Q3 2020 Endo International PLC Earnings Call

November 6, 2020

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Ladies and gentlemen, thank you for standing by and welcome to the Q3 Twentytwenty Endo International Plc earnings Conference call.

At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time, if anyone should require assistance. During the conference. Please press Star then zero on your Touchtone telephone as a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host Mr. Lori Park head of industrial Relations and corporate Affairs. Please go ahead.

Good morning, and thank you for joining us to discuss our third quarter 2020 financial results. Joining me on today's call are Blaise Coleman, President and CEO of Endo, Mark Bradley Executive Vice President and CFO and Patrick Perry President Global commercial operations, we prepared a slide presentation to accompany today's webcast.

And that presentation as well as other materials are posted online in the investors section at Endo Dotcom I would 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 the press release and in our U.S. and 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 U.S. accounting principles covered by the United States and may be different from non-GAAP financial measures used by other companies.

Investors are encouraged to review Endos current report on form 8-K furnished with the FCC for Endos reasons for including those non-GAAP financial measures in our earnings release and presentation.

The reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures is contained in our earnings press release issued last night, unless otherwise noted there and I'd now like to turn the call over to Blaise Blake. Good morning, everyone and thank you for joining us for this call. We're pleased by better than expected third quarter results.

Driven by our branded and sterile injectable segments. The results speak to our team's ability to continue to adapt and deliver in this challenging environment.

Based on our performance, we are raising our 2020 full year financial guidance.

Now moving to the agenda on slide two I will start with a discussion of the strategic actions. We've recently taken in support of our key strategic priorities.

I will then review third quarter business performance and provide an update on our pipeline.

Mark will then address our third quarter financial results, including the expected impact of our recently announced restructuring program and provide financial expectations for the remainder of the year.

Turning to slide three.

August we introduced our new strategic priorities Ics.

Expanded enhance our portfolio represents our focus on investing to build a more differentiated and durable portfolio.

Reinvent how we work reflects our focus on embracing the future and evolving our ways of working to better serve our customers promote innovation and improve productivity.

And before through good which expresses our commitment to delivering our priorities in a way that benefits all our stakeholders.

These priorities guide every decision we make as we work to create long term sustainable value for all of our stakeholders.

Moving to slide four.

In order to accelerate our progress against our strategic priorities to set up our company for success today and well into the future. We've taken a number of recent strategic actions.

Yesterday, we announced a set of business transformation initiatives designed to increase our organizational effectiveness and generate significant cost savings that will be reinvested among other things to support our strategic priority to expand and enhance our portfolio, including the planned launch of quell for.

During the continued growth of XIAFLEX and increasing our funding behind our sterile injectables pipeline.

Here are the actions we are taking as part of our business transform transformation initiative.

First we're optimizing the company's generic business by exiting manufacturing sites in Irvine, California, and Chestnut Ridge in New York.

As well as our API manufacturing and bio bio equivalent study sites in India. We.

We plan to take a phased approach to exit these sites, which we estimate will extend through the second half of 2022.

During this period the majority of projects from these facilities will be absorbed into our existing network of internal and external capacity.

Additionally, we will actively evaluate the sale of these sites.

Second we will improve operating flexibility and reduce future gionee expense by transferring certain transaction processing activities over the next year to third party global business process service providers.

Finally, we will increase our organizational effectiveness by fully integrating induce commercial operations and research and development functions, respectively to support our key strategic priorities.

Unfortunately these actions will also result in a significant reduction in roles across a number of areas of our company.

Which means we are parting ways with some of our fellow team members.

These actions are in no way a reflection of these team members talents for the value of their contributions they are solely a reflection of the necessary changes, we must take to evolve as the business for long term success.

I want to do if we thank each member of our team affected by this change to the positive impact they've made to our company.

Each has played an important role in our team and I'm truly grateful.

We are committed to executing a thoughtful transition and to providing support and assistance to our impacted team members through this period.

In addition to this business transformation initiative, we also recently announced an investment in a significant long term growth potential of XIAFLEX in Cotwo for the planned acquisition of bio specifics.

We anticipate the $540 million transaction will close later this quarter.

Will be financed with cash on hand.

And we will immediately enhance adjusted EBITDA increased profitability of XIAFLEX in CLO.

We believe these recently announced actions further position endo to create long term value.

Moving to slide five this is a snapshot of our segment and consolidated revenues and our adjusted EBITDA for the quarter.

Third quarter revenues of $635 million decreased 13% and reported adjusted EBITDA of $287 million declined by 15% compared to the prior year. This.

This was probably primarily due to significantly lower generic pharmaceutical segment revenues and adjusted gross margins.

Third quarter consolidated revenues and adjusted EBITDA exceeded our previously communicated expectations based on the performance of our branded and sterile injectables segments.

Turning to slide six.

Third quarter branded segment revenues increased by 3% compared to the same period in 2019.

The specialty products portfolio third quarter revenues increased by 6% compared to the prior year driven by price and volume.

XIAFLEX revenue bounced back within the quarter and continues to show a strong recovery growing 7% compared to the prior year.

The specialty products portfolio performance exceeded our expectations as the recovery of physician administered products were stronger than planned.

We're also very encouraged by the continued strong demand recovery, we've seen to date for both XIAFLEX indications as well as the interest of patients willing to seek treatment.

For example visits to the unbranded facts on hand, and the branded XIAFLEX websites have increased significantly since we re initiated our promotional campaigns.

Importantly for both indications. We're also seeing strong consumer activity on our physician locator sites, which is a good early indicator of potential future patient demand.

Our established products portfolio declined by 2% compared to the same period in the prior year, primarily due to ongoing competitive pressures.

The sterile Injectables segment revenues declined by 5% compared to the third quarter of 2019.

This decrease was primarily the result of reduced Apple saw revenues driven by lower volumes associated with the nonrecurring product restocking event that occurred in the third quarter 2019, and ongoing competitive pressures on certain products, including adrenaline.

This was partially offset by year over year growth in data district.

Sterile injectable segment revenue was better than anticipated mainly due to the district performance for visa strict while we experienced anticipated channel inventory destocking through in the third quarter. This was offset by favorable purchasing patterns and higher underlying demand utilization.

Moving to slide seven in line with our expectations. Our generic segment revenues decreased by 38% during the third quarter compared to the third quarter of 2019.

The underlying performance in the quarter reflects the impact of competitive events, which were anticipated.

The decrease in international segment revenues for the third quarter was primarily due to ongoing generic competition in the segment.

Turning to slide eight and discussing our ongoing clinical studies and pipeline starting with Quero, our data generation plant and development remains focused on dosing injection technique and responses and target patient populations as well as rollover studies on durability.

Results analysis from these studies are key to our publication and presentation strategies.

We are pleased that there were four presentations and three posters presented by a number of medical aesthetics key opinion leaders at the recent Vegas Vegas cosmetic surgery conference and the American Society of Dermatologic surgeries annual meeting.

Two of the leading medical aesthetics conferences. These presentations contain a breadth of research topic reinforcing endos commitment to a robust quote clinical program and real world data generation.

We continue to make progress on the XIAFLEX development programs for the treatment of plantar Fibromatosis and adhesive capsulitis or.

He says Capsulitis program continues to progress and we expect interim analysis results from the proof of concept study for plantar fibromatosis in the first quarter of 2021.

If we turn to slide nine as we said before you can see that our pipeline is increasingly reflective of our sterile injectables growth strategy.

We believe our CIO injectables opportunities have a higher level of differentiation and a more durable revenue profile.

We are pursuing opportunities that we believe can help to meet the evolving needs of our customers and potentially improve patient care.

We also wanted to share pipeline updates from our strategic relationship with Evercore at this time never cars three applications filed and accepted one of which was for ephedrine sulfate ready to use vial, which has been approved by the USA, we anticipate launching this product in the near term.

Year to date, we've launched eight products and plan to launch approximately 10 products in 2022 across our business segments. During the third quarter, we launched the tablet and powder version of generic you then which is the first and only generic version currently available.

Now, let me turn the call over to Mark to further discuss the company's financial results and provide an update on our financial guidance Mark.

Thank you Blake and good morning, everyone first on Slide 10, you will see a snapshot of our third quarter GAAP and non-GAAP financial results. Please covered company and segment revenues earlier, So I will not review that again.

On a GAAP basis reported loss from continuing operations was approximately $69 million were 30 cents per share on a diluted basis in the third quarter of 2020.

Compared to a loss from continuing operations of approximately $41 million or 18 cents per share on a diluted basis in the third quarter of 2019.

The loss in the third quarter of 2020, with primarily related to severance and other restructuring charges associated with the previously discussed strategic actions.

On an adjusted basis income from continuing operations was $122 million or 52 cents per share on a diluted basis in the third quarter of 2020 compared to income from continuing operations of $153 million or 66 cents per share on a diluted basis in the third quarter of 2019.

The decrease was primarily due to a decline in revenues.

And an unfavorable change in product mix in the generic segment.

Turning to slide 11, as a result of the strategic actions to Blake spoke about earlier, we expect to realize annualized pre tax cash savings of between $85 million and $95 million for the first half of 2023.

The savings are primarily related to a net reduction in our global workforce of approximately 560 position.

Most of which will be in our generic manufacturing segment.

The cash savings from these actions are expected to be reinvested in the business.

We do not expect a material impact from product Discontinuations as a result of this restructuring.

In connection with these actions, we expect to incur total pre tax restructuring related expenses of approximately 163 million to $183 million, which includes approximately 100 million to $110 million of cash charges.

In the third quarter, we recorded a pre tax charge of approximately $67 million, which included approximately $54 million of cash charges and $13 million of noncash charges.

The noncash charges, primarily relate to accelerate depreciation and asset impairments.

The remaining charges are primarily expected to be incurred in 2021.

Turning to slide 12.

Based on better than expected year to date 2020 performance in our branded and sterile injectable segment, we are raising our full year financial guidance.

While our guidance contemplates a number of different scenarios, we have not assumed a significant impact from resurgence of code 19 for the remainder of the year also the strategic actions previously mentioned are not expected to have a material impact on our 2020 adjusted results.

Having said that we are raising our full year 2020 revenue guidance to be between $2.75 billion and $2.8 billion.

And our adjusted EBITDA guidance to be between 1.3 billion and $1.32 billion.

Additionally, we are raising our full year 2020 adjusted earnings per share from continuing operations guidance to be between $2.50 in $2.55 per share.

Our full year 2020 guidance now assumes an adjusted gross margin of approximately 67%.

And adjusted operating expenses to be approximately 23.5% of revenue.

Additionally, we now assume adjusted interest expense will be approximately $525 million.

And our 2020 adjusted effective tax rate will be approximately 13.5%.

Switching to slide 13. This is a summary of full year segment and total enterprise revenue guidance as you will notice we have slightly updated the full year growth projections for each of our branded sterile and international segments.

Advancing to slide 14, and wrapping up the financial discussion unrestricted cash flow prior to debt payment was $308 million for the first nine months of 2020.

We ended the third quarter of 2020 with approximately $1.7 billion of unrestricted cash and a net debt to adjusted EBITDA leverage ratio of approximately 4.7 times.

For full year 2020, we are updating our expectations for unrestricted cash flow prior to debt payments to be between $315 million and $335 million compared to our prior estimate of between 60 million to $100 million.

This change reflects the impact of the better than expected results of operations.

As well as the shift in the estimated timing of cash distributions to settle accrued mesh claims from 2020 to 2021.

However for clarity this updated guidance does not contemplate the impact of the Biospecific exclude acquisition, which we expect to close in late 2020.

Let me now turn the call back over to Lori to manage our question and answer period Laurie. Thank you Mark in the interest of time, if you could limit your initial questions to allow us to get in as many as possible. We would appreciate it operator, let's take the first question. Please.

Thank you and your first question comes from the line of Gregg Gilbert with true.

Thank you good morning, everyone ill.

Ill ask two upfront one sort of defence one off events first as on on opioids, we've seen from tangible movement from Jane Jane the distributors to chase.

Change their estimates for.

The amount they will I was hoping you could tell us whether or not.

You're talking about a global settlement that specifically includes the end, though or are you waiting to see what other finalize first and maybe you could talk about that opioid cash flow line that you have $54 million year to date and 80 estimated for the year and what that specifically includes and then on on CLO.

Pat I was hoping you could address kind of what's going on between the GAAP and approval and launch in what you're doing behind the scenes to get the an injector community educated and excited and when do you turn on the consumer activation. Thank you.

Hey, Thanks, Greg for the questions. Let me start off on the opioids question. So Greg there's really nothing new for us to report on the opioid litigation front.

As we've previously noted we continue to remain open to finding a constructive resolution.

To the matter and we are actively engaged with counterparties with that all being said, we also continue to prepare for trials and we'll be ready to defend ourselves if were unable to find a resolution in terms of your question on the cash flow line that's.

Thats simply represents our legal.

Legal expenses associated with the opioid litigation that Thats, what that line has let me turn over to Patrick to talk about CLO. Yes. Thanks for the question Greg a couple things I would point to first of all we're right on track relative to our beginning to staff up all our sales team. So thats been a big focus of.

Some will be continue to be a big focus in terms of between now and the end of the year.

I would say right now Greg as Weve been pretty consistent communicating and we're taking advantage of getting our data out and so we have had a tremendous amount of positive data that was disseminated both that vcs as well as Sds and this is the real world data, which I think will be real impactful and it's what the market is really.

Craving to understand for example, dr. sit around any released some mechanism makes action data as well as some interim analysis on our 305 real world data, essentially suggesting and elucidating the mechanism of action for quell which is really exciting and so when you look at that.

The ammo way, what we're seeing is that theres, an enzymatic substitution remodeling essentially meaning that.

Potentially impacting us three modalities for cellulite, not only the fiber Sep died, but also fat remodeling and perhaps some dermal thinking and that's been really well received from the marketplace and then we had some real positive pace patient satisfaction and efficacy data released at Sds as well so.

We're going to continue to get that real world data out in advance of launch we're going to continue to recruit will start ramping up our consumer activation probably in the January timeline, Greg with some.

Condition awareness and PR is going to continue to start to build as well early in 21 and of course as we get into launch will start really start amping up in converting to a branded digital activation and up.

A big Splash from a direct to consumer activation as we get into the mid way of 21 and were willing to launch.

Thank you.

Next question, yes.

Your next question comes from the line of David Amsellem with Piper Sandler.

Thanks, So just a couple of quick ones first with the acquisition of bio specifics.

Can you talk about the extent to which you are going to.

Cast a wider net in terms of the exploration of expansion opportunities for us.

Flex thinking beyond plantar fibromatosis entities with Capsulitis now that the you don't have any royalty bearing obligations going forward.

And then secondly, given how the business is evolving with going into in aesthetics medical aesthetics.

A greater presence in sterile Injectables are you open to divestitures.

I remain the potentially accelerating deleveraging talk about.

Your strategic thinking there thanks.

Great. Thanks, David appreciate the questions in terms of bio specifics acquisition and how we think about.

XIAFLEX maximization and also how we think about quo.

Obviously, we have our two indications under development right now for XIAFLEX, which is plantar fibromatosis and adhesive capsulitis and listen there are other very interesting potential indications for XIAFLEX as well that we.

We are actively evaluating and we will be making decisions on as we move forward and the same goes for a close. So this only increases obviously the profitability profile for both of those assets for us. So it is something that we're going to look to do to make sure. We're fully maximizing XIAFLEX and also fully maximizing close we move forward.

In terms of your question on divestitures and deleveraging.

David our strategy has been pretty clear here, which is from a capital allocation standpoint, our priorities and fully invest into our internal assets and make sure. We're getting everything we can out of those assets be really smart about business development and then also obviously be paying attention to paying down debt, but the fundamental principle is that in order for us to delay.

Average, we have to do it through the portfolio and we have to do it through driving EBITDA. So when we think about divestitures divestitures makes sense when it's aligned with what I, just articulated and that we'd be able to do that in a way that.

Was aligned with our strategy in terms of where we want to be from overall portfolio standpoint, and also obviously commands a purchase price, which actually results in deleveraging. So it's as usual those are things strategically that we're looking at all the time.

So it is something that we will consider it but our real focus right. Now is is on continuing to improve our portfolio and ultimately driving to where we can drive EBITDA growth in the future.

Next question please.

Your next question comes from the line of Randall Stanicky with RBC capital markets.

Great. Thanks plays I want to ask you about the restructuring you guys were early to make moves when the sector downturn happened in 2016 can you talk about endos footprint in generics in 2023 are you still a generic company are you still allocating capital to this business.

Or is the strategic intent to pivot away from this business. That's the first question and then secondly, I I want to ask conveyed so strict I know this is not a comfortable question, but it's an important one for investors last quarter, you talked about being open to settlement.

Eagle has recently discussed being open to launching at risk theres going to be a lot of focus on this over the next several months can you just comment on the durability of this franchise and.

Strategic options or opportunities for you to protect this product given how important it is to to endo. Thanks.

Great Hey, thanks for both those questions Randall so on on the restructuring piece and how it relates to our generics business.

We are still absolutely fully committed to the generics business. What you saw announced yesterday is really us full fruit further optimizing that business.

I mentioned the mini go around our capital allocation priorities. It is about fully investing into our portfolio. We've been very clear that a big area of focus for us is going to be maximization of XIAFLEX.

Fully investing behind the launch of quell and what can come after qual in terms of us from a medical aesthetics presence standpoint, and also what we're doing around sterile injectables. So our level of investment will be different for our generics business compared to those priorities I just mentioned, but this plan. We are taking is around fully optimizing our generic.

Business just to can continue to improve and enhance its competitiveness as we move forward in terms of your question on on days District. This is what I can tell you owned days are strict random.

Randall and I do appreciate the question and I know, it's top of mind for our investors.

Listen paragraph four challenges are obviously, a very common part of our industry and a naturally create a level of uncertainty, especially when you're dealing with large products like visa strict anda.

P for litigation is obviously, a very important area of focus for us.

We are very confident in our position.

And we're not going to be making predictions are our probabilities on on different outcomes.

As you can imagine we're doing everything possible.

To be ready for for trial, we absolutely remain open to trying.

Trying to find a constructive resolution and settlement if we can do that outside of trial.

And obviously, we're also preparing ourselves commercially for potential outcomes. So we have a we have a plan in place and we continue to execute against that plan, but.

But thats, where we stand on the district front.

Thanks, Mike.

Thank you and ladies and gentlemen at this time, if you would like to ask a question Press Star then the number one to remove yourself you may press the pound key.

Our next question comes from the line of Gary Nachman with BMO capital markets.

Hi, guys. Good morning first.

First how much of the strength and XIAFLEX has been from pent up demand. So thats procedures from Covidien at all we do expect there to be a reverse so if there is a backlog that's being worked through.

And are you seeing more growth and corona needs.

Super trends sounds like both are doing well how much more upside is there in those markets and then for both us track.

And so much demand during the pandemic, how much of that might stick.

And are you able to make enough supply to meet all the debt increased demand there. Thank you.

Great Hey, Thank you for those questions I'll take the district first and I'm going to turn over to Patrick to address the XIAFLEX piece, we are absolutely extremely well positioned to meet any market demand on bays are straight that's something that we've taken significant steps onto.

Fully be prepared to address any demands that are required and we've been able to meet every single demand in the marketplace through the COVID-19.

Surge that we saw back in the earlier part of the year and I'm really proud of how we were able to do that in terms of the underlying utilization of visa strict on whats going to stick I think what we're seeing now is a is it part of the the reason we had the better than expected performance of age restricted that we did see utilization of these are strict.

Increase in the third quarter.

Versus what we were expecting and I think you're seeing you are seeing some additional use on the COVID-19 front, but also as the shelter in place, which has been removed and we see when we look at mobility data.

Significant increase in mobility that leads to additional.

Additional events that happened that are outside of COVID-19. So we think as we move into out of Q3 and into Q4, we are a bit more of a normalized now new run rate for phase of strict let me turn over to Patrick to take the questions on XIAFLEX. Yeah. Thanks for the question on XIAFLEX I would start by saying we're extremely encouraged by the recovery.

Her that weve seen during the quarter.

Net sales were up over $50 million versus quarter. Two as you suggest there was certainly a little bit of a pent up demand and and it is was contingent upon of normalization of physician activity in inpatient activity, we did roll through some of that pent up demand, but as we look at ongoing demand we're very very.

We encouraged we saw a tremendous increase in demand for both indications from quarter two to quarter. Three for example in the Peroni is indication demand was up by almost 50% demand was up by 107% versus quarter two for the difference contracture indication and we're looking as we look at.

Items were almost back to where we were prior year and then when we look to the future to your question on this.

The sustainability of that when we look at early indicators like benefit investigations and benefits verifications through our patient hub platforms, we see actually in quarter through three that we were slightly up versus quarter three of previous year and so all those things coming together is a lot of data coming at you, but all those things.

Coming together to suggest that we're well on our way to continue to recover and are certainly approaching those pre coated levels.

And we're certainly as blazes mentioned multiple times, a very committed to continuing to sustain and grows iflix.

Next question please.

Your next question comes from the line of Amy if the deal with Leerink.

Hi, Good morning, Thank you for taking the question.

I wanted to go back to the additional indications on XIAFLEX and now that you own the full rights to the product.

The second key or increasing the pace of development of additional indications.

We've seen but let's say that.

You defend indication over the last couple of years I'm, just curious if that's going to be pronounced change in the basin that you expect these others.

And then just from a strategic standpoint.

To me.

Take the.

Announcement from Black Knight can mean that you're going to invest more on the branded side and could we see you more products resident headaches or other branded products overtime. Thank.

Thank you.

Amy Thank you very much for your questions in terms of XIAFLEX list.

Listen we we absolutely are very.

Interested in continuing to pursue additional indications in XIAFLEX were doing those evaluations now two.

To the extent that they make sense for us to do we'll pursue them, but those will be decisions will take going forward, but we are actively doing that work and evaluating potential indications on on that front in terms of when we think about investment and what does the restructuring announced yesterday mean in terms of our investment going forward. It doesn't change anything in terms of what our folks.

Mrs. So our focus is absolutely on what I said earlier, which is making sure we're fully maximizing the assets we have in our portfolio and that obviously is around XIAFLEX maximization around qual, when our sterile injectables portfolio is going to be our primary focus from a business development standpoint, we're going to continue we have been active will continue to be.

Active on evaluating and seeing if there are opportunities out there that makes sense for us to bring on.

In terms of medical aesthetics, I think from a business development standpoint that will be something we would do after we.

Successfully launched quell and really establish ourselves in the marketplace.

With that foundational asset so thats really where our focus is going to be Amy as we move forward next question. Please.

Your next question comes from the line of Annabel Samimy with Stifel.

Hi, Thanks for taking my question and again, along the lines with restructuring take our chart on seems to create that quite a bit of capital and.

Just wondering if you can give us some flavor on the priorities for aesthetics I understand launching cloud isn't a priority, but it's kind of hard to launch with only one product to be considered a serious player.

And these practices, sometimes it's helpful to fluctuate multiple products.

And then separately you when you think about aesthetics, a sterile injectables and generic business segments don't exactly fit together naturally so what are some of your longer term priority for the structure of the business and awareness going thanks.

Yes, Thanks, Annabel well, all im going to let Patrick comment on on quo.

And in terms of medical Statics on that question in terms of the strategy again, we we continue to be hyper focused on.

Desired flex maximization quote.

CWO launched successfully launching that establishing that as a foundational product and continue to invest behind our sterile injectables portfolio Thats, where the focus is.

We will continue to evaluate all parts of the portfolio going forward.

And again I mentioned earlier, our generics business. The actions, we're taking now are really around optimizing that.

And as we move forward, we will evaluate as we always do what makes sense for us going forward, but theres no change with the announcement made yesterday in terms of what our focus is new packages want to comment on the aesthetics and are really our view of how.

CWO can be really successful.

On a standalone basis, Yes, let me address address your quote launch question. We certainly believe that we will be successful launch in CWO and certainly overtime, a multiple a basket of products.

Who does a lot of things that improves relevance it certainly expands margins and those are all good smart and prudent things we'd be looking to do that but in terms of the requirement of having an additional product to be successful with quell we don't see it that way.

The way I would consider it is this is a brand new category, it's remarkable innovation and so this innovation will certainly stand on its own as the first and only injectable to be able to treat a cellulite patient. So we're extremely bullish on that opportunity I think if you look at the other competitors.

There is quite a bit of overlapping of portfolio and the requirement for them to be successful is they do need the dermal filler they need a bunch lined them in so we're certainly open to adding additional products that make sense to compliment quo, but to suggest that we needed to be successful with quell we don't we don't support that premise and so.

We will be successful as well as.

As this right.

Really brand new category and once we're successful we will continue to look to complement that with real innovation in the space and we've made a good splash year as someone who is providing real new innovation and Thats. What we would look to do as we look at the follow on opportunities behind CLO.

Next question. Please thank you.

Thank you and your last and final question comes from the line of Dana Flanders with Guggenheim.

Yeah.

Great. Thank you for squeezing me in just two questions from me.

The first one just on the Novavax feel free to fill finish agreement.

Wondering if CMO opportunities could be a bigger part of your strategy going forward and then curious.

Curious if you can give any.

Quantification of the potential impact if that's successful.

Then my second question on CLO I know the label of stress for bought talks but you are running data generation studies.

In Badakhshan fives, and just wondering if thats an important distinction.

I know these types of products tend to get used everywhere over time and just wondering if you think physicians will initially stick to the label or if you could see a bit broader use.

Around the body. Thank you.

Yeah, Thanks, Dan in for those questions and I'll I'm going to let Patrick take the the quote question in a moment in terms novavax.

Listen we were we were really excited to be able to partner with Novavax and have the potentially play a role in helping them bring together bring to market are really important obviously critical need for for our country around COVID-19, so really pleased to be partnering with them.

Our strategy is not to be CMO player. This was a bit of a unique situation and again something we're very proud of the terms of the agreement are confidential. So we won't be able to really speak to anything from a financial standpoint around that let me turn it over to quo Dana to answer your question around.

To Patrick I'm, sorry on the quick question Patrick Yes, as you say, obviously, we're quite pleased with the approval of quell for the treatment of cellulite and buttocks and women and so we've got very strong data for phase three that really was a big difference maker in terms of achieving that.

Approval.

I can't comment on.

In terms of we will certainly be launching with about UC indication.

Certainly our physicians when they have access to the first and only injectable they will considering many things the.

The community has suggested that we need to be able to provide real world data and thats essentially what we've done and so we've continued to provide real world data era around dosing around injection technique.

Hi data is something that we will continue to be looking to pursue.

We're starting that pursuit with data generation and so the through five data is real world data and Eisai suggested some world class physicians that are have already begun to disseminate data, suggesting that there's very solid data in and the improvement of cellulite in patients who have that so.

The light Inphi and we're learning more about mechanism of action. So really it was really about getting the approval and continuing to support the clinical development of quell through really strong data generation. In fact, we feel like thats going to differentiate us in the marketplace.

To be able to be able to provide great science to the medical aesthetic community as a part of the strategy and so happy with the indication around buybacks and pleased with the clinical development plan regarding.

Other other treatment modalities for for quell.

And I'm showing no further questions at this time and I would like to turn the conference back in laundry Park for closing remarks.

Great Hey, Thank you operator, we appreciate everyone's continued interest and support of Endo and we look forward to providing you with updates as we as we move forward. Thank you for joining us this morning.

Ladies and gentlemen that concludes todays conference. Thank you for your participation you may now disconnect.

[music].

Ladies and gentlemen, thank.

Thank you for standing by and welcome to the Q3, Twentytwenty Endo International Plc earnings Conference call.

As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host Mr. Laurie Park head of Industrial Relations and corporate Affairs. Please go ahead.

Good morning, and thank you for joining us to discuss our third quarter 2020 financial results. Joining me on today's call are Blaise Coleman, President and CEO of Endo, Mark Bradley Executive Vice President and CFO and Patrick Barry Glut, President Global commercial operations, we've prepared a slide presentation to accompany today's web.

Yeah, and that presentation as well as other materials are posted online in the Investor section at Endo Dot Com I.

I would 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 applicable Canadian Securities laws and are subject to the changes risks and uncertainties described in the press release and in our U.S. and 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 U.S. accounting principles covered bond to the United States and may be different from non-GAAP financial measures used by other companies.

Investors are encouraged to review Endos current report on form 8-K furnished with the FCC for Endos reasons for including those non-GAAP financial measures in our earnings release and presentation.

The reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measure is contained in our earnings press release issued last night, unless otherwise noted there and I'd now like to turn the call over to Blaise blade.

Good morning, everyone and thank you for joining us for this call. We're pleased by better than expected third quarter results driven by our branded and sterile injectable segment. The results speak to our team's ability to continue to adapt and deliver in this challenging environment.

Based on our performance we are raising our 2020 for your financial guidance.

Now moving to the agenda on slide two I will start with a discussion of the strategic actions. We have recently taken in support of our key strategic priorities.

I will then review third quarter business performance and provide an update on our pipeline.

Mark will then address our third quarter financial results, including the expected impact of our recently announced restructuring program.

Provide financial expectations for the remainder of the year.

Turning to slide three.

August we introduced our new strategic priorities.

Bad enhance our portfolio represents our focus on investing to build a more differentiated and durable portfolio.

Reinvent how we work reflects our focus on embracing the future and evolving our ways of working to better serve our customers promote innovation and improve productivity.

And be force for good which expresses our commitment to delivering our priorities in a way that benefits all our stakeholders.

These priorities died every decision we make as we work to create long term sustainable value for all of our stakeholders.

Moving to slide four.

In order to accelerate our progress against our strategic priorities.

Set up our company for success today, and well into the future. We've taken a number of recent strategic actions.

Yesterday, we announced a set of business transformation initiatives designed to increase our organizational effectiveness and generate significant cost savings that will be reinvested among other things to support our strategic priority expanded enhance our portfolio, including the planned launch of quell.

During the continued growth of XIAFLEX and increasing our funding behind our sterile injectables pipeline.

Here are the actions we are taking as part of our business transfer transformation initiative.

First we're optimizing the company's generic business by exiting manufacturing sites in Irvine, California, and Chestnut Ridge in New York.

As well as our LPI manufacturing.

Bio equivalent study sites in India.

We plan to take a phased approach to exit these sites, which we estimate will extend through the second half of 2022.

During this period the majority of projects from these facilities will be absorbed into our existing network of internal and external capacity addition.

Additionally, we will actively evaluate the sale of these sites.

Second we will improve operating flexibility and reduce future gene expense by transferring certain transaction processing activities over the next year to third party global business process service providers.

Finally, we will increase our organizational effectiveness by fully integrating endos commercial operations and research and development functions, respectively to support our key strategic priorities.

Unfortunately these actions will also result in a significant reduction in roles across a number of areas of our company.

Which means we are parting ways with some of our fellow team members.

These actions are no way a reflection of these team members talents for the value of their contributions they are solely a reflection of the necessary changes, we must take to evolve as the business for long term success.

I want to if we thank each member of our team affected by this change to the positive impact they've made to our company.

Each has played an important role in our team I am truly grateful.

We are committed to executing a thoughtful transition and providing support and assistance to our impact the team members through this period.

In addition to this business transformation initiative, we also recently announced an investment in the significant long term growth potential of XIAFLEX in Cotwo the planned acquisition by the specifics.

We anticipate the 540 million dollar transaction will close later this quarter.

Will be financed with cash on hand.

And we will meaningfully enhance adjusted EBITDA increased profitability of XIAFLEX in Htwo.

We believe these recently announced actions further position endo to create long term value.

Moving to slide five this is a snapshot of our segment and consolidated revenues and our adjusted EBITDA for the quarter.

Third quarter revenues of $635 million decreased 13% and.

And reported adjusted EBITDA of $287 million declined by 15% compared to the prior year.

This was probably <unk>, primarily due to significantly lower generic pharmaceutical segment revenues and adjusted gross margins.

Third quarter consolidated revenues and adjusted EBITDA exceeded our previously communicated expectations based on the performance of our branded and sterile injectable segments.

Turning to slide six.

Third quarter branded segment revenues increased by 3% compared to the same period in 2019.

Specialty products portfolio third quarter revenues increased by 6% compared to the prior year driven by price and volume.

XIAFLEX revenue bounced back within the quarter and continues to show a strong recovery growing 7% compared to the prior year.

The specialty products portfolio performance exceeded our expectations as the recovery of physician administered products were stronger than planned.

We're also very encouraged by the continued strong demand recovery, we've seen to date for both XIAFLEX indications as well as the interest of patients willing to seek treatment.

For example visits to the unbranded facts on hand, and the branded XIAFLEX websites have increased significantly since we initiated our promotional campaigns.

Importantly for both indications. We're also seeing strong consumer activity on our physician locator sites, which is a good early indicator of potential future patient demand.

Our established products portfolio declined by 2% compared to the same period in the prior year, primarily due to ongoing competitive pressures.

The sterile Injectables segment revenues declined by 5% compared to the third quarter of 2019.

This decrease was primarily the result of reduced Apple saw revenues driven by lower volumes associated with the nonrecurring product restocking event that occurred in the third quarter 2019.

And ongoing competitive pressures on certain products, including adrenaline.

This was partially offset by year over year growth in data district.

Sterile injectable segment revenue was better than anticipated mainly due to the district performance fees are strict why we experienced anticipated channel inventory destocking through in the third quarter. This was offset by favorable purchasing patterns and higher underlying demand utilization.

Moving to slide seven in line with our expectations, our generics segment revenues decreased by 38% during the third quarter compared to the third quarter of 2019.

The underlying performance in the quarter reflects the impact of competitive events, which were anticipated.

The decrease in international segment revenues for the third quarter was primarily due to ongoing generic competition in the segment.

Turning to slide eight and discussing our ongoing clinical studies and pipeline starting with quell data generation plant and development remains focused on dosing injection technique and responses and target patient populations as well as rollover studies on durability.

Results analysis from these studies are key to our publication and presentation strategies.

We are pleased that there were four presentations in three posters presented by a number of medical aesthetics key opinion leaders at the recent Vegas Vegas cosmetic surgery conference and the American Society of Dermatologic surgery annual meeting.

We continue to make progress on XIAFLEX development programs for the treatment of plantar Fibromatosis and that he says capsulitis.

He says caps was program continues to progress and we expect interim analysis results from the proof of concept study for plantar Fibromatosis.

The first quarter of 2021.

If we turn to slide nine as we said before you can see that our pipeline is increasingly reflective of our sterile injectables growth strategy.

We believe our CIO injectables opportunities have a higher level of differentiation and a more durable revenue profile.

We are pursuing opportunities that we believe can help to meet the evolving needs of our customers and potentially improve patient care.

We also want to sure pipeline updates from our strategic relationship with Evercore at this time debit cards three applications filed and accepted one of which was for ephedrine sulfate ready to use vial, which has been approved by the U.S. FDIC.

We anticipate launching this product in the near term.

Year to date, we've launched eight products and plan to launch approximately 10 products in 2022 across our business segments.

During the third quarter, we launched the tablet and powder version of generic you then which is the first and only generic version currently available.

Now, let me turn the call over to Mark to further discuss the company's financial results and provide an update on our financial guidance Mark.

On a GAAP basis reported loss from continuing operations was approximately $69 million or 30 cents per share on a diluted basis in the third quarter of 2020.

Impaired to a loss from continuing operations of approximately $41 million or 18 cents per share on a diluted basis in the third quarter of 2019.

The loss in the third quarter of 2020, with primarily related to severance and other restructuring charges.

So with the previously discussed strategic actions.

On an adjusted basis income from continuing operations was $122 million were 52 cents per share on a diluted basis.

Third quarter 2020, compared to income from continuing operations of $153 million or 66 cents per share on a diluted basis in the third quarter of 2019.

This decrease was primarily due to a decline in revenues.

And an unfavorable change in product mix in the generic segment.

Turning to slide 11, as a result of the strategic action to Blake spoke about earlier, we expect to realize annualized pre tax cash savings of between $85 million and $95 million for the first half of 2023. So.

Savings are primarily related to a net reduction in our global workforce of approximately 560 position most of which will be in our generics manufacturing segment.

The cash savings from these actions are expected to be reinvested in the business.

We do not expect a material impact from product Discontinuations as a result of this restructuring.

In the third quarter, we recorded a pre tax charge of approximately $67 million, which included approximately $54 million of cash.

Thats charges and $13 million noncash charges.

The noncash charges, primarily relate to accelerate depreciation and asset impairments.

The remaining charges are primarily expected to be incurred in 2021.

Turning to slide 12.

Based on better than expected year to date 2020 performance in our branded in sterile Injectables segment.

We are raising our full year financial guidance.

Well our guidance contemplates a number of different scenarios, we've not assumed a significant impact from resurgence of COVID-19 for the remainder of the year.

Also the strategic actions previously mentioned are not expected to have a material impact on our 2020 adjusted results.

Having said that we are raising our full year 2020 revenue guidance to be between $2.75 billion and $2.8 billion.

And our adjusted EBITDA guidance to be between 1.3 billion and $1.32 billion.

Additionally, we are raising our full year 2020 adjusted earnings per share from continuing operations guidance to be between $2.50 in $2.55 per share.

Our full year 2020 guidance now assumes an adjusted gross margin of approximately 67% and.

And adjusted operating expenses to be approximately 23.5% of revenue.

Additionally, we now assume adjusted interest expense will be approximately $525 million.

And our 2020 adjusted effective tax rate will be approximately 13.5%.

Switching to slide 13 this.

This is a summary of full year segment and total enterprise revenue guidance as you will notice we have slightly updated the full year growth projections for each of our branded sterile and international segments.

Advancing to slide 14, and wrapping up the financial discussion unrestricted cash flow prior to debt payment was $308 million for the first nine months of 2012.

We ended the third quarter of 2020 with approximately $1.7 billion of unrestricted cash and a net debt to adjusted EBITDA leverage ratio of approximately 4.7 times.

This change reflects the impact of the better than expected results of operations.

As well as the shift in the estimated timing of cash distributions to settle accrued mesh claims from 2020 to 2021.

However for clarity this updated guidance does not contemplate the impact of the bio specific acts with acquisition, which we expect to close in late 2020.

Thank you and your first question comes from the line of Gregg Gilbert what's true.

Thank you good morning, everyone ill.

Ill ask two upfront one sort of defence one offence first is on.

Opioids, we've seen from tangible movement from Jane Jane the distributors to chase.

Change their estimates for.

The amount they will I was hoping you could tell us whether or not.

You're talking about a global settlement that specifically includes end, though or are you waiting to see what other finalize first and maybe you could talk about that opioid cash flow line that you have 54 million year to date and 80 estimated for the year and what that specifically includes and then on on CLO.

Pat I was hoping you could address kind of what's going on between the GAAP and approval and launch in what you're doing behind the scenes to get the injector community educated and excited and when do you turn on the Consumer Act.

Activation. Thank you.

Hey, Thanks, Greg for the questions. Let me start off on the opioids question. So Greg there's really nothing new for us to report on the litigation front.

As we've previously noted we continue to remain open to finding a constructive resolution.

Thats simply represents our legal.

Legal expenses associated with the opioid litigation.

Litigation that Thats, what that line has let me turn over to Patrick to talk about club, yes. Thanks for the question, Greg a couple things I would point to.

First of all we're right on track relative to our beginning to staff up our sales team. So thats been a big focus of us and we will be continue to be a big focus in terms of between now and the end of the year I would say right now Greg as Weve been pretty consistent communicating and we're taking advantage of getting our data out and so we have had.

Matt.

A tremendous amount of positive data that was disseminated both that vcs as well as Sds and this is the real world data, which I think will be real impactful and it's what the market is really craving to understand for example, dr. sit around any released some mechanism makes action data as well as some.

Interim analysis on our three all five real world data essentially.

Suggesting and elucidating the mechanism of action for quell which is really exciting and so when you look at the ammo way what we're seeing is that theres, an enzymatic substitution remodeling essentially meaning that for.

Condition awareness and PR is going to continue to start to build as well early in 21 and of course as we get into launch will start really start amping up in converting to branded digital activation and.

A a big splash from a direct to consumer activation as we get into the mid way of 21 and were willing to launch.

Thank you.

Next question.

Next question comes from the line of David Amsellem with Piper Sandler.

Okay.

Thanks, So just a couple of quick ones first with the acquisition of bio specifics.

Can you talk about the extent to which you are going to tap.

Cast a wider net in terms of the exploration of expansion opportunities for XIAFLEX thinking beyond plantar fibromatosis entities of Capsulitis now that the you don't have any royalty bearing obligations going forward and.

And then secondly, given how the business is evolving with going into in aesthetics medical aesthetics.

A greater presence in sterile Injectables are you open it to divestitures.

Hi remains potentially accelerating delay.

Deleveraging talk about.

Your strategic thinking there thanks.

Great Hey, Thanks, David appreciate the questions in terms of bio specifics acquisition and how we think about.

XIAFLEX maximization and also how we think about quo.

Goes for a close so this only increases obviously the profitability profile for both of those assets for us. So it is something that we're going to look to do to make sure. We're fully maximizing XIAFLEX and also fully maximizing quell as we move forward.

In terms of your question on divestitures and deleveraging.

So it is something that we will consider it but our real focus right. Now is is on continuing to improve our portfolio and ultimately driving to where we can drive EBITDA growth in the future.

Next question please.

Your next question comes from the line of Randall Stanicky with RBC capital markets.

Pivot away from this business. That's the first question and then secondly, I I want to ask on base. So strict I know this is not a comfortable question, but it's an important one for investors last quarter, you talked about being open to settlement.

Eagle has recently discussed being open to launching at risk there's going to be a lot of focus on this over the next several months can you just comment on the durability of this franchise and.

Strategic options or opportunities for you to protect this product given how important it is to to endo. Thanks.

Great Hey, thanks for both those questions Randall so on on the restructuring piece and how it relates to our generics business.

We're still absolutely fully committed to the generics business. What you saw announced yesterday is really us full through further optimizing that business.

You mentioned a minute ago around our capital allocation priorities. It is about fully investing into our portfolio. We've been very clear that a big area of focus for us is going to be maximization of XIAFLEX.

Fully investing behind the launch of quell and what can come after qual in terms of us from a medical aesthetics present standpoint, and also what we're doing around sterile injectables. So our level of investment will be different for our generics business compared to those priorities I just mentioned, but this plan. We're taking is around fully optimizing our generics.

Business just to continue to improve and enhance its competitiveness as we move forward in terms of your question on on days District. This is what I can tell you on days are strict random.

Randall and I do appreciate the question and I know, it's top of mind for our investors.

Listen paragraph four challenges are obviously, a very common part of our industry and they naturally create a level of uncertainty, especially when you're dealing with large products like the district and.

P for litigation is obviously very important area of focus for us.

We are very confident in our position.

And we're not going to be making predictions or probabilities on on different outcomes.

As you can imagine we're doing everything possible.

To be ready for for trial, we absolutely remain open to trying.

Trying to find a constructive resolution and settlement if we can do that outside of trial.

And obviously, we're also preparing ourselves commercially for potential outcomes. So we have a we have a plan in place and we continue to execute against that plan, but thats, where we stand on the district front.

Thanks, Mike.

Thank you and ladies and gentlemen at this time, if you would like to ask a question Press Star then the number one to remove yourself you may press the pound key.

Our next question comes from the line of Gary Nachman with BMO capital markets.

Hi, guys good morning.

How much of the strength and XIAFLEX has been from pent up demand. So thats procedures from Covidien at all we do expect there to be reversed so if there's a backlog that's being worked through.

[music].

And are you seeing more growth and priorities.

Well I do print trends sounds like both are doing well how much more upside is there.

Those markets and then for both us track both.

So much demand during the pandemic, how much of that might stick.

And are you able to make enough supply to meet all the big increase demand there. Thank you.

Great Hey, Thank you for those questions I'll take the district first I'm going to turn over to Patrick to address the XIAFLEX piece, we are absolutely extremely well positioned to meet any market demand on base district, that's something that we've taken significant steps onto.

Fully be prepared to address any demands that are required and we've been able to meet every single demand in the marketplace through the COVID-19.

Surge that we saw back in the earlier part of the year and I'm really proud of how we were able to do that in terms of the underlying utilization of visa strict and whats going to stick I think what we're seeing now is a is it part of the the reason we had the better than expected performance of these districts that we did see utilization of these districts.

Increase in the third quarter.

Versus what we were expecting and.

I think you're seeing you are seeing some additional use on the COVID-19 front, but also as you the shelter in place has been removed and we see when we look at mobility data.

Significant increase in mobility.

That leads to.

Additional events.

That happened that are outside of COVID-19, So we think as we move into out of Q3 and into Q4, we are a bit more of a normalized now new run rate for for base of strict let me turn over to Patrick to take the questions on XIAFLEX, yes. Thanks for the question on XIAFLEX I would start by saying we're extremely encouraged by the recover that weve seen during the quarter.

[music].

Net sales were up over $50 million versus quarter. Two as you suggest there was certainly a little bit of a pent up demand and and it is was contingent upon.

Normalization of physician activity and patient activity, we did roll through some of that pent up demand, but as we look at ongoing demand. We're very very encouraged we saw a tremendous increase in demand for both indications from quarter to quarter. Three for example in the Peroni is indication demand was up by.

Almost 50% demand was up by 107% versus quarter two for the Duke Truants contracture indication and we're looking as we look at volumes were almost back to where we were prior year and then when we look to the future to your question on this.

The sustainability of that when we look at early indicators like benefit investigations and benefits verifications through our patient hub platforms, we see actually quarter through three that we were slightly up versus quarter three of previous year and so all those things coming together is a lot of data coming at you, but all of those things.

Turning to gather to suggest that we're well on our way to continue to recover and are certainly approaching those pre coated levels.

And we're certainly as blazes mentioned multiple times, a very committed to continuing to sustain and grow side effects.

Next question. Please your next question comes from the line of Amy for deal with Leerink.

Hi, Good morning, Thank you for taking the question.

I wanted to go back to the additional indications on XIAFLEX and now that you own the rights to the product.

We expect to see increasing the pace of development of additional indications.

We've seen by the SEC.

You have a different indication over the last couple of years.

Im just curious if that's going to be no change in the pace at which you extolled the does.

And then just from a strategic standpoint.

It should be.

Take the.

Announcements from Black Knight can mean that you're going to invest more on the branded side and could we see you add more products, whether its techniques or other branded products overtime. Thank.

Thank you.

Amy Thank you very much for your questions in terms of XIAFLEX list.

Listen we we absolutely are very.

Interested in continuing to pursue additional indications in XIAFLEX were doing those evaluations now.

To the extent that they make sense for us to do we'll pursue them, but those would be decisions will take going forward, but we are actively doing that work and evaluating potential indications on on that front in terms of when we think about investment and what does the restructuring announced yesterday mean in terms of our investment going forward. It doesn't change anything in terms of what our folks.

This is so our focus is absolutely on what I said earlier, which is making sure. We're fully maximizing the assets we have in our portfolio and that obviously is around XIAFLEX maximization around qual, when our sterile injectables portfolio is going to be our primary focus from a business development standpoint, we're going to continue we have been active will continue to be.

Active on evaluating and seeing if there are opportunities out there that make sense for us to bring on.

In terms of medical aesthetics, I think from a business development standpoint, that'll be something we.

Do after we.

Successfully launched quell and really establish ourselves in the marketplace.

With that foundational asset so thats really where our focus is going to be Amy as we move forward.

Next question please.

Your next question comes from the line of Annabel Samimy with Stifel.

Hi, Thanks for taking my question and again, along the lines with restructuring take architecture.

Okay, great that quite a bit of capital and.

Just wanted to one another if you can give us some flavor on the priorities for aesthetics, I understand launch and close a big priority, but it's kind of hard to launch with only one product can be considered a serious player.

And these practices, sometimes it's helpful to launch with multiple products.

And then separately you.

When you think about aesthetics for sterile injectables.

<unk> generic business segments don't exactly fit together naturally so what are some of your longer term priorities for the structure of the business and where end. Thanks.

Yes, Thanks, Annabel well, all im going to let Patrick comment on on quo.

And in terms of medical Statics on that question in terms of the strategy again, we we continue to be hyper focused on.

XIAFLEX maximization.

Hello launched successfully launching that in establishing that as a foundational product and continue to invest behind our sterile injectables portfolio Thats, where the focus is.

We'll continue to evaluate all parts of the portfolio going forward.

And again I mentioned earlier, our generics business. The actions, we're taking now are really around optimizing that.

And as we move forward, we will evaluate as we always do what makes sense for us going forward, but theres no change with the announcement made yesterday in terms of what our focus is maybe Patrick just want to comment on the aesthetics and are really our view of how.

Quote can be really successful.

On a standalone basis, Yes, let me address address your quote launch question. We certainly believe that we will be successful launch in CWO and certainly overtime, a multiple a basket of products.

The way I would consider it is this is a brand new category, it's remarkable innovation and so this innovation will certainly stand on its own as the first and only injectable to be able to treat cellulite patient. So we're extremely bullish on that opportunity I think if you look at the other competitors.

There is quite a bit of overlapping of portfolio and the requirement for them to be successful is they do need the dermal filler they need a bunch lined them in so we're certainly open to adding additional products that make sense to complement quo, but to suggest that we need it to be successful with quell we don't we don't support that premise and so.

We will be successful as well as.

As this rig.

Really brand new category and once we are successful we will continue to look to complement that with real innovation in the space and we've made a good flashier as someone who is providing real new innovation and Thats. What we would look to do as we look at the follow on opportunities behind CLO.

Next question. Please thank you.

Thank you and your last and final question comes from the line of Dana Flanders with Guggenheim.

Yeah.

Great. Thank you for squeezing me in just two questions for me.

The first one just on the Novavax feel free fill finish agreement.

Wondering if CMO opportunities could be a bigger part of your strategy going forward and then curious.

Curious if you can give any.

Qualification of the potential impact if that's successful.

Then my second question on quo I know the label of stress or bought talks but you are running data generation studies in.

In Badakhshan size, and just wondering if thats an important distinction.

No. These types of products tend to get used everywhere overtime and just wondering if you think physicians will initially stick to the label or if you could see a bit broader use.

Around the body. Thank you.

Thanks, Dan in for those questions and I'll I'm going to let Patrick take the the quote question in a moment in terms of Novavax.

Listen we were we were really excited to be able to partner with Novavax and have the.

Potentially play a role in helping them bring together bring to market are really important obviously critical need for for our country around COVID-19, So we're really pleased to be partnering with them.

Our strategy is not to be CMO player that this was a bit of a unique situation and again something we're very proud of the terms of the agreement are confidential. So we won't be able to really speak to anything from a financial standpoint around that let me turn it over to CLO Dana to answer your question around.

To Patrick I'm, sorry on the quick question Patrick Yes, as you say, obviously, we're quite pleased with the approval of quell for the treatment of cellulite and products and women and so we've got very strong data for phase three that really was a big difference maker in terms of achieving.

That approval.

I can't comment on.

In terms of we will certainly be launching with the Baltic indication.

Certainly physicians when they have access to the first and only injectable they will considering many things.

The community the suggested that we need to be able to provide real world data and that's essentially what we've done and so we've continued to provide real world data era around dosing around injection technique.

Hi data is something that we will continue to be looking to pursue.

We're starting that pursuit with data generation and so the through five data is real world data and as I suggested some world class physicians that are have already begun to disseminate data, suggesting that there's very solid data in and the improvement of cellulite and patients who have that.

Slide Inphi and we're learning more about mechanism of action. So really it was really about getting the approval and continuing to support the clinical development of quo through really strong data generation. In fact, we feel like thats going to differentiate us in the marketplace.

Other other treatment modalities for for quell.

And I'm showing no further questions at this time and I would like to turn the conference back to Lori Park for closing remarks.

Ladies and gentlemen that concludes todays conference. Thank you for your participation you may now disconnect.

Q3 2020 Endo International PLC Earnings Call

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