Endo International plc
Q4 2019 Earnings Call Transcript

Published: 26 Feb 2020

[Operator:]

Thank you for standing by and welcome to the Q4 2019 Endo International plc Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. [Operator Instructions]I would now like to hand the conference over to your speaker today, Laure Park, Senior Vice President, Investor Relations and Corporate Affairs. You may begin.

[Laure Park:]

Thank you. Good morning and thank you for joining us to discuss our fourth quarter 2019 financial results. Joining me on today's call are Paul Campanelli, Chairman, President, and CEO of Endo; Blaise Coleman, Executive Vice President and CFO; Pat Barry, Executive Vice President and Chief Commercial Officer of our Branded business; and Domenico Ciarico, Executive Vice President and Chief Commercial Officer of our Sterile and Generics business.We have prepared a slide presentation to accompany today's webcast, and that presentation as well as other material are posted online in the Investor section at endo.com.I'd like to remind you that any forward-looking statements made by management are covered under the US Private Securities Litigation Reform Act of 1995 and the applicable Canadian securities laws and are subject to the changes, risks and uncertainties described in yesterday's press release and in 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 Endo's current report on Form 8-K furnished with the SEC today for Endo's reasons for including those non-GAAP measures. The reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures is contained in our earnings press release issued prior to the call unless otherwise noted therein.I would like turn the call over to Paul.

[Paul Campanelli:]

Thanks, Laure. 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 earlier this morning.As announced last week, Blaise Coleman will succeed me as President and CEO to become a member of the board, effective March 6. I will continue in my role as chairman of the board.Over my five years working with Blaise, I've developed a great friendship and tremendous respect for his leadership and ability to drive critical strategic initiatives with [Technical Difficulty].His deep financial and enterprise-wide business acumen has been critical to our ability to execute towards our multi-year transformation strategy. I am excited to hand the reins over to Blaise and I speak on behalf of the entire board of directors when I say that I have the utmost confidence in his ability to lead Endo into its next phase of growth.Blaise, please say a few words.

[Blaise Coleman:]

Yes. Thanks so much, Paul. I'm honored and excited to lead Endo in its next phase. With a highly talented Endo team and a set of significant opportunities that in combination has the potential to create shareholder value and help us become the company we aspire to be over the long term. Thanks to you and the board for the opportunity.I'm also very excited, Mark Bradley will succeed me as Executive Vice President and Chief Financial Officer. Mark is currently Endo's Senior Vice President, Corporate Development and Treasurer. He has spent over 25 years of broad financial and corporate development experience. You will get a chance to meet Mark in the upcoming months.Now, I'll turn it back to Paul to review our fourth quarter 2019 earnings presentation.

[Paul Campanelli:]

Thanks, Blaise. Beginning on slide two, here's a brief agenda for today's call. Moving to slide 3, I'm pleased with our 2019 progress in this multi-year transformational journey. We are seeing the positive impact of investments in our core growth areas of sterile injectables and branded specialty portfolio, including the development of CCH for Cellulite.In 2019, our Branded specialty portfolio and Sterile Injectables segment both grew double digits. This is led by our flagship products, XIAFLEX and VASOSTRICT, which grew by 24% and 17%, respectively for full year 2019.The US FDA accepted our original BLA filing for CCH for Cellulite and we have a PDUFA date of July 6, 2020. We've launched 14 products across the sterile and generics business.At the end of the fourth quarter, we launched generic Afinitor with 180 days of Hatch-Waxman exclusivity on three strengths. I'm proud of the products we've launched and the innovative strategies that we've deployed to bring them to market.As a result of the debt refinancing completed in March, we successfully improved our financial flexibility by meaningfully reducing our nearest debt maturities and by amending and extending our revolving credit facility.We received a favorable FDA decision that vasopressin cannot be used for bulk compounding by outsourcing facilities and we won litigation against a generic manufacturer on adrenaline 1 ml.And as it relates to the opioid litigation, we settled the Track 1 opioid cases with Cuyahoga and Summit Counties. And in January of this year, we announced the settlement with the State of Oklahoma for $8.75 million. We continue to be open to identifying and executing on a constructive path forward to resolve the pending opioid litigation, but there can be no assurances that resolution will be achieved.It is important to note that while settlement discussions remain ongoing, we are prepared to litigate, if necessary. I understand that there are many questions on this topic. However, I'm sure you can appreciate we are limited in what we can say and we'll have no further comment at this time.Turning the slide 4. You will see a snapshot of our segment revenues and our consolidated adjusted EBITDA for the fourth quarter. Total revenues of $765 million and adjusted EBITDA of $346 million exceeded expectations. Blaise will walk you through our financial performance later in our presentation.Now, moving to slide 5. The specialty products portfolio of our Branded Pharmaceuticals segment continued with its strong performances, with fourth quarter year-over-year revenue growth of 15%.For the full year, Specialty Products portfolio revenue exceeded $500 million with year-over-year revenue growth of 17%. This performance was driven by strong execution across all products within the specialty products portfolio.Our XIAFLEX franchise had another outstanding quarter of growth. The franchise saw an acceleration in revenue growth of 27% compared to the fourth quarter of 2018 and 23% compared to the third quarter of 2019. Based on historical purchasing patterns, fourth quarter tends to be the strongest quarter for XIAFLEX.Overall, the growth reflects continued strong underlying demand in both the Peyronie's Disease and Dupuytren's Contracture indications due to the investment and outstanding commercial execution behind XIAFLEX.I am proud of the success of our disease awareness and consumer activation strategies, which have resulted in a double-digit increase in diagnosis rates for both Peyronie's Disease and Dupuytren's Contracture.Based on IQUVIA data, we saw the diagnosis rate increase by an impressive 29% for Peyronie's Disease and by 13% for Dupuytren's Contracture. Despite these increases, the diagnosis and treatment rates remain low, indicating the potential for future growth for both indications.These consumer activation and condition awareness capabilities, along with our commercial capabilities, will be leveraged in the anticipated CCH for Cellulite launch, as well as other future products.The specialty products portfolio, fourth quarter revenue growth was offset by the year-over-year revenue decline in our established products portfolio. The decline was primarily due to generic competition and resulted in a 2% year-over-year decline in our total Branded Pharmaceuticals segment revenue.Based on the continued strong underlying growth in our specialty products portfolio, we expect full-year 2020 XIAFLEX revenues to grow approximately 20%, the specialty products portfolio to have revenue growth of low to mid-teens percentage and full-year 2020 Branded Pharmaceuticals segment revenue growth to be in the low to mid-single digit percentage range. The 2020 guidance contemplates further erosion and competitive pressure to our established brands.Moving on to our CCH for Cellulite product on slide 6. 2020 will be an important year, with our anticipated third quarter approval based on the July 6 PDUFA date and expected launch in the fourth quarter, if approved.In 2019, we made significant progress preparing for the long-term commercial success of CCH for Cellulite by building awareness and critical relationships, as well as refining our understanding of our target consumer and beginning to build our medical aesthetics team. In 2020, we will build on this momentum as we continue to prepare for commercialization.From a key opinion leader and healthcare professional standpoint, we plan to attend approximately 25 conferences and a number of advisory boards in 2020. We will use the insight from these events to develop and refine our strategy.Early experience in physician injector training programs, the sales leadership hired in 2019 will focus on building the sales force over several ways in 2020. This enables us to be prudent with our investments, while still optimizing launch readiness.From a consumer activation standpoint, we will be implementing direct-to-consumer and HCP condition awareness campaigns and we will continue to focus on ongoing data generation and clinical studies, including durability, dosing and injection techniques.Turning to slide 7, our Sterile Injectables segment continues to deliver with revenues growth of 10% in the fourth quarter of 2019 compared to the fourth quarter of 2018. This performance was driven by continued strong growth in VASOSTRICT and ADRENALIN. For the full year, Sterile Injectables segment revenues exceeded $1 billion.VASOSTRICT revenues were $147 million in the fourth quarter of 2019, a 21% increase compared to the same period in 2018. Growth in VASOSTRICT was due to price and modest volume growth.ADRENALIN revenue was $46 million in the quarter, up 10% compared to the same period in the prior year, primarily driven by volume.Looking forward, we expect 2020 Sterile Injectables revenues to grow in the low to mid-single digit percentage range, with VASOSTRICT revenues expected to grow by mid to high-teens percentage range. The 2020 Sterile Injectables revenue growth range reflects the impact of anticipated competitive pressures on certain products during the year.Turning to our Generic Pharmaceuticals segment on slide 8, the decrease in revenues for this segment during the fourth quarter compared to the same period in 2018 primarily reflects the impact of anticipated competitive pressures on key products, which was partially offset by the benefit of certain product launches. During the fourth quarter, we launched five products.On the generic [Technical Difficulty], as we've noted before, the environment remains active and dynamic, reflecting a high level of competition which is primarily driven by new market entrants. Keeping that in mind, we are guiding for full-year 2020 Generic Pharmaceuticals revenue to decline in the mid-teens percentage. The expected decline in the Generic Pharmaceuticals segment relates to assumed competitive pressures on products, including colchicine tablets, the authorized generic of Colcrys.Additionally, 2020 guidance assumes that the timing of new product launches are weighted more heavily towards the second half of the year.Moving to slide nine, our International Pharmaceuticals segment performance reflects, among other things, the impact of ongoing generic competition on our [Technical Difficulty] outside of the United States.For the full-year 2020, we expect International Pharmaceuticals revenues, which are primarily in Canada, to decline by the high-teens percentage range.Turning to slide 10, we shift focus to our diverse pipeline. We've covered much of this earlier, but I want to point to a few items. On CCH for Cellulite, our PDUFA date is July 6, 2020. And if approved, we plan to launch the product in the fourth quarter of 2020.As part of our data generation plan, we have several real world CCH studies in development focused on dosing, injection technique, and responses in target patient populations, as well as rollover studies on durability.At this point, we've initiated XIAFLEX development programs for the treatment of plantar fibromatosis and adhesive capsulitis. We are currently running a Phase I label expansion PK study on plasma clearance of vasopressin in healthy volunteers, which we believe will further advance our clinical work and help physicians.We plan to launch 15 to 20 products in 2020 within the Sterile Injectables, Generics and International segments, and have launched four products year-to-date, including sucralfate oral suspension, the authorized generic of Carafate.Our Sterile Injectables pipeline is supplemented by our strategic relationships with third parties, such as Nevakar, which will potentially provide five differentiated 505(b) (2) hospital and [Technical Difficulty] care based products. We anticipate launching the first Nevakar product in late 2020.The table on the bottom of slide 10 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 financial results and full-year 2020 financial guidance. Blaise?

[Blaise Coleman:]

Thank you, Paul. First, on slide 11, you'll see a snapshot of the fourth quarter GAAP and non-GAAP financial results. Paul covered company and segment revenues earlier, so I will not review that again.On a GAAP basis, we had diluted loss per share from continuing operations of $0.92 in the quarter compared to a loss of $1.18 per share in the fourth quarter of 2018. GAAP loss from continuing operations in the fourth quarter of 2019 was $208 million compared to a GAAP loss from continuing operations of $265 million during the same period in 2018.On an adjusted basis, fourth quarter adjusted income from continuing operations of $171 million was comparable to fourth quarter 2018 adjusted income from continuing operations of $175 million. Adjusted diluted net income per share from continuing operations in fourth quarter 2019 was $0.74 compared to $0.75 in fourth quarter 2018.Slide 12 provides a summary of Endo's 2020 full-year financial guidance. We expect 2020 total revenues in the range of $2.72 billion to $2.92 billion, adjusted EBITDA in the range of $1.22 billion to $1.32 billion and adjusted diluted net income per share in the range of $2.15 to $2.40.There are several considerations that I will review as you think about 2020 guidance. First, the midpoint of our revenue guidance range implies a low-single digit percentage decline compared to 2019 revenue. This implied decline primarily reflects the expected decline in our Generic Pharmaceuticals segment, the established products portfolio of our Branded Pharmaceuticals segment and our International Pharmaceuticals segment, primarily driven by anticipated 2020 competitive events for several of our key products and the expected timing of our new product launches that are skewed towards the second half of 2020. This expected decline is significantly offset by the expected continued growth in our Sterile Injectables segment and our branded specialty products portfolio.Secondly, our adjusted EBITDA guidance is reflective of our commitment to invest for the long term as we invest in our core areas of growth, with the funding of the CCH Cellulite commercial launch, new investments in XIAFLEX lifecycle management opportunities, and an increase in our Sterile Injectables new product development spend. We believe that these strategic investments in our portfolio will generate long-term value for Endo as we move forward.And finally, our 2020 guidance for adjusted diluted net income per share from continuing operations, adjusted EBITDA and adjusted operating expenses exclude opioid-related legal expenses.Please note that the 2019 comparable adjusted EBITDA and adjusted EPS presented on slide 14 also excludes opioid-related legal expenses for compatibility purposes with 2020 guidance.The company's guidance is based on the following assumptions. Full-year 2020 adjusted gross margin of approximately 66% to 67%. Our adjusted gross margin assumption midpoint versus 2019 adjusted gross margin primarily reflects a shift in sales mix, including a reduction in revenues from authorized generics.We expect adjusted operating expenses to be between 25% and 25.5% of revenues. This assumption reflects our continued investments in our core areas of growth for the long term mentioned earlier.We expect adjusted interest expense of approximately 5$35 million to $545 million.In terms of our adjusted effective tax rate, we expect our 2020 adjusted effective tax rate to be in the range of 13.5% to 14.5% range.Although we do not provide specific quarterly guidance, consistent with 2019, we expect the split of total enterprise revenue, adjusted EBITDA and adjusted earnings per share to be more heavily weighted towards the second half of 2020 due to our expected revenue and adjusted operating expense cadence. The higher second half 2020 revenue reflects the expected timing of 2020 new product launches, as well as the impact of historical purchasing patterns in the branded specialty business.In terms of adjusted operating expenses, consistent with 2019, we anticipate the first quarter to be our highest quarter of spend in 2020, mainly due to the timing of certain corporate-related expenses.We expect the first quarter of 2020 adjusted effective tax rate to be the highest quarterly rate, well above our full-year estimated adjusted effective tax rate range due to jurisdictional mix.Moving to slide 13, this is a summary of the segment and product-specific guidance previously discussed.Advancing to slide 14 and wrapping up the financial discussion. For the full-year 2019, we had unrestricted cash flow prior to debt payments of $358 million, which is higher than what we guided to in November. This favorability resulted from higher adjusted EBITDA and lower-than-planned capital expenditures.We ended 2019 with approximately $1.5 billion of unrestricted cash and a net debt to adjusted EBITDA leverage ratio of approximately 5.3 times. As we look forward to 2020, we expect cash flow prior to debt payment in the range of approximately $50 million to $150 million. This assumes approximately $225 million in payments into the mesh qualified settlement fund and for mesh legal expenses; approximately $60 million in estimated other settlement payments, including payments related to the previously announced LIDODERM antitrust and TRT product liability settlements; and $80 million in opioid-related legal expenses and previously announced settlements.Now, let me turn it back over to Paul. Paul?

[Paul Campanelli:]

Thank you, Blaise. Finally, moving to slide 15 and concluding today's presentation. As with any journey, evolution is constant. Since 2016, we've executed against our strategic multi-year plan to transform Endo.Over the last three years, we've been laser focused on executing our strategy to simplify our business, drive productivity improvements and leverage our culture as a differentiator, which has led to strong operating performance despite a challenging external environment. I'm grateful to all of our team members for their commitment and hard work.As I reflect on where we started, I am proud of the company that we've become. I'm excited for Blaise as he leads the company forward on its transformation journey. And I'm honored that, in my role as chairman of the board, I can continue to be actively involved in Endo's future.Let me now turn the call back over to Laure to manage our question-and-answer period. Laure?

[Laure Park:]

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. Can we have the first question?

[Operator:]

Your first question comes from the line of Gregg Gilbert from SunTrust. Your line is open. Please ask your question.

[Gregg Gilbert:]

Thank you. Good morning. And congrats to both of you guys, incoming and outgoing. Two-part question. I want to first ask about XIAFLEX development programs and wondering if you can comment on some timelines associated with those programs you announced. And maybe talk more generally about how aggressive you're going to explore additional indications going forward versus your behavior in the past where it's been a bit slower or less of a focus.And then, Paul, I know you said you can't comment specifically on opioid litigation. So, maybe I'll try to ask more generally. It seems that settlement talks for others that seem to have gotten traction tend to involve either the use of a ton of cash or on the case of Purdue and Mallinckrodt, the tool of bankruptcy. So, I guess my question is, do you see flexibility for companies to deal with this liability without either of those things? That's my attempt at asking it more generally. So thank you, guys.

[Paul Campanelli:]

Great, thank you. I'm going to actually pass it over to Blaise. And Blaise is going to quarterback this for us.

[Blaise Coleman:]

Sure. Gregg, thanks for those two questions. So, in XIAFLEX, as you noted, we came out today and talked about our incremental investment into the lifecycle management of that asset. And we're really excited about both the plantar fibromatosis and adhesive capsulitis and those are really promising opportunities to move forward.What we're going to do with adhesive capsulitis, we plan to move into Phase II sometime in 2020. And then we're also going to do some proof of concept work on plantar fibromatosis and the plan is to do that in 2020. So, that's where we are from a timeline standpoint.In terms of your opioid question, Gregg, at this stage, we've been fairly clear on what our strategy is, which is to remain open to a constructive resolution and defend as needed. In terms of the tools and options that are available to people, what may be needed, what may not be needed, we know what our strategy is. We feel good about our flexibility that we have to deal with that. And so, that's exactly how we're going to move forward.

[Gregg Gilbert:]

Okay, thank you.

[Operator:]

Your next question comes from the line of Randall Stanicky from RBC Capital Markets. Your line is open.

[Randall Stanicky:]

Blaise, congratulations again to you both. I wanted to start on VASOSTRICT. You guys have been putting up really strong growth, 21% in the fourth quarter, guidance for 2020 is mid to high teens. What's driving that? How much is volume versus price? Because I thought you'd previously talked about being pretty well penetrated there.And then, the follow-up to that is, I think you have a settlement conference coming up this month with Eagle, trial in May. Can you walk through the timelines there? And then, potentially, when you could get your follow-on products through FDA and any IP associated with that? Thanks.

[Blaise Coleman:]

Randall, thanks for those two questions. In terms of VASOSTRICT, when you look at the sequential growth from Q3 to Q4, it actually is driven by volume. That's not uncommon for us. We do see spikes in volume in Q4, just based on events. So, that is a volume driven increase in terms of sequential change you're seeing.In terms of year-over-year and our guidance for 2020, that is primarily price driven, but there is volume growth there as well in the low-single digits. What you're seeing from a price standpoint is the annualization of our price increase in 2019. We also recently took a price action in the first quarter. And also, we are getting some favorable mix on our net contracting, so the mix of our contracts and just how that's impacting that price. So, that's what you're seeing in terms of VASOSTRICT.In terms of your other question on Eagle and that process, the timeline is we have a mandatory mediation hearing early March. And then, we have a trial scheduled in May. So, that's the timeline on that.And your question on the follow on, Paul, you want to comment on that real quick?

[Paul Campanelli:]

Yeah. Hi, it's Paul here. Just to be clear, it's not a new product. You're probably referencing the fact that we're running a clinical trial, we've announced that Phase I PK trial. That's a safety study. We've learned a lot about the product over the years of development. So, if there's a way in which we can – if successful, if we can improve the way physicians in coats and clinicians use that, the existing product, that's going to be the goal. So, that's what's happening with the other PK study. So, thanks for the question.

[Operator:]

Your next question comes from the line of Gary Nachman of BMO Capital Markets. Your line is open.

[Rafay Sardar:]

Hi. Good morning. It's Rafay on for Gary. To what extent does your guidance incorporate potential competition from Amphastar for ADRENALIN? And how should we think about the rate of erosion for that product if Amphastar receives an approval sometime in the April timeframe?

[Blaise Coleman:]

Great, thanks for the question. Yeah. So, we don't normally comment on specific guidance around products. I will tell you that, for 2020, we have contemplated different scenarios in terms of what we could see from a competition standpoint on the ADRENALIN 30 ml.And then, in terms of the second part of your question, Domenico, I'm not sure if you want to comment on that at all.

[Domenico Ciarico:]

Yeah. In terms of the competitor, we understand that there's a second CRL. But from a timing standpoint, we're not sure how that's going to play out.

[Blaise Coleman:]

Great. Thank you. Next question, please.

[Operator:]

Next question comes from the line of Ami Fadia from SVB Leerink.

[Eason Lee:]

Hi. Good morning. This is Eason on for Ami. Thank you for taking our question. Just on the generic segment, maybe can you talk about how you're seeing the marketplace shaping up in 2020. Any meaningful shifts versus 2019?And then, we sort of notice that there's – the segment will have some notable AG launches in 2019 that will annualize for 2020. And you also seemed to indicate some sizable generic launches weighted in the second half of 2020. So, just curious if you can level set this with sort of the mid-teens decline guidance that seems consistent with second half '19, but may imply a slight increase in erosion when looking at it on a year-over-year basis? Thank you.

[Blaise Coleman:]

Great. Thanks for the question. And so, I'll set this up and then turn over to Domenico. Just for context, in terms of the industry and what we're seeing in the industry, we are generally seeing across the industry, some stabilization in pricing. But as we've always talked about, this really is portfolio specific. And so, when you look at Endo right now between the competitive events we had in the full year 2019 and some of the competitive events that we expect to potentially have in 2020, we are seeing some impacts to our revenue year-over-year due to those competitive events. Domenico, anything else to add to that in terms of what we're seeing?

[Domenico Ciarico:]

I think that's right.

[Blaise Coleman:]

Great. Next question, please.

[Operator:]

Your next question is from Chris Schott from JP Morgan.

[Chris Schott:]

Great, thanks very much. Just two questions here. Maybe first on XIAFLEX, I think you mentioned still low diagnosis rates. But when you think about the durability of the type of growth you're seeing here, can you maybe just update us in terms of where we stand in terms of actual diagnosis rates and XIAFLEX penetration for the two indications?And then, my second question was on 2020 OpEx. It seems like there's quite a bit of work being done ahead of the CCH launch. When we think about kind of OpEx beyond 2020, is this level of spend a reasonable proxy for expenses? Or should we be thinking about another step up in spend as we get out to 2021 and you're in that kind of full CCH launch mode? Thanks very much.

[Blaise Coleman:]

Great. Thanks, Chris. I'm going to turn it over to Pat on the XIAFLEX question. I'll take the second one.

[Patrick Barry:]

Yeah. Thanks, Blaise. As you cited, the diagnosis rates for both indications are relatively low. They're in the 2% to 3% range for both indications. The treatment rates for Peyronie's are about 14%. Our actual penetration post decision to treat is approaching 60%. So, it fluctuates between 57% and 58% on the Peyronie's indication. For the Dupuytren's Contracture indication, the treatment rate is a bit higher, with surgery falling into the mix. It's about a 30% treatment rate. And the XIAFLEX penetration is about 25%. And so, we're trying to activate both upstream, getting more patients diagnosed. And as Paul said in his comments, that's where the consumer activation strategy comes into play. And of course, we're trying to improve our overall market penetration. And so, for all those reasons, we believe those are – it's really driving the nice growth that we've seen over the last couple of years.

[Blaise Coleman:]

And, Chris, in terms of your go-forward shaping around OpEx and what that might look like, we're not going to give any specific comments around anything beyond 2020. What I would tell you is that those decisions are always portfolio and opportunity-driven decisions, which means if the opportunities are there for us to drive top line and ultimately to put ourselves in a better position to grow EBITDA over time, we are going to make the investments that are required to do that, whether that be on the CCH Cellulite commercial side of things or it be in the further development of some of our really important opportunities around XIAFLEX lifecycle management or in Sterile Injectables business. So, those will be portfolio and opportunity-driven decisions at that time in terms of what we have in front of us.Thanks. Next question please.

[Operator:]

Next question is from Annabel Samimy from Stifel. Your line is open.

[Nick Doyle:]

Hi. This is Nick on for Annabel. Thanks for taking our question. Just two quick ones. So, one, are you seeing benefit from the investment in Nevakar in terms of products materializing, either this year or early next year? And then, for CCH, we have seen some major growth across aesthetics categories recently. Could you perhaps comment on recent developments in the broad cellulite market and how do you envision CCH positioned in the market? Thank you.

[Blaise Coleman:]

Great. Thanks for those two questions. So, on the Nevakar question, I'll turn that to Domenico and then for the CCH question, and the market profile, we'll Pat take that. So, go ahead, Domenico.

[Domenico Ciarico:]

Nick, in terms of the Nevakar opportunity, we're really excited about what they're bringing to the table. We believe that our customers are looking for ready-to-use products and that partnership will set us up well for that. As Paul mentioned, we have our first launch upcoming this year and we're really excited about that.

[Patrick Barry:]

Yeah. And thanks for your question on CCH. And as we look at the market, first of all, the medical aesthetic market in general is just a very attractive market for us. It's an all cash market. And the way we view it, with the potential to have potentially the very first injectable treatment for cellulite, that's a very disruptive opportunity into the marketplace because we know that the injectable space is very well received by our physicians, very well received by the consumers and we're converging on an area of body contouring as well. So, you see really two very attractive growth areas that we could potentially come in and provide the first offering.In terms of innovation, there's really been some challenges in terms of a lack of innovation. So, we're excited about potentially having that first injectable. And we feel like from an addressable patient population, not only can this be a gateway therapy to bring more patients into medical aesthetic offices, but there's a lot of existing women who are seeking treatment of this kind. And so, we believe that it could be upwards of 6 million women who could be potentially candidates for an injectable product for CCH – or for first cellulite, excuse me.

[Laure Park:]

Next question please.

[Operator:]

Next question is from Balaji Prasad of Barclays.

[Balaji Prasad:]

Hi. Good morning. And thanks for taking the questions. Firstly, Blaise, congratulations. Maybe a couple of questions from me. Blaise, I think when you think about the strategy for the company going ahead, is there anything that you think that you would want to change that we can expect to see a major shift in strategy?Secondly, specifically on Sterile Injectables, can you talk about your recent comments around GPO being a strategic channel and also more details behind the commentary of increasing [indiscernible] products in the hospital setting and how does this dovetail into your guidance for the year?Lastly, on the generic side, do you have any other major launches apart from the ones that you have disclosed in the slide baked into the guidance? And gross margins in generics, in the context of the one-off launchers, could we see a year of flat gross margins for the segments basically? Thank you.

[Laure Park:]

Balaji, that's one long question.

[Blaise Coleman:]

Yes. So, we're going to our best to tackle it. All right. So, let's start with the strategy question. I'll take that. And then Domenic is going to help out on the Sterile Injectable and a little bit around what we're doing in the channel strategy on GPOs and hospitals. And then, we'll try to wrap up with some of your gross margin question.So, just in terms of strategy, listen, at this point in time, we have a very normal cadence in the company of how often we reassess strategy, look for capital allocation priorities. We do that on a recurring basis. There is going to be no change in terms of that cadence with me stepping into the role for Paul. So, as we move forward and we make those assessments, if there's anything for us to do differently, we'll communicate that when we make those decisions.But I want to be very clear that our focus right now is about our 2020 priorities. There's nothing we could do that's more important to our future both in the mid to long-term and some of the goals we have in front of us for 2020. So, with that, let me turn it over to Domenic to help a little bit around our strategy going forward around the GPO hospital channel.

[Domenico Ciarico:]

In terms of our channel access strategy, leveraging our relationships with GPOs, GPOs provide a great contracting vehicle for us to get our products visible to customers. What we really like about the health system and hospital market is that, when you talk to one health system, you talk to one health system and they retain both formulary and buy decisions. So, we would like that channel, particularly the way that our portfolio is shaping.

[Blaise Coleman:]

And then, in terms of your generic launch question, so we're not going to comment on specific products that are there. We have a couple of products there that we plan to launch in 2020 that we feel really good about, really attractive opportunities for us.And then, in terms of your gross margin, I think there was a question on – if I have it right, around potentially flat gross margin going forward for that segment. Do I have that right?

[Nick Doyle:]

Right.

[Blaise Coleman:]

Yeah, okay. Yes. So, listen, again, we're not going to comment on anything going forward in terms of profile for that segment or any other segments in terms of gross margins. But as we've talked about, it is very much portfolio dependent. As we move forward, product mix, what we can get out of the pipeline, opposite to what we're seeing on the competitive front. It will be a big dictator of what our profile looks like from a gross margin standpoint.Next question please.

[Operator:]

Next question is from David Amsellem from Piper Sandler.

[David Amsellem:]

Thanks. So, I had some questions on CCH and specifically wanted to get some additional detail on the sales infrastructure that you're putting in place. Give us some color on total number of reps that you're going to have on the ground initially. And them, at peak, how many doctors you're going to be targeting at least initially and then potentially at peak?And then, also regarding the launch, can you give us some window into your thinking on pricing vis-à-vis other aesthetic injectable products? This is not a like a Botox or a filler where you are coming in every few months necessarily. So, it's a different kind of paradigm. So, in that vein, how should we think about pricing for CCH and cellulite? Thank you.

[Blaise Coleman:]

Yeah. Thanks, David, for those questions on CCH. I'm going to turn it over to Pat to talk a little bit about what we're doing in terms of us being prepared to launch this product successfully and then also your question around pricing and durability.

[Patrick Barry:]

Yeah. Thanks, Blaise. So, as Paul mentioned in his comments, we'll be hiring in two waves. And so, all in, between sales managers and sales professionals and also having the opportunity to be able to address corporate accounts and having customer support, all in, we'll be somewhere in the neighborhood of between 80 and 90 on the ground and supporting customer-facing activities.In terms of pricing, we're obviously not going to communicate pricing at this point. We have been pretty consistent, is that we do see the opportunity, we understand an opportunity for value creation. But as an injectable, within that body contouring space, I think there's a range that we're looking at. I think we've been consistent in terms of wanting to be able to price in a way that allows for wide-scale adoption from both consumers as well as physicians. And as we get closer to launch, of course, we'll be communicating a specific price plan.

[Laure Park:]

Next question please.

[Operator:]

Next question is from Elliot Wilbur with Raymond James. Your line is open.

[Vikram Arun:]

Hi. Good morning. This is Vikram Arun on for Elliott. Thanks for taking the questions. I just had two quick ones here on financials. The first is, could you provide any expectations on EPS and EBITDA cadence over the course of the year? And second, would it be possible to provide a rough split between R&D and SG&A within your overall OpEx guidance and maybe how those line items might trend over the course of the year? Thanks.

[Blaise Coleman:]

Great. Thanks for those questions. So, in terms of cadence, refer back to what we talked about [Technical Difficulty]. We will see sort of a higher EPS and higher EBITDA in the second half of the year versus the first half of the year. We sort of articulated what the drivers of those were.In terms of the breakout between R&D and SG&A, what I would just tell you is that our R&D this year is slightly higher than where we've been historically as a percent of sales. And then, therefore, you can kind of back into the SG&A number.Next question please.

[Operator:]

Next question is from the David Risinger with Morgan Stanley.

[Charlie Yang:]

Hi. This is Charlie on for David. Thanks for taking the question. I just have two questions here. The first is, what is the outlook for new product launches in 2020 relative to 2019? And the second question is, could you please provide update on Amphastar, the litigation developments to watch with respect to VASOSTRICT and ADRENALIN? Thank you.

[Blaise Coleman:]

Yeah. So, just in terms of new product guidance, we don't provide specific new product revenue guidance. And then your second question, I think it was on VASOSTRICT which is actually Eagle. And we mentioned earlier that the timeline there, the two things to look out for is there's a mandatory mediation hearing in March and then we have a trial scheduled in May of this year.Next question.

[Operator:]

[Operator Instructions].

[Laure Park:]

If there's no further questions, Paul?

[Paul Campanelli:]

Thanks, Laure. So, with that, maybe just a second. I got – maybe as I move forward to my next phase of life, I just want to maybe take a step to address my team here first. I have to just say how proud I am of Pat and Domenic, guys, great job. Mark Bradley, congratulations as our next CFO. He is going to do great things. Blaise is going to be just tremendous, remarkable, remarkable person. I'm so proud of this entire organization. Matt Maletta, our General Counsel, Chief Legal Officer, just great job. Laure, thank you for everything you've done for us over the last year, year-and-a-half.Just to the research analysts, we are leaving this team in remarkable hands and I'm so proud of everybody here. So, with that, I just have to say that we appreciate your continued interest and support of Endo. We look forward – on behalf of Blaise and our entire leadership team, we look forward to providing you with updates as we move forward.Thank you, everyone, for joining us on today's call. Have a great day everyone. Bye-bye.

[Laure Park:]

Bye.

[Operator:]

Ladies and gentlemen, this concludes our conference call. Thank you for participating. You may now disconnect.