franchise had another outstanding quarter gross.
The franchise saw an acceleration in revenue growth of 29% compared to the third quarter of 2018, and 11% compared to second quarter of 2019.
This accelerating growth reflects continued strong underlying demand in both the barone's disease Indupa trends contracture indications due to the investment and outstanding promotional execution behind XIAFLEX.
Additionally, we are pleased with the third quarter performance of other specialty products, where year over year revenue growth was primarily driven by volume.
Offsetting the specialty products portfolio third quarter revenue growth is the year over year revenue decline in our established products portfolio, which was primarily due to generic competition in resulted in a 1% year over year decline in our total branded pharmaceutical segment revenue.
As part of our mission, we feel a deep responsibility to help raise awareness of the Undertreated disease states supported by XIAFLEX amongst patients caregivers and healthcare professionals that helped drive improved treatment rates for patients suffering from.
Yes.
In this context, we are excited to have engaged pro football Hall of Fame quarterback John Elway as the spokesperson for our facts on hand disease awareness campaign focused on educating the public about do purchase contracts are encouraging patients to reach out to enhance specialists.
Okay.
The early results of the National TV, an online campaign have been impressive.
Visits to the unbranded Saks on hand website tripled with a high conversion to our branded XIAFLEX website.
In searches fourth position on the website physician locator.
This helps to convert seekers into XIAFLEX patients.
I am proud of the commercial capabilities that we've built across our specialty business. These capabilities that are driving growth today are the same ones, we plan to leverage for our potential.
For cellulite product as well as other opportunities.
Based on the continued strong underlying growth and our specialty products portfolio. We have updated our full year 2019 guidance and now expect specialty products revenue growth to be in the mid teens percentage range in XIAFLEX revenue growth to be up.
Approximately 20%.
Now moving to our potential CCH for the treatment of cellulite product.
In September we submitted a delay to the FDA, we're continuing to take what we believe our the appropriate steps across our organization to prepare for regulatory approval and the second half of 2020 .
Additionally, two weeks ago at the American Society for Dermatologic surgery annual meeting held in Chicago, We presented data on the use of is standing MRI for the evaluation of cellulite.
And we launched our new Endo Statics website designed to appropriately engage with the physician community.
Turning to slide six.
Our sterile Injectables segment continues to deliver with revenue growth of 11% in the third quarter of 2019 compared to the third quarter of 2018.
This performance was driven by continued strong growth in Vasostrict and adrenaline as well as Apple Saul.
Vasostrict revenues were $130 million, a 15% increase compared to the same period in 2018.
Adrenalin revenues were $40 million in the quarter up 14% compared to last year.
Apple sole revenues were approximately $28 million compared to $60 million and the same period in 2018.
Driven by wholesalers restocking following a temporary supply shortage.
We anticipate significantly lower Apple sole revenues in the fourth quarter driven by the non recurrence of the third quarter restocking benefit and anticipated wholesaler destocking.
Looking forward, we reaffirm our guidance of 2019 sterile injectables revenue growth in the high single to low double digit percentage range with Vasostrict revenues expected to grow by a low double digit percentage.
Turning to our generic pharmaceutical segment on slide seven.
The decrease in revenues for the segment during the third quarter compared to the same period last year, primarily reflects the impact of anticipated competitive pressures on certain generic products.
This decrease was partially offset by the benefit of certain product launches, including culture seen tablets. The authorized generic of coal brings a paragraph four settlement.
On the generic market landscape as we've noted before the environment remained active in dynamic, reflecting a high level of competition, which is primarily driven by new market entrants.
We are reaffirming our guidance for full year 2019 generic pharmaceutical revenues to decline.
In the mid to high teens percentage range.
Moving to slide eight.
Our international pharmaceutical segment benefited this quarter from delayed generic competition, which we expect to materialize in the near term.
For the full year 2019, we reaffirm our guidance of international pharmaceutical revenue declines of approximately 20% compared to full year 2018.
Turning to slide nine.
We shift focus to our diverse pipeline.
As referenced earlier, we submitted our BLE to the FDA for our CCH for cellulite products.
As part of our data generation plan, we have several real world CCH studies in development focused on dosing.
Injection technique.
The responses in target patient populations as well as well over studies on durability.
Additionally, we remain on track to launch approximately 15, new products in 2019 across our sterile injectables generic pharmaceuticals in international pharmaceutical segments and have launched 11 products year to date.
Including four in the third quarter.
Third quarter launches included throw Croston LNG section indicated for the treatment of pulmonary arterial hypertension and the first generic forfeit in in the us.
We take pride in offering our customers lower cost generic alternatives.
Our sterile Injectables pipeline is supplemented by our strategic relationships with third parties, such as never car, which will potentially provide five differentiated fivefive to hospital in critical care based products.
We continue to expect the first launch from our never car agreement in late 2020 .
The table on the bottom of slide nine shows some of our Kiedis flows future first to file or first to market opportunities.
Now, let me turn the call over to blades to further discuss the Companys third quarter financial performance in full year 2019 financial guidance Blaise.
Thank you Paul and good morning, everyone first on slide 10 to see a snapshot third quarter GAAP non-GAAP financial results.
Covered company segment revenues earlier, so I will not read that again.
On a GAAP basis diluted net loss per share from continuing operations was 18 cents in the quarter compared to a loss of 65 cents per share in the third quarter of 2018.
GAAP loss from continuing operations in third quarter, 2019 was $41 million compared to a GAAP loss from continuing operations of $146 million during the same period in 2018.
On an adjusted basis third quarter adjusted income from continuing operations of $138 million was lower than the previous year, which is mainly due to a lower adjusted gross margin and an increase in our adjusted effective tax rate.
The lower adjusted gross margin was primarily due to declining revenue and an unfavorable change in product mix in our generic pharmaceutical segment.
The lower adjusted effective tax rate is primarily driven by unfavorable change in adjusted pre tax income jurisdictional mix.
Adjusted diluted net income per share from continuing operations in third quarter 2019 was 60 cents compared to 71 cents in third quarter 2018.
Slide 11 provides a summary vendors updated 2019 full year financial guidance, we're narrowing our financial guidance ranges for the year, but revenue adjusted diluted net income per share from continuing operations and adjusted EBITDA and have updated underlying financial guidance assumptions.
These assumptions are presented at the bottom on slide 11 and include our expectation for fourth quarter adjusted gross margin as a percentage of sales to be in line with third quarter 2019.
And for fourth quarter, adjusted operating expenses to increased slightly compared to third quarter 2000 lengths.
Moving to slide 12. This is a summary of the segment and product specific guidance previously discussed.
Advancing this slide 13, and wrapping up the financial discussion.
For the first nine months of 2019, when unrestricted cash flow prior to debt payment of $421 million and we've ended the third quarter of 2019 with approximately $1.5 billion of unrestricted cash and a net debt to adjusted EBITDA leverage ratio of approximately 5.3 times.
Thanks.
We're updating our 2019 guidance for expected owners to cash flow prior to debt payment to be in the range of approximately $280 million to $320 million compared to unrestricted cash flow prior to debt payment of $100 million to $200 million. Previously this change reflects the impact of the shift in the estimated timing.
Of cash distributions to settle Nash mesh claims from 2019 2020.
Now, let me turn it back or Paul Paul. Thank you Blaze finally, moving to slide 14 in concluding today's presentation. Despite circumstances that could easily distract us remain focused on executing against our multiyear strategic plan.
We believe that enhancing our capabilities in sterile injectables and our branded specialty products portfolio, including medical aesthetics, and strengthening our generics business physicians and well for the future.
I am grateful to all of our team members for their commitment and hard work.
Let me now turn the call back over to Lori to manage our question and answer period.
Laurie Thank you Paul in the interest of time, if you could limit. Your initial question to allow us to get in as many as possible we would really appreciate it.
Can you Trust me, we have the first question.
As a reminder to ask a question you read the press Star one on your telephone John Your question. Please press the pound.
Please standby.
Yes, Sir.
And our first question comes from Iran. Go Stanicky with RBC capital markets. You May proceed.
Great. Thanks, Paul you caught a lot of a softcard last night, especially given the extended the exception your contract in April So let me ask what I think a bunch of people are thinking.
Why announced this now I mean, the stock is depressed it's a critical time, given the litigation a defensive base a strict pending launch of Cchf.
I know you don't want to comment on the opioid litigation, but the read for some is going to be that near term resolutions unlikely. So so that's number one if you could just expand on your thinking there.
And then secondly, it seems to me that the biggest opportunity for endo given some of the balance sheet constraints is to leverage the commercial footprint more by way of.
Aggressive business development more deals like never car, but maybe with a bigger folks on the brand side, what's the rate limiting factor. There is why we havent seen more and is that something that you intend to put greater emphasis on in your new rule I mean I guess the question is can we expect more more active business development at append due in 2020 with you in a chairman role with more time.
I am to spend on that thanks.
Yes, Thanks Randall.
The first question with respect to.
Really the timing, we ultimately I looked at it two ways in terms of its a.
The balance of a personal life decision and at the same time looking at the the strength of the company, where I believe it is looking at what we've achieved and where were where we're headed and things in which we control. There's no doubt that we all know what are our challenges our with respect to liabilities, but when I take a step back and I look.
With this leadership team has done over the last year I truly the leave that we are we on the best position.
Our growth and looking at what we've done both on the specialty side in the sterile side I think were disposition very very well with respect to some of the open items those things will continue with respect to vasostrict et cetera.
Alex I'm still here at the end of the day I am I'm still the president and CEO I would anticipate being able to participate in some of the unsold finished business, but at the end of the dates a balance between my family and also knowing as I look around the stable here and looking at leadership within Endo that we have a lot of talent in a lot of stock.
Turning to take us to the next to that's levels I actually so very very comfortable frankly my family is quite excited for me as I am.
Regarding the business development question.
I don't think anything has really changed in that regard in terms of deals like never car.
That was an opportunistic deal that we are incredibly excited about clearly there is.
A focus on the specialty side, if there is a product opportunity that to fit in with either our orthopedic or men's health on urology side Theres nothing stopping us from from.
Looking at appropriately sized deals for product acquisitions, So thats something that the business development team continues to want to evaluate and frankly, we also have a bull pen I'm looking at future success, we're not we're not moving forward at this point in time with adding additional medical aesthetics, but there is a bolt and ready to go.
If and when.
We have a launch with CCH I'm confident in our ability to have success, one sub once if and when we get approved but there is a a database of targets and medical aesthetics, and there's nothing stopping us too to bring in small appropriate size deals on the specialty and sterile injectable side for that.
Matter.
Okay. Thanks for that.
And our next question comes from Greg Gilbert with Suntrust. You May proceed.
Thanks, Congrats Paul I know, we're going to Miss you I know, you're not going anywhere but.
Thanks for everything.
I suspect you all are standing around the fax machine you have any news on on the BLE.
Well, let so what's the direct that question first of all Craig. Thank you. Thank you for.
Sure.
For the kind words there.
With respect to news on the on the BLA No. We don't have any direct news I think we we were candidate with respect to everybody knows the the file date of the BLA, which was September six.
We've noted there was a 60 day period I believe that is tomorrow.
So I think at this point in time no. Good no new no news at this point is viewed as good news.
We've had limited interactions and I would say at this point in time, we've seen no surprises and.
I would say its normal course in what our expectations are so a little bit more time as required.
Great well, let me ask my real question is now on visa strict good growth in the quarter and you're expecting continued growth.
Is that growth tied mostly to the compounded product or what little of it was out there are coming off the market or are there other drivers of revenue growth for the product that could be more durable and how did the hearing go and shape your.
Confidence on on the legal going forward and then question too is just about the XIAFLEX growth outlook for properties versus stupid trends not looking for specific guidance, but maybe you can speak to the runway you're seeing.
The growth of the one indication versus the other thanks.
Okay, let's start off and I'm going to pass it over to Dominic on the Vasostrict slots and I'll pass it to us about on designs at sites. So I think the first thing.
In terms of the growth with respect to the compounded products I think we've seen some small benefit with respect to.
To that opportunity I think also there is very very small volume growth also in vasostrict. So I think it's a combination keep in mind, it's a large product. So very small on volume growth is also helping us with respect to the.
The healthy revenue side.
In a pass it over to two Dombek and key she'd like to add little more color.
Paul I agree with.
With that assessment I do think that.
We're still seeing some of the.
We'll return of capital under product.
Model.
So at the end of the day, Greg I think it's two did I Miss when it's really at this point in time, it's it's probably more tied to small volume growth with respect to peroni, Pat which led to comment yes sure I mean, Paul you mentioned in your in your comments that we have experienced 29% net sales growth. What we're excited about is that.
Net sales growth is really fueled by very strong underlying demand growth and so we saw about a 21% demand growth and we were wanting we want to continue to see both indications growing and so for Oneq is growing at 24% Indupa trends is growing at 15%. So thats exactly what we want to see healthy growth across both in.
Vacation and in terms of the runway Paul mentioned in his comments that were projecting growth in the two at the 20% tile with was XIAFLEX again, that's going to continue to be.
Fueled with underlying demand growth, we're not guiding obviously behind beyond 2019, but.
As we look at sustainable growth, we get excited about the opportunity that is XIAFLEX. When you look at the medical literature.
About 15 million Americans, aged 35, an older have two parents contracture.
Almost many of those most those go on diagnosed and up to 13% of man. We believe based on the literature suggest that have peyronies disease, and so with such low diagnosis rates and treatment rates, we feel like we have us and sustainable growth opportunities for both indications and Greg I think your last question was going back.
Back to the Vasostrict paragraph.
For litigation and as you.
I'm sure you you can understand that.
It is active litigation at this point in time, we just cannot comment on the status litigation so.
More to follow boat, but we don't comment on lack of litigation. So we can go the next question.
And our next question comes from Gary Bachman with BMO capital markets. You May proceed.
Hi, good morning.
First what additional prelaunch activities have you been doing to prepare for CCH for cellulite, when we start hiring those reps and how many will you have.
And then how should we think about gross margins trending over time will it hover in the mid sixties range, what are the pushes and pulls on that front going forward. Thanks.
So so with respect to pre launch activities. We are very excited about our ability to attract strong talent.
We're active on them on the marketing side more to follow on the sales rep at Pat can add additional color on on how we're looking at it yes. Thanks for the question we've been really busy if you've talked to key opinion leaders and who have been.
At the medical meetings, we've been very active establishing endo as a new activator and future leader.
We will you can expect that we would continue to elevate the importance of a cellulite to our HCP fees and consumers.
We will continue to highlight our R&D activities, we've got strong phase to be in phase three data and we've got an aggressive data generation plan, which we think we'll continue to build anticipation for potentially the first approved injectable for the treatment of cellulite, we've hired credential.
We've hired credential medical aesthetics folks are ready, we built out our marketing team will continue to add some strategic positions. We just recently hired two area sales directors that are helping us refine our footprint, we're not going to get into the specific guidance of the size of our footprint, but you can expect that obviously, we would have a a specialty folk.
Focused footprint that would allow us to to reach those core dedicated medical aesthetic position. So again within that our opex profile that fits strategically nicely within our current vision of being focused branded specialty organization.
And I'll pass it over to Deblase with respect to some of the pushes and pulls on the gross margin. So yeah, Gary we're not going to providing any forward looking shaping as it relates to gross margin. What we would say in terms of pushes and pulls they'd be things that you would expect which would be product mix competitive landscape assumptions, our cogs profile over.
Time.
As well as drug pricing is would be the probably the four main factors that we'd be thinking about as we think about our gross margin shaping going forward.
Okay. Just one follow up would you plan to do anything substantial with your facilities to help improve Cogs is that part of the strategy.
Well, we're always looking at ways to improve our our gross margins Gary.
At the end of the day in ways in which that I would really referred to that as normal course, right. So as our portfolio.
Re shapes, we we really look at our portfolio footprint in that light. So thats really normal course, that's always ongoing thats as part of our DNA.
Okay all right. Thank you.
Thanks.
Your next question comes from Annabel Samimy with Stifel. You May proceed.
Hi, Thanks for taking my questions.
Back on.
Finally.
Patient are they going to indicate this is generally.
There is a pretty established at this point.
Is considered a completely different products.
Right.
And then separately just looking at.
In R&D, there seem to have been a tick.
<unk>.
Fences and.
Fiscal year Guy looks like it will come back down could you just help us understand some of the pushes and pulls there for the quarter as it related specifically to preparing for this.
Or is there anything going on there. Thanks.
Yes, again, NFL with respect to the to the to the the application as we said that we submitted the BLM. We believe in our position we're confident in it but until we until we receive a B.L.A.. We're we're just going to have to be silent on that as soon as we understand from the update we will communicate.
That we received the BLM again, we're confident in our position but.
We can't definitively say, one way or them the of the other I'll pass the call over two to Blaze with respect to the financial Quest sure. So Annabel just in terms of your question on operating expenses. We did see an increase sequentially from Q2, Q3, and really related to our R&D spend and I really just had to do with the phase.
Thing.
Project spend so so nothing unusual there and there's also a small increase in in Gionee costs in terms of our guidance for Q4 in the scripts. We noted that we expect to see a slight increase in Q4 spend.
Opposite of Q3, but Thats really normal course, and an aspect to that is us planning for success.
Commercially both on the CCH satellite product, but also as we continue to invest in an XIAFLEX growth.
Okay.
Our next question comes from my side with JP Morgan You May proceed.
Great. Thanks, very much further questions I guess the first we're just on the affiliate opportunity and following up on Gary's question should we be thinking about a meaningful step up in essence una associated with this launch or can you put resources from elsewhere in the organization to support the opportunity not asking for specific numbers, but more just directionally. So we're prepared for thinking about.
Never spend might be associated there.
Second question was on the generic Chris opportunity.
It's become a large product for you how do you think about the durability of the current environment for the product and just the competitive landscape over time. Thank you.
Yes, sure Chris I'll start on on the cellulite opportunity I'm going to pass this over to two to Pat here in the second but I think as we've mentioned on several the calls that what were what works excited about is that we have quite a bit of infrastructure supporting our specialty side Thats established so from that standpoint, we're certainly going to leverage what we have.
In house as Pat indicated already we are we're going to be recruiting for a salesforce. We have disclosed a specific numbers, but we have a very talented team specifically in house on the marketing side, but why don't you had a little color, yes, I think thats right. Paul I mean, obviously this Chris this would be a separate salesforce separate salesforce footprint.
Unique call point.
Dedicated marketing team, but what we've been working on over the course of the last three years has to really to have an infrastructure that scalable on the specialty side and so when you think about the backroom support our sales operations marketing operations, our ability to be able to master the distribution networks, our ability to already in to infuse.
And already capable direct to consumer capability those are things that we would leverage and and that was intentional we've been building that over the course of the last three years and now what we're doing is where complementing that with the Wright medical aesthetic expertise. So that we can be ready for launch and we can maximize the opportunity for cellulite.
And then Chris going back to the coal Creek.
Question in terms of durability.
Without going into specifics of the contract. We are the authorized generic I would tell you from from a time standpoint that.
We we have that for several more years I, probably leave it at that that.
Point here, so from a durability standpoint, several more years.
Thank you.
Okay next question operator.
And our next question comes from aiming for deal with SPP Leeway you May proceed.
Hi, This is Sean.
Thanks for taking our question.
We have.
For this about.
Our quarterly fluctuation of your numbers.
Ladies and gentlemen.
Oh Adrenaline number was in Q3 was slightly below consensus this quarter and.
Is there any pricing pressure with some destocking behaviors and regarding missile.
How much was the contribution from distributor restocking and how should we think about though.
And our second question is about fulfill 80.
These.
The.
To have comparable revenue potential as to other.
Injectables you have launched recently like.
All right so.
I'll take a crack a couple of questions regarding the authorized generic the way you should look at it I don't usually go into great detail, but I would say the standard way that you look at authorized generics is the way you should be looking at the order pattern product right and I think that most people understand what that means with respect to fluctuation in numbers regarding.
Adrenaline.
That product is behaving the way we've anticipated right if we keep in mind with respect to.
The one ml, we've had 35% share and we've had that for a very long time. The 30 M. out we've got a 100% share. So I don't think theres any any real fluctuation or surprise, there, perhaps you're right you're referencing the Apple Sol.
A question I think we address that in the prepared remarks that we had a.
We had a raw material challenge, we fixed it we're back in the market and.
That had to do with some of our comments based upon.
Restocking into the wholesaler, which we don't anticipate.
Happening.
Next quarter and.
Hi by left off anything else that said I think I've answered your question.
Okay, I apologize and the question Entre Prost and all I didn't I might've missed expectations.
I'm going to pass it over two to Dominic with respect to the expectations on Entre process I know, it's very early since the approval for the had dominant share. Thanks Paul.
It's profitable injection is a very complex therapy this product.
Has given us an opportunity to reach further in our customers and build some commercial skills and attributes in our team that thats going to help.
For future launches as well.
I will say that is still early in the process, we have seen pull through on all four of the strengths and we're very confident enough.
And in our commercial strategy.
Thank you operator next question.
Our next question comes from Dana Flanders with Guggenheim You May proceed.
Okay.
If you have Michelle please unmute your line.
Hi, Thanks for the question sorry about that.
Maybe just my first one on a police all boys I think you mentioned that there would be some de stocking in Q4, so should we think about that product.
Declining into Q4, maybe at a at a run rate below what what's normalized.
For that product.
And then just my second one on never car I know you mentioned.
A launch upcoming at the end of 2020 on as we just think about layering those products into our model I know you're sterile injectable margins are very attractive and high.
How does never car margins fall relative to the overall business and should we think about these products as big enough overtime to kind of move the margin profile, one way or the other thank you.
Hey, Dan on the Apple saw question, Yes, we would expect the run rate to come down the benefit we saw in Q3 related to the restocking was somewhere between $10 million to $15 million decisively.
And then data with respect to never were not going to be able to go too deep into the margin profile just keep in mind. This is the collaboration with the collaboration Theres a profit split arrangement. So you'll have to take that into considerations. We're not disclosing too much I would say the lion's share is chip in the favour of endo, but I think at this point in time is probably as far as.
We're we're going to go in where we are confident and excited about the potential launches in late 2020 as as we get closer will probably be able to add a little bit more color.
Thanks, operator.
Operator, we can take the next question.
And our next question comes from David Amsellem with Piper Jaffray. You May proceed.
Okay.
Thanks.
XIAFLEX and then maybe I missed this but can you talk about the mix between perrone isn't.
C and.
Which.
Market, if any is driving the growth and also how you're thinking about your current penetration into both populations. That's number one and then secondly on this district and Adrenalin in particular.
I'm trying to get to read on the trajectory of these two assets longer term. So we've had in mind.
Were you in terms of account penetration there can you just talk about how we should think about those two assets.
Directionally longer term thanks.
Sure. Dave This is Paul I'll start with the the Vasostrict and then I'll pass it over to while.
To Pat regarding side, but in terms of the trajectory of the assets I think you've got to look at these.
These are long established assets I think dominic's team has done an outstanding job with respect to market penetration I would say at this point in time Theres, 100% conversion in terms of volume so what you're seeing ishares. When there is a modest price increase that's really what the when I'm looking at Vasostrict and adrenaline.
Indicated earlier before.
At this point in time, we've got 100% of the the volume regarding the 30 ml and we've got about 30, 537% of the volume on the one ml. So I think thats, that's been pretty historic Dombek anything to add on.
Linker, whose other thanks, so thats the way David I would look at I would look at Vasostrict regarding the the split between parolees and deeper trends Pat Yes sure. Thanks, Paul David This roughly speaking the split between Peroni isn't Indupa Trintris about 60 40 I.
I would also add to that that both indications are growing which is great head I mentioned earlier in my comments that.
Pete Perrone syndication is growing at about 24% and departments contractures growing at about 15% Thats the underlying demand that I'm referencing and then in terms of penetration wind decision to treat has made by physician.
For perrone, so we have about between a 57% to 60% penetration rate, which is a really nice penetration rate, but yet the decision to treat is still relatively low at about 14% and the diagnosis rate is is less than 3%. So theres nice opportunity nice runway.
The air for Us for do picture its contractual we're getting about one of out of every four patients. So we get about 25% from a market penetration perspective on the treatment rates are a little higher about a 30% treatment rate, but again upstream.
At the top of funnel the diagnosis rate is really low. So again, that's why we like we think it's a wonderful opportunity with XIAFLEX in and that's why as Paul mentioned, it's about execution, it's about investment and we feel like there's opportunities to continue that strategy.
Next question.
Our next question comes from David Risinger with Morgan Stanley You May proceed.
Hi.
You should on for David Risinger could you. Please discuss I know its pipeline and prospects for new launches over the next year. So.
Thank you.
Sure. So so this is Paul I think in our presentation. We we outlined several key products that we're excited about now we don't go into the exact launch date, because we don't want to place ourselves at a competitive disadvantage, but as we as we've indicated in slide presentation, where.
Upon success for CCH, we'll start the goal here is to launch on success CCH in late 2020, So thats the first.
First product, we'd like to outlined we've talked about our relationship with never car regarding our TV EU ready to use formulations in critical care in hospital settings were excited about that our first product. If success successful. We're hoping we'll launch also in late 2020.
And then what we've done here on our slide as we've talked about several key generic products that we're very excited about however, we don't end points. The dates because a settlement terms and conditions are confidential, but there there are large hard to make an exciting products products such as generic excellent which is a proton pump and.
Butter, very very difficult challenging delayed release type product that.
We have in our portfolio.
Afinitor is a product that we're also very very site excited about it has about four strains. However, we have exclusivity up three out of the for springs, the molecules about $800 million. However, we have access and our first to file position so about half of that or $400 million again, a very very challenging product to make.
We've talked about Amitiza, which is a a product that is a soft gel that requires a clinical trial also very very hard product to make in that product is about $500 million in brand sales. So just gives you a little bit of an indication. There's if you go back to our presentation Theres three more products that we that we also disclose super decks.
Couponing GATX that are all very difficult products that are in our future pipeline.
Thank you very much for the question.
Next question.
Our next question comes from Kevin Kedra Chief Research you May proceed.
Hi, Thanks for taking the questions Paul jobs. If this was asked earlier.
So I jumped on late but.
With the the CEO transition Theres a lot going on at the company.
I mean opioid you have businesses in the brand side generic side and you're getting into a clinics.
So what.
One or two core capabilities.
Do you feel that the CEO of Endo going forward should really bring to the table as you.
Begin the process of looking for somebody to bring in and then secondly, just wanted.
Some clarification I saw that.
On the balance sheet took the 9.1 million dollar.
Liability for legal settlements it was a long term liability.
I assume that was tied to the.
Track, one case settlements so.
Surprise that this wouldn't be.
Near term liabilities from that would be paid out soon given that.
Seems to be quite an emphasis.
For all the counties that they get paid immediately so that they can address the crisis.
Just wondering kind of way how that.
Timeline plays out for paying up at 10 million plus the 1 million of drug.
So Kevin Hi, this is Paul.
Maybe just a little uncertain regarding the balance sheet question.
Can you just get a little more color on that I want to make sure I fully understand.
Sure so.
On the balance sheet it looks like there was.
And the long term liabilities it looked like.
At line of 9.1 million.
Related to legal settlements I wasn't sure if that was actually tied yet.
Hey, Kevin you. Please let me just thanks for the question on the on the liabilities, we did take a net charge to the balance sheet.
This quarter related to legal liabilities, we had some reversal of some accruals that we had previously accrued for certain legal matters, we took a charge or some other legal matters.
In terms of Truing up some balances and the net impact there is that a portion of that does go to the.
Long term liability part of the balance sheet in terms of the opioids settlement just to clarify that question. That's a that's been settled and Thats already been paid so that's not part of the.
The change you're seeing in the balance sheet.
And then.
The question with respect to maybe some of the aspects of CEO succession plan I'm very broad question I mean, when we look at this company, it's an incredibly exciting and dynamic company you've gotta look across we've got four segments here. So we're going to need somebody that can look at our businesses objective Lee understanding the growth areas.
Sterile and specialty.
We've got to be able to to have excitement and build.
Built continue with the culture that we have across the.
The segments. We've got 13 sites, we have 3000 people. So we're going to need somebody is going to be able to kind of rallied continue the rally the group, but I would tell you that.
Where we are as a company.
While I am excited about my next phase in life I also believe that I'm, leaving this company.
And very very good and talented hands, we have a lot of talented individuals in house.
That are going to have an opportunity to be considered.
And.
And at this stage of the game, we've got a an exciting pipeline and portfolios that.
It's going to fuel this company forum for the long term, so it's going to be an exciting opportunity, but we're getting some of that can log look across multiple segments and also medical aesthetics. So thank you for that question.
Next question please.
Ladies and gentlemen, this concludes actually winning portion of today's call I would now like to turn the call back over to Mr., Paul Kevin Ellich, President and CEO for any closing remarks. Thank.
Thank you operator, we appreciate your continued interest in support of the company and we look forward to providing you with updates as we move forward I want to thank everybody for joining us this morning.
Have a great day.
Ladies and gentlemen, this concludes todays conference call. Thank you for participating you may now disconnect.