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Endo Reports Second-Quarter 2019 Financial Results

August 5, 2019

- Operating Performance Led by Year-over-Year Double-Digit-Percentage Growth in Revenues of Sterile Injectables Segment and Specialty Products Portfolio of Branded Pharmaceuticals Segment -

- Endo Reaffirms Full-Year 2019 Financial Guidance -

DUBLIN, Aug. 5, 2019 /PRNewswire/ -- Endo International plc (NASDAQ: ENDP) today reported second-quarter 2019 financial results, including:

  • Revenues of $700 million, a decrease of 2 percent compared to second-quarter 2018 revenues of $715 million.
  • Branded Pharmaceuticals - Specialty Products revenues increased 17 percent to $124 million compared to second-quarter 2018 revenues of $106 million.
  • Sterile Injectables revenues increased 12 percent to $244 million compared to second-quarter 2018 revenues of $218 million.
  • Reported net loss from continuing operations of $98 million compared to second-quarter 2018 reported net loss from continuing operations of $52 million.
  • Reported diluted loss per share from continuing operations of $0.43 compared to second-quarter 2018 reported diluted loss per share from continuing operations of $0.23.
  • Adjusted income from continuing operations of $120 million compared to second-quarter 2018 adjusted income from continuing operations of $172 million.
  • Adjusted diluted earnings per share from continuing operations of $0.52 compared to second-quarter 2018 adjusted diluted earnings per share from continuing operations of $0.76.
  • Adjusted EBITDA of $307 million compared to second-quarter 2018 adjusted EBITDA of $351 million.

"I am pleased with our second-quarter 2019 operating performance, led by continued year-over-year double-digit percentage growth in revenues of our Sterile Injectables segment and in the Specialty Products portfolio of our Branded Pharmaceuticals segment. XIAFLEX® grew 18 percent in the quarter, reflecting continued demand growth as a result of successful commercial execution and promotional investment," said Paul Campanelli, President and Chief Executive Officer of Endo. "We are on target to meet our previously provided full-year financial guidance and remain highly focused on the continued execution of our multiyear turnaround plan in a challenging external environment."

 

FINANCIAL PERFORMANCE

 

(in thousands, except per share amounts)

 
 

Three Months Ended June 30,

     

Six Months Ended June 30,

   
 

2019

 

2018

 

Change

 

2019

 

2018

 

Change

Total Revenues, Net

$

699,727

   

$

714,696

   

(2)

%

 

$

1,420,138

   

$

1,415,223

   

%

Reported Loss from Continuing
Operations

$

(98,052)

   

$

(52,479)

   

87

%

 

$

(110,664)

   

$

(550,217)

   

(80)

%

Reported Diluted Weighted Average
Shares

226,221

   

223,834

   

1

%

 

225,408

   

223,677

   

1

%

Reported Diluted Loss per Share
from Continuing Operations

$

(0.43)

   

$

(0.23)

   

87

%

 

$

(0.49)

   

$

(2.46)

   

(80)

%

Adjusted Income from Continuing

Operations

$

120,405

   

$

172,195

   

(30)

%

 

$

242,488

   

$

322,978

   

(25)

%

Adjusted Diluted Weighted Average
Shares1

232,713

   

227,273

   

2

%

 

232,174

   

226,114

   

3

%

Adjusted Diluted Income per Share
from Continuing Operations

$

0.52

   

$

0.76

   

(32)

%

 

$

1.04

   

$

1.43

   

(27)

%

__________

(1)

Diluted per share data is computed based on weighted average shares outstanding and, if there is income from continuing operations during the period, the dilutive impact of ordinary share equivalents outstanding during the period. In the case of Adjusted Diluted Weighted Average Shares, Adjusted Income from Continuing Operations is used in determining whether to include such dilutive impact.

 

CONSOLIDATED RESULTS

Total revenues were $700 million in second-quarter 2019 compared to $715 million during the same period in 2018. This decrease was primarily attributable to competitive pressures in the Generic Pharmaceuticals segment, the Established Products portfolio of the Branded Pharmaceuticals segment, and the International segment, partially offset by continued strong growth in the Sterile Injectables segment and the Specialty Products portfolio of the Branded Pharmaceuticals segment.

GAAP net loss from continuing operations in second-quarter 2019 was $98 million compared to GAAP net loss from continuing operations of $52 million during the same period in 2018. This result was primarily attributable to an increase in asset impairment charges and a decrease in gains on the sale of certain assets, partially offset by a decrease in research and development spending. GAAP diluted net loss per share from continuing operations in second-quarter 2019 was $0.43 compared to GAAP diluted net loss per share from continuing operations of $0.23 in second-quarter 2018.

Adjusted income from continuing operations in second-quarter 2019 was $120 million compared to $172 million in second-quarter 2018. This decrease was primarily attributable to lower adjusted gross margin in our Generic Pharmaceuticals segment due to a decline in revenue and an unfavorable change in product mix. Adjusted diluted income per share from continuing operations in second-quarter 2019 was $0.52 compared to $0.76 in second-quarter 2018.

BRANDED PHARMACEUTICALS

Second-quarter 2019 Branded Pharmaceuticals revenues were $209 million compared to $213 million in second-quarter 2018. This decrease was primarily attributable to ongoing generic competition in our Established Products portfolio, offset by continued strong growth of our Specialty Products portfolio.

Specialty Products revenues increased 17 percent to $124 million in second-quarter 2019 compared to second-quarter 2018, primarily driven by the continued strong performance of XIAFLEX®. Sales of XIAFLEX® increased 18 percent to $75 million compared to second-quarter 2018, primarily attributable to demand growth in both the Peyronie's Disease and Dupuytren's Contracture indications driven by continued commercial execution and investment in promotional activities.

With regards to Collagenase Clostridium Histolyticum (CCH) for the treatment of cellulite, Phase 3 data was presented in May at the American Society for Aesthetic Plastic Surgery Hot Topics session by clinical investigator Dr. Lawrence Bass. Additionally, Phase 2 and Phase 3 data was presented by multiple physicians, including clinical investigator Dr. Michael Gold, throughout the Vegas Cosmetic Surgery meeting held in June.

STERILE INJECTABLES

Second-quarter 2019 Sterile Injectables revenues were $244 million, an increase of 12 percent compared to second-quarter 2018. This increase reflects the third-quarter 2018 launch of ertapenem for injection, the authorized generic of INVANZ®, as well as the continued strong growth of VASOSTRICT® and ADRENALIN®. As anticipated, second-quarter 2019 Sterile Injectables revenue declined versus 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.

GENERIC PHARMACEUTICALS

Second-quarter 2019 Generic Pharmaceuticals revenues were $218 million compared to $241 million in second-quarter 2018. This performance was primarily attributable to increased competitive pressure on certain generic products. Partially offsetting the decrease was the impact of certain 2018 product launches including, among others, colchicine tablets, the authorized generic of Colcrys®. During second-quarter 2019, the Generic Pharmaceuticals segment launched three products.

INTERNATIONAL PHARMACEUTICALS

Second-quarter 2019 International Pharmaceuticals revenues were $29 million, compared to $43 million in the same period in 2018.

2019 FINANCIAL GUIDANCE

For the twelve months ending December 31, 2019, at current exchange rates, Endo is reaffirming its previously provided guidance on revenue, adjusted diluted earnings per share from continuing operations and adjusted EBITDA from continuing operations. The Company estimates:

  • Total revenues to be between $2.76 billion and $2.96 billion;
  • Adjusted diluted earnings per share from continuing operations to be between $2.00 and $2.25; and
  • Adjusted EBITDA from continuing operations to be between $1.24 billion and $1.34 billion.

The Company's 2019 non-GAAP financial guidance is based on the following assumptions:

  • Adjusted gross margin of approximately 65.0% to 66.0%;
  • Adjusted operating expenses as a percentage of revenues of approximately 24.5% to 25.0%;
  • Adjusted interest expense of approximately $550 million to $560 million;
  • Adjusted effective tax rate of approximately 17.5% to 18.5%; and
  • Adjusted diluted weighted average shares outstanding of approximately 234 million.
 

BALANCE SHEET, LIQUIDITY AND OTHER UPDATES

In June 2019, the Company borrowed $300.0 million under its existing $1,000.0 million revolving credit facility. The Company expects to use the proceeds from this borrowing for purposes consistent with the Company's previously stated capital allocation priorities, including for general corporate purposes.

As of June 30, 2019, the Company had approximately $1.4 billion in unrestricted cash; debt of $8.4 billion; net debt of approximately $7.0 billion and a net debt to adjusted EBITDA ratio of 5.3.

Second-quarter 2019 cash provided by operating activities was $177 million, compared to $170 million of net cash provided by operating activities during second-quarter 2018.

CONFERENCE CALL INFORMATION

Endo will conduct a conference call with financial analysts to discuss this press release tomorrow at 7:30 a.m. ET. The dial-in number to access the call is U.S./Canada (866) 497-0462, International (678) 509-7598, and the passcode is 4344119. Please dial in 10 minutes prior to the scheduled start time.

A replay of the call will be available from August 6, 2019 at 10:30 a.m. ET until 10:30 a.m. ET on August 13, 2019 by dialing U.S./Canada (855) 859-2056, International (404) 537-3406, and entering the passcode 4344119.

A simultaneous webcast of the call can be accessed by visiting http://investor.endo.com/events-and-presentations. In addition, a replay of the webcast will be available on the Company website for one year following the event.

FINANCIAL SCHEDULES

The following table presents Endo's unaudited Total revenues, net for the three and six months ended June 30, 2019 and 2018 (dollars in thousands):

 

Three Months Ended June 30,

 

Percent
Growth

 

Six Months Ended June 30,

 

Percent
Growth

 

2019

 

2018

   

2019

 

2018

 

Branded Pharmaceuticals:

                     

  Specialty Products:

                     

  XIAFLEX®

$

74,855

   

$

63,500

   

18

%

 

$

143,362

   

$

120,641

   

19

%

  SUPPRELIN® LA

23,714

   

19,963

   

19

%

 

45,770

   

40,540

   

13

%

  Other Specialty (1)

25,524

   

22,585

   

13

%

 

49,927

   

41,612

   

20

%

  Total Specialty Products

$

124,093

   

$

106,048

   

17

%

 

$

239,059

   

$

202,793

   

18

%

  Established Products:

                     

   PERCOCET®

$

28,878

   

$

30,833

   

(6)

%

 

$

59,638

   

$

62,809

   

(5)

%

   TESTOPEL®

11,780

   

13,844

   

(15)

%

 

27,594

   

29,014

   

(5)

%

   Other Established (2)

44,262

   

61,912

   

(29)

%

 

86,247

   

118,256

   

(27)

%

  Total Established Products

$

84,920

   

$

106,589

   

(20)

%

 

$

173,479

   

$

210,079

   

(17)

%

Total Branded Pharmaceuticals (3)

$

209,013

   

$

212,637

   

(2)

%

 

$

412,538

   

$

412,872

   

%

Sterile Injectables:

                     

   VASOSTRICT®

$

116,026

   

$

106,329

   

9

%

 

$

255,163

   

$

220,054

   

16

%

   ADRENALIN®

45,835

   

36,658

   

25

%

 

93,157

   

66,398

   

40

%

   Ertapenem for injection

25,547

   

   

NM

 

57,766

   

   

NM

   Other Sterile Injectables (4)

56,872

   

74,856

   

(24)

%

 

108,242

   

147,245

   

(26)

%

Total Sterile Injectables (3)

$

244,280

   

$

217,843

   

12

%

 

$

514,328

   

$

433,697

   

19

%

Total Generic Pharmaceuticals

$

217,784

   

$

241,236

   

(10)

%

 

$

436,310

   

$

490,476

   

(11)

%

Total International Pharmaceuticals

$

28,650

   

$

42,980

   

(33)

%

 

$

56,962

   

$

78,178

   

(27)

%

Total revenues, net

$

699,727

   

$

714,696

   

(2)

%

 

$

1,420,138

   

$

1,415,223

   

%

__________

(1)

Products included within Other Specialty are NASCOBAL® Nasal Spray and AVEED®. Beginning with our first-quarter 2019 reporting, TESTOPEL®, which was previously included in Other Specialty, has been reclassified and is now included in the Established Products portfolio for all periods presented.

(2)

Products included within Other Established include, but are not limited to, LIDODERM®, VOLTAREN® Gel, EDEX®, FORTESTA® Gel, and TESTIM®, including the authorized generics of TESTIM® and FORTESTA® Gel.

(3)

Individual products presented above represent the top two performing products in each product category for either the three or six months ended June 30, 2019 and/or any product having revenues in excess of $25 million during any quarterly period in 2019 or 2018.

(4)

Products included within Other Sterile Injectables include, but are not limited to, APLISOL® and ephedrine sulfate injection.

 

The following table presents unaudited Condensed Consolidated Statement of Operations data for the three and six months ended June 30, 2019 and 2018 (in thousands, except per share data):

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2019

 

2018

 

2019

 

2018

TOTAL REVENUES, NET

$

699,727

   

$

714,696

   

$

1,420,138

   

$

1,415,223

 

COSTS AND EXPENSES:

             

Cost of revenues

388,208

   

381,905

   

780,117

   

785,503

 

Selling, general and administrative

152,297

   

148,157

   

303,420

   

314,824

 

Research and development

26,348

   

82,102

   

59,834

   

120,748

 

Litigation-related and other contingencies, net

10,315

   

19,620

   

10,321

   

17,120

 

Asset impairment charges

88,438

   

22,767

   

253,886

   

471,183

 

Acquisition-related and integration items

(5,507)

   

5,161

   

(43,008)

   

11,996

 

Interest expense, net

134,809

   

130,059

   

267,484

   

254,049

 

Gain on extinguishment of debt

   

   

(119,828)

   

 

Other (income) expense, net

(597)

   

(28,831)

   

4,205

   

(31,709)

 

LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAX

$

(94,584)

   

$

(46,244)

   

$

(96,293)

   

$

(528,491)

 

INCOME TAX EXPENSE

3,468

   

6,235

   

14,371

   

21,726

 

LOSS FROM CONTINUING OPERATIONS

$

(98,052)

   

$

(52,479)

   

$

(110,664)

   

$

(550,217)

 

DISCONTINUED OPERATIONS, NET OF TAX

(7,953)

   

(8,388)

   

(13,914)

   

(16,139)

 

NET LOSS

$

(106,005)

   

$

(60,867)

   

$

(124,578)

   

$

(566,356)

 

NET LOSS PER SHARE—BASIC:

             

Continuing operations

$

(0.43)

   

$

(0.23)

   

$

(0.49)

   

$

(2.46)

 

Discontinued operations

(0.04)

   

(0.04)

   

(0.06)

   

(0.07)

 

Basic

$

(0.47)

   

$

(0.27)

   

$

(0.55)

   

$

(2.53)

 

NET LOSS PER SHARE—DILUTED:

             

Continuing operations

$

(0.43)

   

$

(0.23)

   

$

(0.49)

   

$

(2.46)

 

Discontinued operations

(0.04)

   

(0.04)

   

(0.06)

   

(0.07)

 

Diluted

$

(0.47)

   

$

(0.27)

   

$

(0.55)

   

$

(2.53)

 

WEIGHTED AVERAGE SHARES:

             

Basic

226,221

   

223,834

   

225,408

   

223,677

 

Diluted

226,221

   

223,834

   

225,408

   

223,677

 
 

The following table presents unaudited Condensed Consolidated Balance Sheet data at June 30, 2019 and December 31, 2018 (in thousands):

 

June 30, 2019

 

December 31, 2018

ASSETS

     

CURRENT ASSETS:

     

Cash and cash equivalents

$

1,446,949

   

$

1,149,113

 

Restricted cash and cash equivalents

307,587

   

305,368

 

Accounts receivable

442,078

   

470,570

 

Inventories, net

335,890

   

322,179

 

Other current assets

222,548

   

95,920

 

Total current assets

$

2,755,052

   

$

2,343,150

 

TOTAL NON-CURRENT ASSETS

7,319,237

   

7,789,243

 

TOTAL ASSETS

$

10,074,289

   

$

10,132,393

 

LIABILITIES AND SHAREHOLDERS' DEFICIT

     

CURRENT LIABILITIES:

     

Accounts payable and accrued expenses, including legal settlement accruals

$

1,786,054

   

$

1,914,285

 

Other current liabilities

49,766

   

35,811

 

Total current liabilities

$

1,835,820

   

$

1,950,096

 

LONG-TERM DEBT, LESS CURRENT PORTION, NET

8,369,972

   

8,224,269

 

OTHER LIABILITIES

458,969

   

456,311

 

SHAREHOLDERS' DEFICIT

(590,472)

   

(498,283)

 

TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT

$

10,074,289

   

$

10,132,393

 
 

The following table presents unaudited Condensed Consolidated Statement of Cash Flow data for the six months ended June 30, 2019 and 2018 (in thousands):

 

Six Months Ended June 30,

 

2019

 

2018

OPERATING ACTIVITIES:

     

Net loss

$

(124,578)

   

$

(566,356)

 

Adjustments to reconcile Net loss to Net cash provided by operating activities:

     

Depreciation and amortization

320,788

   

379,646

 

Asset impairment charges

253,886

   

471,183

 

Other, including cash payments to claimants from Qualified Settlement Funds

(363,494)

   

(65,341)

 

Net cash provided by operating activities

$

86,602

   

$

219,132

 

INVESTING ACTIVITIES:

     

Purchases of property, plant and equipment, excluding capitalized interest

$

(23,632)

   

$

(41,960)

 

Proceeds from sale of business and other assets, net

2,594

   

37,971

 

Other

(1,278)

   

(4,999)

 

Net cash used in investing activities

$

(22,316)

   

$

(8,988)

 

FINANCING ACTIVITIES:

     

Proceeds from (payments on) borrowings, net

$

257,605

   

$

(19,650)

 

Other

(22,676)

   

(21,143)

 

Net cash provided by (used in) financing activities

$

234,929

   

$

(40,793)

 

Effect of foreign exchange rate

841

   

(1,010)

 

NET INCREASE IN CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS

$

300,056

   

$

168,341

 

CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS, BEGINNING OF PERIOD

1,476,837

   

1,311,014

 

CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS, END OF PERIOD

$

1,776,893

   

$

1,479,355

 
 

SUPPLEMENTAL FINANCIAL INFORMATION

To supplement the financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), the Company uses certain non-GAAP financial measures. For additional information on the Company's use of such non-GAAP financial measures, refer to Endo's Current Report on Form 8-K furnished today to the U.S. Securities and Exchange Commission, which includes an explanation of the Company's reasons for using non-GAAP measures.

The tables below provide reconciliations of certain of our non-GAAP financial measures to their most directly comparable GAAP amounts. Refer to the "Notes to the Reconciliations of GAAP and Non-GAAP Financial Measures" section below for additional details regarding the adjustments to the non-GAAP financial measures detailed throughout this Supplemental Financial Information section.

Reconciliation of EBITDA and Adjusted EBITDA (non-GAAP)

The following table provides a reconciliation of Net loss (GAAP) to Adjusted EBITDA (non-GAAP) for the three and six months ended June 30, 2019 and 2018 (in thousands):

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2019

 

2018

 

2019

 

2018

Net loss (GAAP)

$

(106,005)

   

$

(60,867)

   

$

(124,578)

   

$

(566,356)

 

Income tax expense

3,468

   

6,235

   

14,371

   

21,726

 

Interest expense, net

134,809

   

130,059

   

267,484

   

254,049

 

Depreciation and amortization (15)

158,055

   

170,011

   

320,788

   

344,469

 

EBITDA (non-GAAP)

$

190,327

   

$

245,438

   

$

478,065

   

$

53,888

 
               

Inventory step-up and other cost savings (2)

$

   

$

124

   

$

   

$

190

 

Upfront and milestone-related payments (3)

1,444

   

36,964

   

2,383

   

38,296

 

Inventory reserve increase from restructuring (4)

   

202

   

   

2,590

 

Separation benefits and other restructuring (5)

2,124

   

28,951

   

4,149

   

75,550

 

Certain litigation-related and other contingencies, net (6)

10,315

   

19,620

   

10,321

   

17,120

 

Asset impairment charges (7)

88,438

   

22,767

   

253,886

   

471,183

 

Acquisition-related and integration costs (8)

   

1,034

   

   

1,034

 

Fair value of contingent consideration (9)

(5,507)

   

4,127

   

(43,008)

   

10,962

 

Gain on extinguishment of debt (10)

   

   

(119,828)

   

 

Share-based compensation

12,600

   

12,096

   

37,333

   

29,986

 

Other (income) expense, net (16)

(597)

   

(28,831)

   

4,205

   

(31,709)

 

Other adjustments

3

   

(10)

   

87

   

(708)

 

Discontinued operations, net of tax (13)

7,953

   

8,388

   

13,914

   

16,139

 

Adjusted EBITDA (non-GAAP)

$

307,100

   

$

350,870

   

$

641,507

   

$

684,521

 
 

Reconciliation of Adjusted Income from Continuing Operations (non-GAAP)

The following table provides a reconciliation of our Loss from continuing operations (GAAP) to our Adjusted income from continuing operations (non-GAAP) for the three and six months ended June 30, 2019 and 2018 (in thousands):

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2019

 

2018

 

2019

 

2018

Loss from continuing operations (GAAP)

$

(98,052)

   

$

(52,479)

   

$

(110,664)

   

$

(550,217)

 

Non-GAAP adjustments:

             

Amortization of intangible assets (1)

140,418

   

153,215

   

286,017

   

310,387

 

Inventory step-up and other cost savings (2)

   

124

   

   

190

 

Upfront and milestone-related payments (3)

1,444

   

36,964

   

2,383

   

38,296

 

Inventory reserve increase from restructuring (4)

   

202

   

   

2,590

 

Separation benefits and other restructuring (5)

2,124

   

28,951

   

4,149

   

75,550

 

Certain litigation-related and other contingencies, net (6)

10,315

   

19,620

   

10,321

   

17,120

 

Asset impairment charges (7)

88,438

   

22,767

   

253,886

   

471,183

 

Acquisition-related and integration costs (8)

   

1,034

   

   

1,034

 

Fair value of contingent consideration (9)

(5,507)

   

4,127

   

(43,008)

   

10,962

 

Gain on extinguishment of debt (10)

   

   

(119,828)

   

 

Other (11)

86

   

(28,007)

   

1,620

   

(31,261)

 

Tax adjustments (12)

(18,861)

   

(14,323)

   

(42,388)

   

(22,856)

 

Adjusted income from continuing operations (non-GAAP)

$

120,405

   

$

172,195

   

$

242,488

   

$

322,978

 
 

Reconciliation of Other Adjusted Income Statement Data (non-GAAP)

The following tables provide detailed reconciliations of various other income statement data between the GAAP and non-GAAP amounts for the three and six months ended June 30, 2019 and 2018 (in thousands, except per share data):

Three Months Ended June 30, 2019

 

Total
revenues,
net

 

Cost of
revenues

 

Gross
margin

 

Gross
margin
%

 

Total
operating
expenses

 

Operating
expense to
revenue %

 

Operating
income
from
continuing
operations

 

Operating
margin %

 

Other
non-
operating
expense,
net

 

(Loss)
income
from
continuing
operations
before
income tax

 

Income
tax
expense

 

Effective
tax rate

 

(Loss)
income
from
continuing
operations

 

Discontinued
operations,
net of tax

 

Net (loss)
income

 

Diluted
(loss)
income
per share
from
continuing
operations (14)

Reported (GAAP)

$    699,727

 

$ 388,208

 

$ 311,519

 

44.5 %

 

$ 271,891

 

38.9 %

 

$    39,628

 

5.7 %

 

$ 134,212

 

$   (94,584)

 

$   3,468

 

(3.7)%

 

$   (98,052)

 

$      (7,953)

 

$ (106,005)

 

$    (0.43)

Items impacting
comparability:

                                                             

Amortization of
intangible assets (1)

 

(140,418)

 

140,418

     

     

140,418

     

 

140,418

 

     

140,418

 

 

140,418

   

Upfront and
milestone-related
payments (3)

 

(739)

 

739

     

(705)

     

1,444

     

 

1,444

 

     

1,444

 

 

1,444

   

Separation benefits
and other
restructuring (5)

 

 

     

(2,124)

     

2,124

     

 

2,124

 

     

2,124

 

 

2,124

   

Certain litigation-
related and other
contingencies, net (6)

 

 

     

(10,315)

     

10,315

     

 

10,315

 

     

10,315

 

 

10,315

   

Asset impairment
charges (7)

 

 

     

(88,438)

     

88,438

     

 

88,438

 

     

88,438

 

 

88,438

   

Fair value of
contingent
consideration (9)

 

 

     

5,507

     

(5,507)

     

 

(5,507)

 

     

(5,507)

 

 

(5,507)

   

Other (11)

 

 

     

175

     

(175)

     

(261)

 

86

 

     

86

 

 

86

   

Tax adjustments (12)

 

 

     

     

     

 

 

18,861

     

(18,861)

 

 

(18,861)

   

Exclude discontinued
operations, net of tax

(13)

 

 

     

     

     

 

 

     

 

7,953

 

7,953

   

After considering items
(non-GAAP)

$    699,727

 

$ 247,051

 

$ 452,676

 

64.7 %

 

$ 175,991

 

25.2 %

 

$  276,685

 

39.5 %

 

$ 133,951

 

$  142,734

 

$ 22,329

 

15.6 %

 

$  120,405

 

$             —

 

$  120,405

 

$     0.52

 

Three Months Ended June 30, 2018

 

Total
revenues,
net

 

Cost of
revenues

 

Gross
margin

 

Gross
margin
%

 

Total
operating
expenses

 

Operating
expense to
revenue %

 

Operating
income
from
continuing
operations

 

Operating
margin %

 

Other non-
operating
expense,
net

 

(Loss)
income
from
continuing
operations
before
income tax

 

Income
tax
expense

 

Effective
tax rate

 

(Loss)
income
from
continuing
operations

 

Discontinued
operations,
net of tax

 

Net (loss)
income

 

Diluted
(loss)
income
per share
from
continuing
operations (14)

Reported (GAAP)

$    714,696

 

$ 381,905

 

$ 332,791

 

46.6 %

 

$ 277,807

 

38.9 %

 

$    54,984

 

7.7 %

 

$ 101,228

 

$   (46,244)

 

$   6,235

 

(13.5)%

 

$   (52,479)

 

$      (8,388)

 

$   (60,867)

 

$    (0.23)

Items impacting
comparability:

                                                             

Amortization of
intangible assets (1)

 

(153,215)

 

153,215

     

     

153,215

     

 

153,215

 

     

153,215

 

 

153,215

   

Inventory step-up and
other cost savings (2)

 

(124)

 

124

     

     

124

     

 

124

 

     

124

 

 

124

   

Upfront and
milestone-related
payments (3)

 

(694)

 

694

     

(36,270)

     

36,964

     

 

36,964

 

     

36,964

 

 

36,964

   

Inventory reserve
increase from
restructuring (4)

 

(202)

 

202

     

     

202

     

 

202

 

     

202

 

 

202

   

Separation benefits
and other
restructuring (5)

 

(26,613)

 

26,613

     

(2,338)

     

28,951

     

 

28,951

 

     

28,951

 

 

28,951

   

Certain litigation-
related and other
contingencies, net (6)

 

 

     

(19,620)

     

19,620

     

 

19,620

 

     

19,620

 

 

19,620

   

Asset impairment
charges (7)

 

 

     

(22,767)

     

22,767

     

 

22,767

 

     

22,767

 

 

22,767

   

Acquisition-related
and integration costs
(8)

 

 

     

(1,034)

     

1,034

     

 

1,034

 

     

1,034

 

 

1,034

   

Fair value of
contingent
consideration (9)

 

 

     

(4,127)

     

4,127

     

 

4,127

 

     

4,127

 

 

4,127

   

Other (11)

 

 

     

     

     

28,007

 

(28,007)

 

     

(28,007)

 

 

(28,007)

   

Tax adjustments (12)

 

 

     

     

     

 

 

14,323

     

(14,323)

 

 

(14,323)

   

Exclude discontinued
operations, net of tax
(13)

 

 

     

     

     

 

 

     

 

8,388

 

8,388

   

After considering items
(non-GAAP)

$    714,696

 

$ 201,057

 

$ 513,639

 

71.9 %

 

$ 191,651

 

26.8 %

 

$  321,988

 

45.1 %

 

$ 129,235

 

$  192,753

 

$ 20,558

 

10.7 %

 

$  172,195

 

$             —

 

$  172,195

 

$     0.76

 

Six Months Ended June 30, 2019

 

Total
revenues,
net

 

Cost of
revenues

 

Gross
margin

 

Gross
margin
%

 

Total
operating
expenses

 

Operating
expense to

revenue %

 

Operating
income
from
continuing
operations

 

Operating
margin %

 

Other
non-
operating
expense,
net

 

(Loss)
income
from
continuing
operations
before
income tax

 

Income
tax
expense

 

Effective
tax rate

 

(Loss)
income
from
continuing
operations

 

Discontinued
operations,
net of tax

 

Net (loss)
income

 

Diluted
(loss)
income
per share
from
continuing
operations (14)

Reported (GAAP)

$ 1,420,138

 

$ 780,117

 

$ 640,021

 

45.1 %

 

$ 584,453

 

41.2 %

 

$    55,568

 

3.9 %

 

$ 151,861

 

$   (96,293)

 

$ 14,371

 

(14.9)%

 

$ (110,664)

 

$    (13,914)

 

$ (124,578)

 

$    (0.49)

Items impacting
comparability:

                                                             

Amortization of
intangible assets (1)

 

(286,017)

 

286,017

     

     

286,017

     

 

286,017

 

     

286,017

 

 

286,017

   

Upfront and
milestone-related
payments (3)

 

(1,400)

 

1,400

     

(983)

     

2,383

     

 

2,383

 

     

2,383

 

 

2,383

   

Separation benefits
and other
restructuring (5)

 

 

     

(4,149)

     

4,149

     

 

4,149

 

     

4,149

 

 

4,149

   

Certain litigation-
related and other
contingencies, net (6)

 

 

     

(10,321)

     

10,321

     

 

10,321

 

     

10,321

 

 

10,321

   

Asset impairment
charges (7)

 

 

     

(253,886)

     

253,886

     

 

253,886

 

     

253,886

 

 

253,886

   

Fair value of
contingent
consideration (9)

 

 

     

43,008

     

(43,008)

     

 

(43,008)

 

     

(43,008)

 

 

(43,008)

   

Gain on
extinguishment of
debt (10)

 

 

     

     

     

119,828

 

(119,828)

 

     

(119,828)

 

 

(119,828)

   

Other (11)

 

 

     

175

     

(175)

     

(1,795)

 

1,620

 

     

1,620

 

 

1,620

   

Tax adjustments (12)

 

 

     

     

     

 

 

42,388

     

(42,388)

 

 

(42,388)

   

Exclude discontinued
operations, net of tax
(13)

 

 

     

     

     

 

 

     

 

13,914

 

13,914

   

After considering items
(non-GAAP)

$ 1,420,138

 

$ 492,700

 

$ 927,438

 

65.3 %

 

$ 358,297

 

25.2 %

 

$  569,141

 

40.1 %

 

$ 269,894

 

$  299,247

 

$ 56,759

 

19.0 %

 

$  242,488

 

$             —

 

$  242,488

 

$     1.04

 

Six Months Ended June 30, 2018

 

Total
revenues,
net

 

Cost of
revenues

 

Gross
margin

 

Gross
margin %

 

Total
operating
expenses

 

Operating
expense to
revenue %

 

Operating
(loss)
income
from
continuing
operations

 

Operating
margin %

 

Other
non-
operating
expense,
net

 

(Loss)
income
from
continuing
operations
before
income tax

 

Income
tax
expense

 

Effective
tax rate

 

(Loss)
income
from
continuing
operations

 

Discontinued
operations,
net of tax

 

Net (loss)
income

 

Diluted
(loss)
income
per share
from
continuing
operations (14)

Reported (GAAP)

$ 1,415,223

 

$ 785,503

 

$ 629,720

 

44.5 %

 

$ 935,871

 

66.1 %

 

$ (306,151)

 

(21.6)%

 

$ 222,340

 

$ (528,491)

 

$ 21,726

 

(4.1)%

 

$ (550,217)

 

$    (16,139)

 

$ (566,356)

 

$    (2.46)

Items impacting
comparability:

                                                             

Amortization of
intangible assets (1)

 

(310,387)

 

310,387

     

     

310,387

     

 

310,387

 

     

310,387

 

 

310,387

   

Inventory step-up and
other cost savings (2)

 

(190)

 

190

     

     

190

     

 

190

 

     

190

 

 

190

   

Upfront and
milestone-related
payments (3)

 

(1,350)

 

1,350

     

(36,946)

     

38,296

     

 

38,296

 

     

38,296

 

 

38,296

   

Inventory reserve
increase from
restructuring (4)

 

(2,590)

 

2,590

     

     

2,590

     

 

2,590

 

     

2,590

 

 

2,590

   

Separation benefits
and other
restructuring (5)

 

(53,831)

 

53,831

     

(21,719)

     

75,550

     

 

75,550

 

     

75,550

 

 

75,550

   

Certain litigation-
related and other
contingencies, net (6)

 

 

     

(17,120)

     

17,120

     

 

17,120

 

     

17,120

 

 

17,120

   

Asset impairment
charges (7)

 

 

     

(471,183)

     

471,183

     

 

471,183

 

     

471,183

 

 

471,183

   

Acquisition-related
and integration costs
(8)

 

 

     

(1,034)

     

1,034

     

 

1,034

 

     

1,034

 

 

1,034

   

Fair value of
contingent
consideration (9)

 

 

     

(10,962)

     

10,962

     

 

10,962

 

     

10,962

 

 

10,962

   

Other (11)

 

 

     

630

     

(630)

     

30,631

 

(31,261)

 

     

(31,261)

 

 

(31,261)

   

Tax adjustments (12)

 

 

     

     

     

 

 

22,856

     

(22,856)

 

 

(22,856)

   

Exclude discontinued
operations, net of tax
(13)

 

 

     

     

     

 

 

     

 

16,139

 

16,139

   

After considering items
(non-GAAP)

$ 1,415,223

 

$ 417,155

 

$ 998,068

 

70.5 %

 

$ 377,537

 

26.7 %

 

$  620,531

 

43.8 %

 

$ 252,971

 

$  367,560

 

$ 44,582

 

12.1 %

 

$  322,978

 

$             —

 

$  322,978

 

$     1.43

 

Notes to the Reconciliations of GAAP and Non-GAAP Financial Measures

Notes to certain line items included in the reconciliations of the GAAP financial measures to the Non-GAAP financial measures for the three and six months ended June 30, 2019 and 2018 are as follows:

(1)

Adjustments for amortization of commercial intangible assets included the following (in thousands):

   
 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2019

 

2018

 

2019

 

2018

Amortization of intangible assets excluding fair value
step-up from contingent consideration

$

134,473

   

$

146,906

   

$

271,338

   

$

296,766

 

Amortization of intangible assets related to fair value
step-up from contingent consideration

5,945

   

6,309

   

14,679

   

13,621

 

Total

$

140,418

   

$

153,215

   

$

286,017

   

$

310,387

 
   

(2)

To exclude adjustments for inventory step-up.

(3)

Adjustments for upfront and milestone-related payments to partners included the following (in thousands):

   
 

Three Months Ended June 30,

 

2019

 

2018

 

Cost of revenues

 

Operating
expenses

 

Cost of revenues

 

Operating
expenses

Sales-based

$

739

   

$

   

$

694

   

$

 

Development-based

   

705

   

   

36,270

 

Total

$

739

   

$

705

   

$

694

   

$

36,270

 
 
 
 

Six Months Ended June 30,

 

2019

 

2018

 

Cost of revenues

 

Operating
expenses

 

Cost of revenues

 

Operating
expenses

Sales-based

$

1,400

   

$

   

$

1,350

   

$

 

Development-based

   

983

   

   

36,946

 

Total

$

1,400

   

$

983

   

$

1,350

   

$

36,946

 
   

(4)

To exclude charges reflecting adjustments to excess inventory reserves related to our various restructuring initiatives.

(5)

Adjustments for separation benefits and other restructuring included the following (in thousands):

   
 

Three Months Ended June 30,

 

2019

 

2018

 

Cost of revenues

 

Operating
expenses

 

Cost of revenues

 

Operating
expenses

Separation benefits

$

   

$

410

   

$

3,983

   

$

1,440

 

Accelerated depreciation and product discontinuation
charges