Q1 2025 Endo Inc Earnings Call
So, thank you. Thank you. Thank you.
Speaker Change: Thank you for standing by. Welcome to the earnings conference call for Endo Inc. This call is being recorded. If you have any objections, you may disconnect at this time.
Speaker Change: I would now like to turn the call over to Laurie Park, Senior Vice President of Investor Relations and Corporate Affairs. You may begin.
Speaker Change: Thank you. Good morning, and thank you for joining us to discuss Endo Inc's first quarter 2025 financial results.
Speaker Change: Joining me on today's call are Scott Hirsch, Interim CEO and Member of the Board of Directors, and Mark Bradley, Executive Vice President and CFO .
Speaker Change: We have prepared a slide presentation to accompanies today's webcast and that presentation as well as other materials can be found in the investor section at Endo.com.
Speaker Change: I would like to remind you that any forward-looking statements made by management on today's call are covered under the US Private Security's Litigation Reform Act of 1995.
and are subject to significant changes.
Wrists and uncertainties described in our earnings release and other press releases and in our SEC filings. Actual results may differ materially from those set forth in any forward-looking
Speaker Change: As previously disclosed, substantially all of Endo International's assets were acquired by Endo Inc. on April 23rd, 2024, pursuant to Endo International's plan of reorganization.
Speaker Change: Endo Inc's first quarter 2025 financial results reflect the effects of the plan of reorganization and the application of fresh start accounts.
Speaker Change: During this call, all references to First Quarter 2025 results refer to Endo Inc. All references to First Quarter 2024 results refer to Endo International PLC.
Speaker Change: In addition, during today's 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 measures used by other companies.
Speaker Change: Investors are encouraged to review our current report on Form 8K, furnished with the SEC for our reasons for including those non-GAAP financial measures in our earnings release and presentation.
Speaker Change: The reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures are contained in our earnings release issued earlier this morning, unless otherwise noted they're in.
Speaker Change: This call does not constitute an offer to buy or sell or solicitation of an offer to buy or sell any securities.
Speaker Change: or a solicitation of any vote or approval. In connection with the potential combination between Melanchroid and Endo, Melanchroid has filed with the SEC a registration statement that includes a joint proxy statement of Melanchroid and Endo and a prospectus for Melanchroid
Speaker Change: The Joint Proxy Statement Perspectives, and other relevant documents filed by Malancrot and Endo with the SEC will be available free of charge at the respective company's investor relations web pages, or at the SEC's website.
Speaker Change: You should review such materials filed or to be filed with the SEC carefully because they contain or will contain important information about Endo, Malancrot, the business combination and remrelated matters, including information about certain of their respective directors, executive officers and other employees.
Speaker Change: who may be deemed to be participants in the solicitation of proxies and connection with the business combination and about their interest in the solicitation.
Speaker Change: As outlined on Slide 9, during today's call, Scott will provide a first quarter performance and business update. Mark Bradley will then walk you through the financial results in 2025 outlook, and then we will open it up for Q&A. I would now like to turn the call over to Scott.
Scott Hirsch: Thank you, Laurie. And thank you to everyone for joining us this morning.
Scott Hirsch: Let's start on slide 11, which provides our first quarter financial performance in recent business highlights.
Scott Hirsch: I am pleased that Endo had a good start to the year with all segments of the business performing in line with our expectation.
Scott Hirsch: Driven by strong zi-flex performance and continued lidocaine patch strength, first quarter 2025 revenues were 393 million and adjusted EBITDAF with 99 million. Based on this performance, we are reaffirming our full year financial guidance for 2025.
Scott Hirsch: Our first quarter performance was anchored by yet another attractive zy-flex growth performance.
Scott Hirsch: Total Difflex Revenue's grew 7% versus the first quarter of 2024 and demonstrated growth across both on-market indications.
Scott Hirsch: In first quarter 2025, we expanded customer adoption for our Duralin RTU bag, which was launched during the fourth quarter of 2024.
Scott Hirsch: Consistent with our comments last quarter, we invested in our sterile operational and development capabilities and we progressed our injectables pipeline with three new FDA submissions in the quarter.
Scott Hirsch: As a result, we are on track to achieve our sterile injectables pipeline goal of seven submissions and three product launches in 2025.
Scott Hirsch: As mentioned last quarter, we announced the plan combination with Malingrat as well as the divestiture of our international pharmaceutical business. These transactions provide meaningful transformation to the company and are expected to enhance the combined growth potential and value creation.
Scott Hirsch: Both transactions remain on track, and I will provide more details about our progress in a moment.
Scott Hirsch: Moving to Slide 12 and diving into the segment level performance.
Scott Hirsch: Starting with the branded pharmaceutical segment. Branded revenues grew 4% in 1st quarter 2025 compared to 1st quarter 2024. This growth was primarily driven by a 7% increase in ZFX revenues compared to the prior year.
Scott Hirsch: This growth was primarily driven by an increase in volumes associated with underlying demand and is reflective of our continued efforts to drive consumer awareness and patient access along with our focus on improving the provider experience.
Moving to the Staryl Injectible segment.
Scott Hirsch: 1st quarter, 2025 revenues were 71 million compared to 98 million in the prior year. This change was primarily driven by continued competitive pressure on Bezos Strict and Adrenaline
Scott Hirsch: However, we are seeing strong customer adoption of our recently launched adrenaline RTU back. We expect to see continued growth in the adrenaline RTU customer base throughout the year as we increase the availability of supply and introduce additional dosage forms.
Scott Hirsch: Based on this, we expect growth in revenue from the adrenaline RTU bag to offset ongoing competitive pressure on the adrenaline vials in the second half of 2025.
with respect to the Staryl Injectibles Pipeline.
Scott Hirsch: I am pleased by the solid progress we have made early this year. Following our previously communicated strategic review and internal reallignment, the segment has successfully gained traction in the pipeline build.
Scott Hirsch: First quarter, 2025 generic pharmaceutical segment revenues were 99 million compared to 103 million in the prior year. Let it gain patch revenues increase 16% compared to prior year as we continue to provide the market with reliable supply.
Scott Hirsch: This growth partially offset competitive pressure across a number of products, notably Dex Land's Opera's All Delay for these capsules.
Scott Hirsch: First quarter, 2025 revenues from the international pharmaceutical segment were 13 million compared to 17 million in prior year. This change was primarily driven by the known expiration of a product distribution license that lapsed in fourth quarter of last year.
Moving to slide 13
Scott Hirsch: I am pleased by the continued performance of our IFlex franchise.
The Chart On The Left,
Scott Hirsch: shows the growth in First Quarter's IFX revenues over the past several years.
Scott Hirsch: is important to note the current diagnosis and treatment rates for both on-market indications remain low, providing the opportunity for continued future growth. Remain confident in ZioFlex, remaining a long-term growth driver for the company based on patient adoption and market expansion of our current indications, as well as our development pipeline and durable IP estate.
Turning to Slide 14
Scott Hirsch: To my previous point, we are continuing investments to drive dialects brand awareness and improve the patient and provider experience.
Transcription by CastingWords
Scott Hirsch: During the first quarter, we launched new campaigns for both Pironi's disease and Dupetrans Contracture. Our new Pironi's disease campaign, named I Got Somebody, encourages men to openly discuss D.D. and connect with trusted healthcare providers to discuss non-surgical treatment options.
Scott Hirsch: In February , we launched our first brand-a-duper-transcontractor campaign featuring Steve, a real-life diaphlex-treated patient and his spouse.
Scott Hirsch: We are also modernizing our go-to-market strategies to leverage artificial intelligence and data science to improve the patient experience. For example, we are analyzing data from our patient call centers with AI tools to quickly identify and implement solutions to address pain points in customer engagement.
Scott Hirsch: Many patients prefer non-surgical treatments for peronies and dupetrains. Approximately 90% of commercial patients pay zero out of pocket. Therefore, we are working to streamline responses to patients with questions about diaplex treatment, questions about providers, or questions about their cost and coverage.
Scott Hirsch: This real-time engagement enables us to optimize the flow of information across patient interactions and support our goal of an increasingly productive experience for our patients.
[inaudible]
Scott Hirsch: Additionally, we believe that a high-touch provider approach focused on education and a seamless xyaplex acquisition experience will increase physician loyalty and support the preferential use of xyaplex as a non-surgical treatment option.
Scott Hirsch: Accordingly, we recently expanded our new spatial computing injection simulator to help refine their injection technique for the administration of Zyaplex and the treatment of
Scott Hirsch: Our simulator now supports hand-in-eurology specialists to interact with both physical and digital objects using life-like physical models and digital content through an Apple Vision Pro app.
Scott Hirsch: Endo's spatial computing injection simulator represents a major leap forward in enhancing patient care. We believe this first of its kind educational technology in the pharmaceutical sector will support injection training and help build provider confidence.
Turning to Slide 15
Scott Hirsch: We continue to explore the potential to drive further's IFLEX growth by expanding it to a new, muscular skeletal and urological indications.
Scott Hirsch: We recently, we retained an Independent Data Monitoring Committee to complete a blinded interim analysis of our Phase III planter or fibromatosis PFI program. The Independent Data Monitoring Committee completed their assessment and recommended we continue the study unchanged.
Scott Hirsch: Based on current recruitment status, we expect to report top-line PFI results around year end. Our plans to our FASHIitis program remains under review following results from our FACE 2A Clinical Study Communicated last quarter.
Scott Hirsch: These include a Phase I, Proof of Concepts Study for Hammertoe, Preparations for Our First Inhuman Studies for Euretial Stricture, and an IND Submission for Arthur Fibrosis of the Knee, Post Knee Arthroplasty.
Scott Hirsch: Like our currently approved indications, these include objective endpoints which we believe present strong probabilities of clinical success. In all three indications, Zyafflex may offer non-surgical treatment options for conditions where the current standard of care often includes surgical intervention.
Turning to Slide 16
Scott Hirsch: Darryl Injectibles and acute care capabilities continue to represent an attractive growth pillar.
Scott Hirsch: We currently provide approximately 40 on-market sterile injectable products to over 95% of hospitals in the US.
Scott Hirsch: These products are primarily manufactured in the U.S. at our Rochester Michigan facility. Following our previously discussed review of the Sterling-Jectables business and pipeline prioritization changes, we believe we are better positioned.
Scott Hirsch: to leverage our sterile injectable capabilities, improve execution, and deliver growth in the segment. We are actively investing in our pipeline to meet the needs of our customers, which includes essentially every hospital in the country, by providing dependable, high quality FDA-approved sterile injectable products.
Scott Hirsch: Moving to slide 17, I'd like to provide an update on the ongoing transformation of the company.
Scott Hirsch: The combination of our highly complimentary portfolios and the ability for each business to focus resources on growth generation will also strengthen our ability to serve patients and customers.
Scott Hirsch: Following the combination and subsequent separation of the generic and starling jackable business, we believe the focus companies will have enhanced financial flexibility to invest in growth opportunities and create value.
Scott Hirsch: In April , the anti-trust submission was filed, and Malancrot filed a registration statement with the SEC, which included a preliminary joint proxy statement and prospectus. In addition, our joint transaction planning teams are working very well together. We continue to expect the transaction to close in the second half of the year.
Scott Hirsch: Additionally, the divestiture of international business remains on track. This transaction will enable us to more sharply focus on time, energy, and resources on our core growth businesses while putting these assets in the hands of a company focused on commercializing in Canada. We continue to expect this transaction to close in mid 2025.
Scott Hirsch: Before turning the call to Mark, I want to thank our Endo team members for their continued commitment and achievement during an incredibly active time. With that, let me turn the call to Mark, who will take us through the rest of the financial discussions.
Mark Bradley: Thank you, Scott. On slide 19, you will see a summary of our enterprise revenue and non-GAAP financial results for first quarter 2025, compared to prior year.
Mark Bradley: As we got detailed earlier, first quarter 2025 revenues decreased compared to prior year, primarily due to competitive pressures across our sterile injectables and generic pharmaceutical segments, which were partially offset by growth in our branded pharmaceutical segment.
Mark Bradley: First quarter, 2025, adjusted EBITDA was $99 million, compared to $146 million in the first quarter, 2024.
Mark Bradley: This change was primarily driven by decreased revenues and a lower adjusted growth margin due to changes in segment and product mix coupled with investments in our sterile injectables manufacturing network.
Mark Bradley: We also made additional investments in R&D to support the development of our Serial Injectibles Pipeline.
Mark Bradley: 1st quarter 2025, adjusted net income was $24 million, compared to $131 million in the 1st quarter 2024.
Mark Bradley: This change was primarily due to the decrease in adjusted EBITDA that I just mentioned, coupled with an increase in interest expense.
Mark Bradley: We ended the first quarter of 2025 with approximately $370 million of unrestricted cash and cash equivalent and a net debt to a adjusted EBITDA ratio of approximately 3.6 times.
Mark Bradley: Turning to Slide 20, we are reaffirming our full year 2025 Financial Guide.
Mark Bradley: We expect 2025 revenues to be between $1.78 billion and $1.86 billion and adjusted EBITDA to be between $620 million and $650 million.
Mark Bradley: Revenue by Segment, Adjusted Gross Margin is a percentage of revenues, and adjusted operating expenses also remain unchanged.
Mark Bradley: which are typically higher in the second half of the year, as well as the ramp up in revenues in the second half of the year from recently launched sterile products, including the Adrenaline R2U bag.
Mark Bradley: Operating expenses are also expected to be higher in the first half of the year.
Mark Bradley: Additionally, our 2025 Financial Guidance does not include any potential impact related to tariff or trade policy changes.
Mark Bradley: We believe our potential tariff exposure is manageable considering that four of our five primary manufacturing sites are in the US and approximately 70% of our revenues are from products produced in the US.
Mark Bradley: Having said that, our generic segment has the most exposure to potential tariffs, specifically on imports from India.
Mark Bradley: To mitigate potential tariff exposure, we are assessing inventory levels for several key on-market products that are currently produced outside of the U.S., and evaluating a future commercial production location for certain sterile injectable pipeline products.
Laurie: I will now turn the call over to Laurie to manage questions.
Laurie: Thank you, Mark. Operator, can we have our first question, please?
Speaker Change: Thank you, and ladies and gentlemen, we will now begin the question and answer session. Just a reminder, if you would like to ask a question, please press the star 1 on your telephone keypad, and if you would like to withdraw your question, you may do so by pressing star 2. With that, the first question comes from the line, appreciate our views, we have JP Morgan, please go ahead.
Rishi Parikh: Hi, thanks for taking my questions. I know you said that the first half is going to be weaker than the second half, but the EBITDA that we had in the quarter from a cadence standpoint, 16% of what your midpoint EBITDA is for the year.
Speaker Change: Last year's in the mid 20% range. Can you just give us an idea as to how we should think about that ramp in EBITDA and why you feel comfortable in reaffirming your guidance, EBITDA guidance?
Speaker Change: Yeah, sure, Rishi. Thank you for the question. So as I mentioned in the prepared remarks
Speaker Change: The first quarter, it wouldn't be appropriate to analyze the first quarter because of the fact that Zyflex is typically lower, primarily lower in the first quarter than in any other quarter. And as I also mentioned, we do expect Revenue from recently launched sterile products to ramp up in the second half of the year.
Speaker Change: So, when you look at the trajectory of Revenue, it is much higher in the second half of the year than in the first quarter.
Speaker Change: and that translates also to a higher growth margin percentage in the second half of the year versus...
The First Quarter
Speaker Change: And as I also mentioned, we are making investments in R&D to support our sterile injectable pipeline primarily, as well as the investments to support PFI and some other branded indications.
Speaker Change: and that timing will subside over the years, so we'll have lower operating expenses in the second half of the year than in the first quarter or the first half of the year. So when you take all of these things into consideration,
Speaker Change: You do see a step up in the second half of the year, both on Revenue Gross Margin and EBITDA versus 1st quarter.
Speaker Change: Okay, and then just from a follow-up standpoint, can you just speak to the gross tenets in the quarter, how it fared in this quarter, relative to last year, and then also considering you're looking to potentially spin off your generic and sterile injectable business, can you just provide us some sense as to how the other segments perform from an operating income or ebidot basis?
Thank you.
Over the remainder of the year.
from an EBITOP perspective, the segments performed as expected.
Speaker Change: In the first quarter and we are expecting them to perform generally in line with our expectations for the full year. There isn't any meaningful differences in our expectations for the segments.
versus what we had initially indicated earlier.
Thank you.
Speaker Change: And your next question comes from the line of Pamette Corsand, with BWS Financial, please go ahead.
Speaker Change: Sure, I think the most important perspective in SI, right, is to launch.
Speaker Change: Products that are meaningfully differentiated, particularly the RTU products that are ready to use, or different differentiated dosage form or finished.
Speaker Change: Additional hospitals coming online throughout the year, as well as additional dosage forms.
Speaker Change: It's important to say as we launch additional dosage forms, we solve the challenge at the hospital network in an increasing form as they continue to look for other sources.
Speaker Change: to complete that full dosage form family. Once we deliver that we really finalize the solution for them and so that's an important piece throughout the year to really offset as you indicated the competitive pressures of people trying to solve with other generic forms of the same product.
Great, and my other question was...
Speaker Change: When it relates to the Zyflex marketing campaign that you're going, is that more to get patients to actually realize this, you have this drug and it serves this end market, or are you just hoping that it's a, you're taking share away from another drug?
Speaker Change: to enhancing the overall market share adoption and interest for the patients to go in. My patient goes in having seen one of our commercials and asks for product and asks for a non-surgical treatment option. It's a huge benefit for the physician to actually treat with that. And so that's really the driver of both indications right now.
Great. Thank you.
Sure.
Lori Park: There are no further questions at this time. I would like to turn it back to Laurie Park for closing remarks.
Lori Park: Thank you all for joining us this morning. We look forward to providing with update as we move forward and hope you have a great day.
Speaker Change: Thank you presenters and ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.