Q2 2019 Earnings Call
You can disconnect us now [laughter].
Good day, ladies and gentlemen, welcome to the second quarter 2019.
And though.
International LTC 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 be given at that time, if anyone should require assistance during the call. Please press star zero on your Touchtone telephone as a reminder, this conference call is being recorded I would now like to introduce your host for today's call Laurie Park Senior Vice President Investor Relations and corporate Affairs. Please go ahead.
Thank you good morning, and thank you for joining us to discuss our second quarter 2019 financial results.
Joining me on today's call are Paul Campanella, President and CEO of Endo, Blaise Coleman Executive Vice President and CFO , and Pat Murray Executive Vice President and Chief commercial officer of our branded business.
We have prepared a slide presentation to accompany today's webcast and that presentation as well as other materials are posted online in the investors section at Endo dotcom.
I would like to remind you that any forward looking statements made by management are covered on the under the U.S. Private Securities Litigation Reform Act of 1995, and the applicable Canadian Securities laws and are subject to changes risks and uncertainties described in yesterday's press release, and our us 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 accounting principles generally accepted in the United States and that 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 yesterday for Endos reasons for including those non-GAAP financial measures in our earnings release and today's presentation.
The reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measure is contained in our earnings press release issued yesterday, unless otherwise noted therein.
I would now like to turn the call over to Paul.
Thank you Laurie.
Good morning, and thank you for joining us for today's call I Hope you've had a chance to review the company's earnings release issued yesterday.
Let's turn our attention to the second quarter 2019 earnings presentation.
Beginning on slide two here's a brief agenda for today's call.
Moving to slide three.
And I was pleased to report another solid quarter of adjusted operating results, reflecting the continued execution of our multi year strategic plan.
Led by XIAFLEX, Vasostrict and adrenaline revenues for both the specialty products portfolio of our branded pharmaceutical segment and the sterile Injectables segment continued their double digit growth momentum.
We reported second quarter 2019, total enterprise revenues of $700 million and adjusted EBITDA of $307 million, which were both in line with our expectations.
We are reaffirming our previously provided full year 2019 revenue adjusted EBITDA and adjusted EPS guidance.
Believes will walk you through our financial performance later in our presentation.
Moving to slide four.
You will see a snapshot of our segment revenues in our consolidated adjusted EBITDA for the second quarter.
Now moving to slide five.
While our overall branded pharmaceutical segment revenue declined by 2% year over year, the specialty products portfolio of our branded pharmaceutical segment continue to advance in the second quarter with year over year growth of 17%.
This performance was driven by strong execution across all products within our specialty products portfolio.
Starting with our XIAFLEX franchise, we had another outstanding quarter of growth.
Our XIAFLEX franchise grew 18% in the second quarter compared to the second quarter of 2018 in 9% compared to the first quarter of 2019.
This year on year in quarterly sequential growth reflects strong demand growth driven by both the peroni disease in do patrons contracture indications due to continued investment in promotional efforts behind XIAFLEX.
Additionally, we are pleased with the performance of the other specialty products.
Supprelin la upbeat and Nascobal grew by 19%.
26% and 8% respectively in the second quarter compared to the prior year, primarily driven by volume.
Offsetting the growth is ongoing generic competition in the established products portfolio of our branded pharmaceutical segment.
Across our specialty business I am proud of the commercial capabilities that we've built.
These capabilities are driving growth today and provide the framework for the expected launch of CCH for cellulite as well as other opportunities.
This includes strong channel capabilities that provide exceptional access for physicians and their patients.
Innovative unbranded media and PR campaigns, coupled with branded digital consumer tactics that are engaging targeted populations and encouraging them to take action as well as exceptional execution by our sales and field reimbursement teams.
Additionally, I'm pleased with our campaigns and I'm, especially proud of feedback from physicians that we are improving the quality of life for patients.
Based on the continued strong underlying growth in our specialty products portfolio. We are reaffirming our full year 2019, a revenue growth guidance in the low double digit percentage range and our full year 2019, XIAFLEX revenue guidance of growth in the mid to high teens percentage range.
Moving to our CCH development program for assessing the treatment of cellulite.
We continue to prepare on both the commercial and regulatory front.
We remain on track for second half 2019 BLA submission.
With the market launch targeted for the second half of 2020 subject to FDA approval.
On the commercial front, we are continuing to build out our marketing team and plan to add sales leaderships later this year.
As part of our plan to introduce Endo instead, thanks to the physician community. We've attended 16 Congresses in medical meetings through July .
We have the opportunity to engage with hundreds of aesthetic HCPCS, including approximately 170 KNL meetings.
Additionally, our phase three data was recently presented during the Premier Global Hot topics session by clinical investigator Dr. Lawrence bass at the American Society for static plastic surgery meeting in by multiple physicians, including clinical investigator Dr., Michael Gold at the Vegas cosmetic surgery meeting, which is the premier multi specialty meeting within medical aesthetics.
Turning to slide six.
Our sterile Injectables segment continues to deliver with net sales growth of 12% in the second quarter of 2019 versus the second quarter of 2018.
This performance was driven by our independent for injection the authorized generic of in vans, which was launched in the third quarter 2018.
With net sales of $26 million.
Also contributing to the revenue growth were vasostrict with net sales of $116 million, a 9% increase versus the same period in 2018, driven by price in business mix and adrenaline with sales with net sales of $46 million in the quarter up 25%.
Compared to last year, driven by price and volume.
The performance of our key sterile injectable products was partially offset by the impact of competition on other products within our sterile injectables portfolio.
As anticipated second quarter 2019, sterile injectable net sales decline versus the first quarter 2019, primarily as a result of the non recurrence of the first quarter stocking benefit and the expected destocking in the second quarter.
Transitioning to compounding by outsourcing facilities.
We are extremely pleased with the US District Court for the District Court of Columbia's recent decision supporting the Sds determination that Vasco presson cannot be used for bulk compounding by outsourcing facilities.
And granting summary judgment the court specifically upheld the FDA decision that there is no clinical need for such compounding under the drug quality Securities Act.
That said.
While avonex, a compounding outsourcing facility filed a motion for stay or an injunction of the court's ruling and has announced his plan to appeal.
It is required to cease selling it's compounded vasopressor and product unless and until this day or an injunction is granted.
We along with the FDA will oppose at the Nexus motion.
Looking forward, we reaffirm our guidance of 2019 sterile injectables revenue growth in the high single to low double digit percentage range with Vasostrict revenues expected to grow by a low double digit percentage.
Turning to our generic pharmaceutical segment on slide seven.
The decrease in revenue for this segment during the second quarter versus the same period last year, primarily reflects the impact of anticipated competitive pressures on certain generic products.
This decrease was partially offset by the benefit of product launches, including culture seeing tablets. The authorized generic of coal carries a paragraph four settlement.
Now over the past several weeks, we have experienced an increase in questions related to the generic market.
As we've noted before while we are seeing a normalization in the landscape the environment remains active in demand dynamic, reflecting a high level of competition, primarily driven by new market entrants with that said, we are reaffirming our guidance for full year 2019 generics revenue to decline in the mid to high teens percentage range.
Moving to slide eight.
As expected.
Our international pharmaceutical segment performance reflects amongst other things the impact of ongoing generic competition on our ex us businesses, including our Canadian business.
For the full year 2019, we reaffirm our guidance of international Pharmaceuticals revenue declines of approximately 20% compared to full year 2018.
Turning to slide nine.
We shift focus to our diverse pipeline as referenced earlier, we continue to progress through our regulatory in pre commercialization activities for CCH for cellulite and remain on track for our planned commercial launch in the second half of 2020.
As part of our data generation plan, we have several real world CCH studies in development.
Focused on dosing.
Injection technique.
Responses in target patient populations as well as rollover studies on durability.
Also we continue to have optionality with CCH to develop new indications.
We remain on track to launch approximately 15, new products in 2019 across our sterile injectables generic pharmaceuticals, and international pharmaceutical segments and have launched six products year to date.
Our sterile Injectables pipeline is supplemented by strategic relationships with third parties, such as never car, which will potentially provide five differentiated five ofi to hospital in critical care based products.
We continue to expect to launch the first product from our never card agreement in late 2020.
As part of the normal course, we actively review and manage our portfolio. While there are no guarantees of success. The projects we choose to commercialize our those we believe will provide the highest probability of profitability door ability and that have an appropriate return on investment.
In that context, we called our portfolio focusing our attention on approximately 65 products on file with the FDA and approximately 55 projects in development.
That are anticipated as high value endurable opportunities.
Our R&D portfolio is now more heavily focused on sterile and related products, along with branded specialty and CCH.
After these actions our pipeline is increasingly reflective of our core growth strategy.
The table on the bottom of slide nine shows some of our key disclosed future first to file or first to market opportunities.
Now, let me turn the call over to Blaise to further discuss the company's second quarter financial performance and full year 2019 financial guidance plays.
Thank you Paul and good morning, everyone first on slide 10, you'll see a snapshot of the second quarter GAAP and non-GAAP financial results Paul covered the company in segment revenues earlier, So I will not review that again.
On a GAAP basis, we the diluted loss per share of 43 cents from continuing operations in the quarter versus a loss of 23 cents per share in the second quarter of 2018.
GAAP operating income in the second quarter, 2019 was $40 million compared to GAAP operating income of $55 million during the same period in 2018.
On an adjusted basis second quarter adjusted net income from continuing operations of $120 million was lower than the previous year.
Primarily driven by lower adjusted gross margin in our generic pharmaceutical segment.
Due to a decline in revenue and an unfavorable change in product mix.
Adjusted diluted income per share from continuing operations in the second quarter 2019 was 52 cents compared to 76 cents in second quarter 2018.
Slide 11 provides a summary vendors 2019 full year financial guidance, we are reaffirming our financial guidance for the year and the financial guidance assumptions are unchanged. These assumptions are presented at the bottom of slide 11.
Moving to slide 12. This is a summary of the segment and product specific guidance previously discussed.
Advancing to slide 13, and wrapping up the financial discussion in June 2019, we borrowed $300 million under our $1 billion revolving credit facility and expect to use the proceeds from this borrowing for purposes consistent with our previously stated capital allocation priorities.
For the first six months of 2019, we had unrestricted cash flow prior to debt payment of $334 million and we ended the second quarter of 2019 with approximately $1.4 billion of unrestricted cash and a net debt to adjusted EBITDA leverage ratio of approximately 5.3 times.
We are updating our 2019 guidance for expected unrestricted cash flow prior to debt payment to be in the range of approximately $100 million to $200 million compared to expected use of unrestricted cash prior to debt payment of $100 million to $200 million previously.
This change reflects the impact of the revolver drawdown, we executed in June 2019.
Now, let me turn it back over to Paul Paul.
Thank you Blaise.
Moving to slide 14 in concluding today's presentation. We are very proud of the many achievements to date and a steadfast focus of our teams to execute on all levels. We've taken and we will continue to take the actions needed to achieve our longer term objectives.
We believe that our focus on enhancing our capabilities in sterile injectables and our branded specialty products portfolio, including medical aesthetics, and strengthening our generics portfolio profile position us well for the future.
I am grateful to all of our Endo team members for their commitment and their hard work.
Let me now turn the call back over to Lori to manage our question and answer period Laurie. Thank you Paul in the interest of time, if you could limit your initial questions to allow us to get in as many as possible we would appreciate it.
Operator may we have the first question.
Thank you, ladies and gentlemen, I have a question at this time.
Start one full year attendance, Tom telephone one moment please.
First question comes from Gregg Gilbert from Suntrust. Your line is open.
Thank you and good morning team just one two parter.
Paul It seems like most agree that a settlement that puts the opioid issue to bed is unlikely anytime soon and I wanted to know if you agree with that and if so can you speak to the importance or lack of on the eminent Oklahoma Rolling and let us know what's been going on with the MTL actions, leading up to the trial.
And the second question is about your injectable strategy can you update us on your strategy to expand your Injectables portfolio and maybe you could touch on that from both an internal capabilities standpoint, and Biz Dev standpoint. Thanks.
Sure. Thanks.
Thanks, Greg So I think as we've said in terms of.
Opioids.
No. The focus has been and always will be on a global settlement.
No.
The teams are always working hard we're never going to take anything off the table. If something was if something was appropriate would we consider of course, but absent of something material, we need to be focused for central NGL trial, which.
We don't know for inner not but that timeframe as everybody knows is October so there's really no material update with respect to two two.
To the Mds or really Oklahoma with respect to two JJ I can't speculate with respect to.
A a decision one way or another.
At the end of the day, we have to focus on our business from an execution standpoint, and Thats really what this is about your at Endo.
The internal and external attorneys.
Have how the opioid situation.
Obviously.
Hi focus and we're doing what we can do with respect to our sterile injectables strategy.
We're actually real proud of of some of the decisions that we've made to to expand our portfolio. We've got a we've got a incredible facility in Rochester, Michigan that we're proud of we're also looking to expand injectable capabilities in indoor we've got construction going on as we as we speak we're hoping to have opportunities to launch products.
In the mid 2020 2021 timeframe so.
That will be a big part of Endo in parts Daryl as we move forward.
The strategy is going to be focused on hard to make injectables I know that that a lot of people say that but this is our focus I think it's something that we've proven on polypeptides capabilities and really a strong focus to our key ready to use formulations and really get it into the hands of caregivers.
From a critical care standpoint, so that's where we're headed as as a single company.
Thanks.
Our next question comes from Randall Stanicky from RBC capital markets. Your line is open.
Great. Thanks, Paul if you look bigger picture strategically there seems to be two avenues that companies are pursuing in the sector number one consolidate to de lever and diversify although we've not seen much of that.
We're number two shifts spend in business development to try to diversify away from retail generics over time, and if I'm hearing you correctly that seems to be the ladder seems to be endo strategy. So is that correct and then is there a way to expedite that process. That's number one and then number two for Blaze can you just talk about the rationale behind the $300 million revolver drawdown from June intended use there given that it didnt seem like you needed to be.
Cash given the cash you had on the balance sheet existing thanks.
Yeah Randall. So this is Paul I think I think your instinct is correct then where.
First of all we're not walking away from from retail generics, we just need to be very smart about it but what we are doing is we want to put more of an emphasis in our sterile side.
I think I think complex injectable products is an area that we're starting to build a skill set.
So you're going to see that shift with respect to endo.
We've made an announcement, where we're being very mindful with respect to products that we bring to the market.
I think sizing size of portfolio is not as important it really gets down to the quality of the products within your portfolio.
Generics right now there is a lot of there is a lot of competition, if we're going to be in a retail product.
That we believe can have more than four players we want to avoid that.
With that in mind, you're going to start to see a a bit more mindful approach to products that we focus on the retail side, so theres going to be a heightened focused on sterile and a heightened focus on our specialty portion of our business with respect to products like XIAFLEX.
And our Supprelin, la our nascobal product and as well as moving into CCH, So from and those point of view.
You should see a strengthening of our sterile and our specialty portfolio.
Sure. So Randall just on your question regarding the draw down the $300 million.
Consistent with the financial guidance that we provided for 2019, our secured borrowing capacity.
We will likely be decreasing throughout the rest of 2019 based on our projected trailing 12 month covenant EBITDA and in that context, we made the decision to draw a portion of the revolver credit $300 million really to improve our financial flexibility by increasing our liquidity really through the timely use of the secured capacity that otherwise would be decreasing through the rest of 2019. So this is really about.
Providing us additional financial flexibility going forward and really to deploy that against the previously stated cap allocation priorities that we set out for ourselves.
Makes sense, but there is no specific intended use so it was just more of an opportunistic drawdown.
Yes, just increase our clinic.
Thats correct.
Great. Thanks, guys.
Next question comes from Chris Schott from JP Morgan Your line is open.
Good morning. This is carried on for Chris. Thank you for taking my questions.
My first question is you've touched upon this in your prepared remarks, but maybe you could elaborate a bit more.
Can come companies say that the U.S. generic environment is stabilizing others are citing accelerating competition buying consortium pressure. So what are you seeing on the ground or we had a better place than we were a year ago or two quarters ago, and then kind of.
On the topic of generic can you provide some additional color on the launch of you're expecting in the second half are these dates certain or are these approved for these.
So some pending approvals there as well.
Just in terms of the quarterly progression or are these more for quarter.
Fourth quarter heavy or three quarter heavy thank you.
Okay, Yes. Thank you Kat Arena I think with respect to the portfolio I'll take that one first I mean, I just I would just go back to the.
The presentation. Unfortunately, we can't place an enormous amount of color on it.
There are some of these products are part of settlement agreements, which we are unable to disclose exactly the launched its that's just normal course, such as part of.
Our settlement negotiations products that are not part of settlements frankly, we don't want to put ourselves at competitive disadvantage either so we just ask you to be patient. The important thing is when you look at that portfolio. The products that we disclose our technically challenging hard to make their either clinical trial requirements difficult molecules extended release things that we hope and we anticipate we'll have durability.
With respect to the to the generic market I mean, there's been a lot of use of words stable normalization.
I think I think with every.
Every company needs to look at is their own particular portfolio. These are these are words based upon a point in time. So if you want to start comparing to.
Pre 2015, Thats, not where we are right I think we need to get off of that mindset.
We are in a we are in a hyper competitive competitive environment with the consortiums and it's driven by new market entrants right at the end of the day, that's the way we're looking at it so.
When you hear normalization. It may really mean that we're able to navigate or understand how to react in today's environment and thats. The way you need to be looking at it but the companies that are going to navigate through this are the ones that are going to take a mindful thoughtful mindful process on their portfolios and our particular case. Our strategy is we don't want to play in areas. We're going to have 567 players. So we're taking a very very disciplined approach to products that we bring to market.
And products that we did do we choose to to develop so thats the way I'm looking at the generic market today.
Great. Thanks.
Our next question comes from.
Fadi from SBB Leerink your line is open.
Hi, good morning, Thanks for taking the question.
Paul I wanted to ask you about how you think about the tradeoff between.
Building out a commotion organization on the specialty side disciplined NCCN launch.
Does that open doors for you to bring in additional assets on the specialty side.
Or would you prioritize mall was using sort of your capital to focus on.
Bringing in more injectables to market.
Yes so.
So right now. Thank you we want to be we are going to be agnostic for I think thats. The starting point now we're not trying to be all things to all people maybe I'll take one step further back an area that I don't see us looking to expand is on the retail side and I think I made myself pretty clear in that regard so I don't.
That's something that's that that is very unlikely. However, I don't think we necessarily have to say there is a trade off between building out injectables or should we want to go deeper into two into specialty the starting point for us is.
We need to execute on our plan right, we've talked about filing in the back half of this year, we are preparing for success.
I think over time as we advance through the regulatory process.
That will allow our business development teams to go deeper into.
A filtering process of either company or product opportunities, that's clearly a priority for us, but we need to prove a little bit more success that will be on the com, but it's not too deep in time.
On a sterile injectable side, we have capabilities for from a development standpoint, So I don't feel like we're giving up much. If there was a small company acquisition would reconsider absolutely, but where we.
Where we don't go after an M&A opportunity. We're excited about is is internal development, which were very aggressive on and even partnership product yields where we may be developing collaborations the sporting profits of some some magnitude. So that's been that's normal course, we're continuing to do that and our business development teams are very active both the sterile side and the medical static side and lastly, we're not giving up a high there on the men's health side right. So from that standpoint, it's the same team looking for in licensing of products. These are not a this is not a real wide casting of a net I think some something that that is some is manageable and exciting for us to execute on.
Thank you.
Thanks, David Amsellem from Piper Jaffray. Your line is open.
Thanks, So the retail market Paul just philosophically.
I know your your comments dovetail with.
Your peers about focusing on more complex products, but specifically on retail where do you think ultimately margins are going to settle you've talked about commoditization. So.
Do you think.
The margins over the long term can can be robust in the U.S. retail generics market. So thats number one and then secondly on five or five Btwos point well taken on your on your focus there I just wanted to get your thoughts on potentially expanding your work with and have a car since that company's focuses on five of diabetes and potentially working with other companies or even internally with your working on your pipeline and cultivating more and more final five b two based products I want to get a sense of how big of a priority.
That is within the context of the sterile business. Thanks.
Sure David So I'll start with that when the final five B twos is a is a major priority for us what we like about five five b twos is the potential to file intellectual property. If we have something novel and we can have a formulation bring something to the market that number one the obviously the patient needs differentiate yourself and as intellectual property that is something that is very very attractive for us.
Specifically on the sterile side, we've got a we've got a sales force of about 20 reps this bodes real well it fits right into our.
And to our strategy.
On the specialty side I mean, those are fiber phy, b twos as well right and obviously, we've got our salesforce.
With respect to to what we're doing here with patched team. So five of buy Btwos are very exciting from a from a formulation standpoint, and an intellectual property standpoint. So.
You should expect to see us some.
Aggressively move in that regard.
Regarding your question on retail margins I mean, that's that's a company specific question.
It is hard for me to put my hands on it and it really kind of depends on a particular company strategy.
There are companies that that still pursue volume and are looking to to offset plant absorption issues and may be backward integrated into Asia.
These are typically offshore companies they can operate on smaller margins and that's that's acceptable for their strategy.
A company like Endo, our par's generic version.
Parts generic.
Subsidiary, we're focused our strategies on first to file first the market.
Upon success, you're going to see hopefully you're going to see and realized higher margins the sheer nature of of what you're doing but you're investing.
More dollars in is higher risk and higher reward ultimately you're going to file the paragraph four that's going to cost you.
Greater expenses to litigate, but you can get the benefit of that and Thats something thats been our strategy and weve been frankly quite successful over time.
So that's a tough question I would tell you that for Endo, I would anticipate margins being a little bit more robust because it's a different type of strategy.
Thanks.
Our next question comes from Annabel Samimy from Stifel. Your line is open.
[noise].
Your line is open ma'am.
Oh.
Hello.
Hi, Thanks for taking the question. So I know you're doing a number of additional studies for CCH in cellulite too just to establish the experience and.
Real World every treatment I was just wondering if you can give us a sense of some of the goals and points of these trials and weather.
We'd be seeing any data emerge as well as the extent to which any of them are required for the B L. A filing and then a follow on in medical set X clearly you have.
To build a different presence here with some new infrastructure I think in the past you've mentioned that you have certain systems and procedures in place with your existing portfolio that you can leverage can you articulate exactly what you can leverage what you still have to build.
And any plans to add additional products to leverage the entire platform. Thanks.
Sure. So so annabel I I'll start and then I'm gonna headed over to Pat in terms of adding additional products I think I I.
I basically answered that question and I think that's going to be over time, assuming success with our BLE and launching into CCH. Our business development team is already building a portfolio of.
Either products or companies for consideration, but thats going to be that's going to be a bit in the future, but clearly it's an area that we that we're excited about we plan on building out and we want to expand when appropriate.
I'll pass the call over to the pad that can talk a little bit more about the other trials, yes sure. Thanks, Paul in terms of the BLA submission obviously with.
The phase Twob trial in the phase three trial being the largest cellulite trial ever conducted.
Both both of which have rollover designs as well, we've got a robustness of data and a very very strong submission. So as Paul said, we're excited to be in a position to submit that B.L.A. and that would trigger the review clock for US. We've also been mindful of understanding what it will take to be successful in medical aesthetics with an ear towards what our Kale wells are telling us in terms of data generation and having that available at launch. So the timing is really about having a successful submission, which we're on track and also at commercial launch having a robustness of data in the real world setting and so a couple of things I would say as I mentioned the phase two b and phase three have rollover design, so that will be important for us because that will provide durability data, which I think is an insight and an understanding that kale wells and injectors will want to know about the type of durability of the product we also.
We will.
Just completed a tool nine study, which is an injection and dosing technique.
We you can anticipate most of these studies being up for publication and presentation as we get into next year and as we get right at the timing of the commercial launch, but what to own nine did was validated our buttock technique and also unveiled some new insights for side and again, we will be publishing and presenting this data as we get closer to launch.
The technique for thigh.
Good news for US is it's consistent with how thought leaders have used other injection modality. So that those are meaningful insights to be able to drive strong patient outcomes and so we'll be publishing and presenting that we will also be embarking upon a 212 trial, which is an open label trial evaluating CCH for cellulite and mild moderate and severe patients in size.
Also these patients are probably mirroring more closely what a physician would see in the clinic not obese active younger patient likely even potentially aesthetically experience. So we're excited about what that data may show.
And then finally, the three or five real World study is an open label trial in products in sight, and we will be assessing.
Efficacy as well as patient satisfaction using.
The an investigator global aesthetic improvements score at day 90, and so.
And we will continue to follow all these patients. So the take away is that we've got really strong regulatory science and we're complementing that with real real very strong real world science in the form of data generation plant. So we're going to have lots of great data focus on patient outcomes that when we get ready to launch.
Okay, I think that.
Yes on the capability question, it's a fair question.
Again, we have built very strong sales and marketing and distribution capabilities on the branded specialty side. So what I would say is our ability to be able to master distribution channel again, a medical aesthetic injectable is a direct buy and bill model and so we have mastery of that we've also built a very very strong direct to consumer capability, which will absolutely have.
Application and so.
We also know how to support a sales and marketing infrastructure. So.
We have a strong sales operations backroom support function in place. So what that will allow us to do is it's higher out of Salesforce and we've already made the strategic hires on the marketing side and we will continue to to build out those teams as we prepare for launch.
Okay. Thank you so much.
Our next question from Abraham from Citi. Your line is open.
Good morning.
Paul.
I was hoping you could provide a little bit more color on your business development strategy.
Do you need more clarity on the.
Opioid situation and potential liability there to get more aggressive on business development given your access to cash flows that will be.
Relatively unencumbered in 2020.
And then second question, given where we are in 2019.
Any preliminary comments on EBITDA on this year and whether this year is could be the trough on what the pushes and pulls there.
And with that respect that would be helpful. Thank you.
So we have I pause and probably not going to get too deep into into the future on EBITDA.
With respect to the BD strategy and the opiates.
We're not we're not looking at the leap the opioid situation as.
As impeding our ability to do business development deals I mean at the end of the day.
We've had some of the details on that on the table here over the past year that.
That we've announced before the end they didn't go forward for for appropriate reasons.
I think I think right now where we are in the right yield at the right size comes through of course, we would consider it and.
And I think the debit card deal while small small deal works well for US those are things that if we can bolt on real will continued to do an excites us and we are by nature lower risk.
But if the right opportunity came for for an injectable company appropriately sized sure we would consider that as I said.
At an appropriate time, showing more success on the medical aesthetic side, we would consider that and the BD teams out there right now looking for urology. So no I don't I don't believe that the.
Opioid situation impedes, our ability to execute on our BD strategy now.
Great. Thanks.
Our next question comes from.
Gary Nachman from BMO capital markets. Your line is open.
Hi, Good morning, Paul how would you characterize the timing of the FDA approvals for your key pipeline products relative to expectations, especially sterile injectables.
Have there been any meaningful delays and have you experienced additional challenges when launching new products.
And secondly is visa strict now at a normalized run rate after the stocking benefit and one queue. Thank you.
So I'm going to I'll pass to the latter question on the.
On the Vasostrict run rate over to tableau, yes, so Gary in terms of days are strict as we had indicated we would see destock in Q2, which we did see come through and now we would expect visa straight in Q3 to be backs were normal run rate.
Regarding the FDA timelines I mean, Gary.
It's a tough question I mean, it's real every product is is he has a story.
And the first one in terms of delays.
Much of our portfolio contains paragraph works right. So the inherent nature of a 30 months stay in an appeal typically things that we're dealing with so so from that standpoint, when we're in that type of cadence.
I don't see delays coming out of.
How did the FDA with respect to our own.
Our injectable portfolio or solid oral dosage. So you always have to take that into consideration or from a paragraph four standpoint.
Links that are on our mine I mean right now.
I would tell you that you need to be closely watching your PPI sources from an inspection of the quality standpoint, those are things that can create delays.
But I think you're only as good as your quality systems in the in the people that you employ and I would tell you here at Endo. This is the strength of our company. So.
From a delay standpoint.
It's something that we manage through but I wouldn't say that it's some.
It's some.
A problematic issue for for US at this at this point in time.
So I think we're I think we're executing on our plan as we've indicated when we say we're going to launch about 15 products and were around six or seven year to date.
I mean, we're kind of hitting exactly where we thought we would be so.
Now we're focused on operational execution, and I think thats something thats proven success here at Endo.
Okay, and just when you launch new products are you seeing.
Any additional challenges just given the competitive dynamics that you talked about earlier.
So in terms of heavy competition is that what you're referring to yes exactly.
Again, it's.
It's it's every product is different so it's.
We are launching a high barrier products as an example.
We launched or depend on.
With little to no competition over time, so we got a little more of a run way, it's a difficult product to make we were the authorized generic that would be an example, where we we didn't realize multiple competition. If we're going to look at on a product that doesn't have a patent barrier.
It is not difficult to to manufacturing you elect to launch that product yeah, we're going to have heavy competition, you're going to have four six players coming to the market that's not changing.
But that's no longer our model as we move forward, you're going to see us, but we are moving away from that so that's exactly what we want to avoid.
Okay, great. Thank you.
Our next question comes from.
Koffler from.
Your line is open.
Hi, Thanks for taking my question as you build out your cosmetic segment.
Through business development or internal development are you thinking about this as.
On a pure cash pay segment of products and that's how you're going to build out this segment or could there be.
Medical dermatology or other medically reimburse products within this segment and is there any plan.
Disclosure financials and performance of that business separately. Thanks.
So I'll take the first part of it and I'll pass it over to Pat So.
I got to preface by saying this is very very early we're focusing on CCH in terms of building out in the future.
Assuming success with CCH, assuming the BLE success.
Clearly the area that we like is going to be in a cash play area now I'm never going to limit myself and say no, but we can only do so much cash pay medical aesthetics clearing area that we that.
That we want to we want to be highly focused in on and ill pass it over to you in terms. If you have any other book, yes. Thanks, Paul in terms of.
In terms of the type of Salesforce that we would be onboarding. This would be in a medical aesthetic injectable sales force so that is.
For those who know that space that is a remarkably different type of sales model and sales rep capability than a reimburse medical derm.
So so we would build out obviously that team that will be successful with CCH for cellulite, and we would look to complement that portfolio with cash businesses other cash businesses injectables or injectable like products that would be synergistic and complementary from an innovation perspective to CCH for cellulite. So we wouldn't be pursuing BD strategy, where we would have medical derm products that would go travel if that were an opportunity down the line as an extension to our specialty strategy that would likely be a totally different field force, but that's not part of our thinking right now.
Okay, and if I could just sneak in one more on XIAFLEX pipeline is are you moving forward any other indications I know there used to be frozen shoulder, but we havent talked about it in some time.
Yes, so so Irene I think I'd certainly we have access to other indications we talked about adhesive capsulitis, we talked about plantar fibromatosis.
Laxity is also a possibility I think right now we're focused on execution for CCH, that's the number one priority.
As we roll up our.
Our budgets for next year, we'll start considering other indications I think that some that's where we are but most importantly, we have the rights to follow on indications when appropriate.
This is the year that we want to be in.
Great. Thank you.
Our next question comes from Elliot Wilbur from Raymond James Your line is open.
Thanks, Good morning.
Paul you mentioned.
That.
The impact of new competition and established generics is sort of being the key variable in terms of.
Leading to a driving volatility in the generic space I guess couple of.
Of your peers have been burned by sort of materially Ms. Calculating the impact of incremental competition. Just wondering from your perspective do you think about new entrants coming into products like focusing if in fact, you are seeing changes in behaviour.
With respect to trying to take market share or whether just the current structure of the market is forcing companies to be much more aggressive in terms of wrestling share from the established consortium network. So that you'll see a much more negative impact than you might have seen a couple of years ago.
Yes, I think it's both right I mean again.
So at the end of the day.
So.
Clearly clearly there is more.
There's aggressive behavior in the market right and the aggressive behavior youre going to see on on both products that you have.
Exclusivities and and even where you have a.
Saturation of mature generic price. So there there is still that degree that you're seeing the big the big change and when I keep on going back when we use these words of normalization and stability can change here between today and a couple of years ago is the obvious right. A couple of years ago, We had 20 customers and we could cobble together the market share that doesn't exist as well anymore right. So we all know that when you have a.
A a change in the market at a consortium level that youre talking about swings of 30% right. This creates massive massive supply chains challenges, that's what you're seeing and in the environment and clearly we all know that if a company lands one of the consortiums that doesn't necessarily mean that you get 30% of the market because they're going to split the formulary, but theres a lot of change within the environment at a with a product with in a consortium, which creates pressure on your supply chain. That's what I think is happening right and everything kind of also fall backwards a bit right. So so so the consortium's came.
Into existing putting pressure on manufacturers I am today, there is pressures on Npis sources right. So I think it's all intertwined that's what I believe you're starting to see here.
In 2019, those are the pressures that that we said we have dealt with I believe we were kind of first movers. Obviously, a couple of years ago, we talked a little bit today about calling our portfolio I think we are first movers again.
We just want to be really smart about products that we bring to market. So we can have a durable segment with the generics division. So that's what you're saying I think thats a some of the challenges that we have in the <unk> and then just generic environment today.
Yeah.
I think so.
If there's no more are there any more questions in the queue.
Im showing no further questions at this time I would like.
Turn to call over to Paul camping, only president and CEO for closing remarks.
Okay, well. Thank you everybody I just want to say we appreciate your continued interest and support of our company. We look forward to providing you with updates as we move forward and again, thank you and have a great morning.
Okay.