Endo International plc (ENDP) CEO Paul Campanelli on Q3 2019 Results - Earnings Call Transcript

Nov. 05, 2019 12:16 PM ETEndo International plc (ENDPQ)
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Endo International plc (ENDP) Q3 2019 Earnings Conference Call November 5, 2019 7:30 AM ET

Company Participants

Laure Park - Senior Vice President, Investor Relations & Corporate Affairs

Paul Campanelli - Chairman, President, & Chief Executive Officer

Blaise Coleman - Executive Vice President & Chief Financial Officer

Pat Barry - Executive Vice President & Chief Commercial Officer, Branded business

Dominic Ciarico - Executive Vice President & Chief Commercial Officer, Sterile and Generics business

Conference Call Participants

Rand Stanicky - RBC Capital Markets

Gregg Gilbert - SunTrust

Gary Nachman - BMO Capital Markets

Annabel Samimy - Stifel

Chris Schott - JPMorgan

Sheldon Fan - SVB Leerink

Dana Flanders - Guggenheim

David Amsellem - Piper Jaffray

Yih-Jiunn Chiu - Morgan Stanley

Kevin Kedra - G. Research

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Q3 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

Good morning and thank you for joining us to discuss our third 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 Dominic 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 U.S. Private Securities Litigation Reform Act of 1995 and the applicable Canadian securities laws and are subject to the changes risks and uncertainties described in yesterday's press release in our U.S. and Canadian securities filings.

In addition, during the course of this call, we may refer to non-GAAP financial measures that are not prepared in accordance with 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 yesterday for Endo's reasons for including those non-GAAP financial measures in the yesterday's earnings release and today's presentation. The reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures is contained in our earnings press release issued yesterday unless otherwise noted.

I would now like turn the call over to Paul.

Paul Campanelli

Thank you, 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 announcement from last evening. As announced yesterday, I notified the Board of the my intention to retire as President and Chief Executive Officer of Endo as soon a successor is named and accordingly, the Board has implemented its CEO succession plan. Additionally, I am honored to become the Chairman of the Board and Roger Kimmel has been appointed Senior Independent Director. I'll continue as President and CEO until my successor is appointed and will then continue to serve as Chairman of the Board following the appointment of Endo's next CEO. Along with the entire Board, I would like to thank Roger Kimmel for his service as Chairman and his ongoing service to the company.

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. Building from this position of strength, now is the time to transition to new leadership, who will look to build on the momentum. I am proud of what the Endo team has accomplished and I'm confident that we've positioned the company for long-term growth and success. I'm thrilled to remain a part of Endo for its next chapter.

Now, let's turn our attention to the third quarter 2019 earnings presentation. Beginning on slide 2, here is a brief agenda for today's call. Moving to slide 3, I'm pleased to report that Endo's third quarter financial results further demonstrate the continued execution of our multiyear strategic plan. Led by XIAFLEX and VASOSTRICT third quarter revenues for both the Specialty Products portfolio of our branded pharmaceutical segment and the Sterile Injectables segment continued their year-over-year double-digit growth momentum. We reported third quarter 2019 total enterprise revenues of $729 million and adjusted EBITDA of $321 million, which were both in line with our expectations. We are updating full-year 2019 guidance narrowing the expected ranges for revenue, adjusted diluted net income per share from continuing operations and adjusted EBITDA. Blaise will walk you through our financial performance later in our presentation.

Additionally, we are pleased that during the third quarter, we settled with Cuyahoga and Summit counties in the Track 1 multidistrict opioid litigation for a total of $10 million in cash and up to $1 million of free product. We continue to be open to identifying and executing on a constructed path forward to resolve the pending opioid litigation. But there could be no assurances that resolution will be achieved. And it is important to note that, while settlement remains our goal, we are prepared to litigate, if necessary. I understand that there are many questions on this topic, however, as I'm sure you can appreciate, we are limited to what we can say and I have no additional comments to add at this time.

Moving to slide 4, you will see a snapshot of our segment revenues and our consolidated adjusted EBITDA for the third quarter. Now moving to slide 5. The Specialty Products portfolio of our Branded Pharmaceuticals segment continue to advance in the third quarter with year-over-year revenue growth of 18%. This performance was driven by strong execution across all products within our Specialty Products portfolio.

Our XIAFLEX franchise had another outstanding quarter of growth. The franchise saw an acceleration in revenue growth of 29% compared to the third quarter of 2018 and 11% compared to the second quarter of 2019. This accelerated growth reflects continued strong underlying demand in both the Peyronie’s disease and Dupuytren’s contracture indications due to the investment in outstanding promotional executions behind XIAFLEX. Additionally, we are pleased with the third quarter performance of other specialty products, where year-over-year revenue growth was primarily driven by volume. Offsetting the Specialty Products portfolio, third quarter revenue growth is the year-over-year revenue decline in our Established Products portfolio, which was primarily due to Generic competition and resulted in a 1% year-over-year decline in our total Branded Pharmaceutical segment revenue.

As part of our mission, we feel a deep responsibility to help raise awareness of the under-treated disease states supported by Zanaflex amongst patients, caregivers, and healthcare professionals to help drive improve treatment rates for patients suffering from those conditions. In this context, we are excited to have engaged Pro football Hall of Fame quarterback John Elway as the spokesperson for our Facts on Hand Disease Awareness Campaign focused on educating the public about Dupuytren's contracture and encouraging patients to reach out to a hand specialist.

The early results of the national TV and online campaign have been impressive. Visits to the unbranded Facts On Hand website tripled with the high conversion to our branded XIAFLEX website in searches for a physician on the website physician locator. This helps to convert seekers into XIAFLEX's patients. I'm proud of the commercial capabilities that we've built across our Specialty business. These capabilities that are driving growth today are the same ones we plan to leverage for our potential CCH for cellulite product as well as other opportunities. Based on the continued strong underlying growth in our Specialty Products portfolio, we have updated our full year 2019 guidance and now expect Specialty Products revenue growth to be in the mid-teens percentage range and XIAFLEX revenue growth to be approximately 20%.

Now, moving to our potential CCH for the treatment of cellulite products. In September, we submitted a BLA to the FDA. We are continuing to take what we believe are the appropriate steps across our organization to prepare for regulatory approval in the second half of 2020. Additionally, two weeks ago at the American Society for Dermatologic Surgery Annual Meeting held in Chicago, we presented data on the use of a standing MRI for the evaluation of cellulite and we launched our new Endo Aesthetics website designed to appropriately engage with the physician community.

Turning to Slide 6, our Sterile Injectables segment continues to deliver with revenue growth of 11% in the third quarter of 2019 compared to the third quarter of 2018. This performance was driven by continued strong growth in VASOSTRICT and ADRENALIN as well as APLISOL. VASOSTRICT revenues were $130 million, a 15% increase compared to the same period in 2018. ADRENALIN revenues were $40 million and a quarter, up 14% compared to last year. APLISOL's revenues were approximately $28 million compared to $16 million in the same period in 2018, driven by wholesaler's restocking following a temporary supply shortage. We anticipate significantly lower APLISOL revenues in the fourth quarter, driven by the non-recurrence of the third quarter restocking benefit and anticipated wholesaler de-stocking.

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 7. The decrease in revenues for the segment during the third quarter compared to 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 certain product launches, including colchicine tablets, the authorized generic of Colcrys, a Paragraph IV settlement.

On the generic market landscape, 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. We are reaffirming our guidance for full-year 2019 Generic Pharmaceutical revenues to decline in the mid-to high teens percentage range.

Moving to slide 8. Our international pharmaceutical segment benefited this quarter from delayed generic competition, which we expect to materialize in the near-term. For the full-year 2019, we reaffirm our guidance of International Pharmaceutical revenue declines of approximately 20% compared to full-year 2018.

Turning to slide 9. We shift focus to a diverse pipeline. As referenced earlier, we submitted our BLA to the FDA for our CCH for cellulite products. 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. Additionally, 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 11 products year-to-date, including four in the third quarter.

Third quarter launches included epoprostenol injection indicated for the treatment of pulmonary arterial hypertension in the first generic more fit in the U.S. We take pride in offering our customers lower cost generic alternatives. Our Sterile Injectables pipeline is supplemented by our strategic relationships with third-parties such as Nevakar, which will potentially provide side differentiated 505(b)(2) hospital and critical care-based products. We continue to expect the first launch from our Nevakar agreement in late 2020. The table on the bottom of the slide 9 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 third quarter financial performance and full year 2019 financial guidance. Blaise?

Blaise Coleman

Thank you, Paul, and good morning, everyone. First on slide 10 you see a snapshot of the third quarter GAAP and non-GAAP financial results. Paul covered company and segment revenues earlier, so I will not read that again.

On a GAAP basis with the diluted net loss per share from continuing operations to $ 0.18 in the quarter compared to a loss of $0.65 per share in the third quarter of 2018. GAAP loss from continuing operations in the third quarter 2019 was $41 million compared to a GAAP loss from continuing operations of $146 million during the same period in 2018. On an adjusted basis third quarter adjusted income from continuing operations of $138 million was lower than the previous year which is mainly due to a lower adjusted gross margin and an increase in our adjusted effective tax rate.

The lower adjusted gross margin was primarily due to a decline in revenue and an unfavorable change in product mix in our Generic Pharmaceutical segment. The lower adjusted effective tax rate is primarily driven by an unfavorable change in adjusted pretax income jurisdictional mix.

Adjusted diluted net income per share from continuing operations in third quarter of 2019 was $0.60 compared to $0.71 in third quarter 2018. Slide 11 provides a summary of Endo's updated 2019 full-year financial guidance. We are narrowing our financial guidance ranges for the year of revenue adjusted diluted income per share from continuing operations and adjusted EBITDA and are updated from the underlying financial guidance assumptions.

These assumptions are presented at the bottom of slide 11 and include our expectations for fourth quarter adjusted gross margin as a percentage of sales to be in line with third quarter 2019. And for fourth quarter adjusted operating expenses to increase slightly compared to third quarter 2019.

Moving to slide 12, this is a summary of the segments and product specific guidance previously discussed. Advancing to slide 13 and wrapping up the financial discussion, for the first nine months of 2019 we had an unrestricted cash flow by the debt payment of $421 million. And we ended the third quarter of 2019 with approximately $1.5 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 to $280 million to $320 million compared to unrestricted cash flow prior to debt payment of $100 million to $200 million previously. And this change reflects the impact of the shift in the estimated timing of cash distributions to settle mesh claims from 2019 to 2020.

Now let me turn it back over to Paul. Paul?

Paul Campanelli

Thank you, Blaise. Finally moving to slide 14, in concluding today's presentation, despite circumstances that could easily distract us, we remain focused on executing against our multiyear strategic plan. We believe that enhancing our capabilities in Sterile Injectables and our Branded Specialty Products portfolio including Medical Aesthetics and strengthening our Generics business, positions and they’re well for the future.

I am grateful to all of our team members for their commitment and hard work. Let me now turn the call back over to Lori to manage our question-and-answer period. Laure?

Laure Park

Thank you, Paul. [Operator Instructions] Can we have the first question?

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from Rand Stanicky with RBC Capital Markets. You may proceed.

Rand Stanicky

Great, thanks. Paul you kind of had a soft guard last night especially given the extension in your contract in April. So let me ask what I think a bunch of people are thinking. Why and else this now, I mean the stock is depressed, it's a critical time given the opioid litigation defense base are strengthened pending launch of CCH. I know, you don't want to comment on the opioid litigation, but the read for some is going to be that near-term resolution is unlikely. So that's number one, if you could just expand on your thinking there?

And then secondly, it seems to me that the biggest opportunity for Endo given some of the balance sheet constraints is to leverage the commercial footprint more by way of aggressive business development, more deals like Nevakar but may be with a bigger focus on the brand sight, what’s the rate limiting factor there, why we haven't seen more? And is that something that you intend to put greater emphasis on in your new role, I guess the question is can we expect more active business development out of Endo in 2020 with you in a Chairman's role with more time to spend on that? Thanks.

Paul Campanelli

Yeah, thanks Randall. The first question with respect to really the timing, ultimately I look at in two ways in terms of let's say, it's a balance of personal life decision and at the same time looking at the strength of the company where I believe it is and looking at what we've achieved and where we're headed and things that, which we control. There's no doubt that we all know what our challenges are with respect to liabilities.

But when I take a step back and I look at what this leadership team has done over the last year, I truly believe that we are in the best position for growth and looking at what we've done both on the Specialty side and the Sterile side, I think we're just positioned very, very well.

With respect to some of the open items, those things will continue with respect to VASOSTRICT et cetera. I'm still here, at the end of the day I'm still the President and CEO. I would anticipate being able to participate in some of the unfinished business. But at the end of the day it's a balance between my family and also knowing as I look around this table here and looking at leadership within Endo that we have a lot of talent and a lot of strengths to take us to the next levels. So I actually feel very, very comfortable, frankly my family is quite excited for me as I am.

Regarding the business development question, I don't think anything has really changed in that regard in terms of deals like Nevakar that was an opportunistic deal that we are incredibly excited about. Clearly there is a focus on the Specialty side. If there is a product opportunity that could fit in with either our orthopedic or men's health on the neurology side there's nothing stopping us from looking at appropriately sized deals for product acquisitions. So that something that the business development team continues to evaluate.

And frankly we also have a ball pen looking at future success, we're not moving forward at this point in time with adding additional aesthetics, but there's a bullpen ready to go if and when we have a launch with CCH. I'm confident in our ability to have success once if and when we get approved, but there is a database of targets in medical aesthetics and there is nothing stopping us to bring in small appropriate sized deals on the Specialty and Sterile Injectables side for that matter.

Randall Stanicky

Okay. Thanks for that Paul.

Operator

And our next question comes from Gregg Gilbert with SunTrust. You may proceed.

Gregg Gilbert

Thanks. Congrats Paul. I know, we're going to miss you, I know you are not going anywhere but thanks for everything. I suspect you all are standing around the fax machine having any news on the BLA?

Paul Campanelli

Well, that's a direct question. First of all, Gregg thank you for the kind words there.

With respect to news on the BLA, no, we don't have any direct news. I think we were candid with respect to everybody knows the file date of the BLA, which was September 6th. We have noted there was a 60 day period, I believe that is tomorrow. So, I think at this point in time, no news at this point is viewed as good news. We have had limited interactions, and I would say, at this point in time, we have seen no surprises and I would say, it's normal course and what our expectations are. So, a little bit more time is required.

Gregg Gilbert

Great. Well, let me ask my real questions now. On VASOSTRICT did good growth in the quarter and you're expecting continued growth is that growth is tied mostly to the compounded product or what the little of it was out there coming off the market or there are other drivers of revenue growth for the product that could be more durable? And how did the hearing go and share your confidence on the legal going forward? And then question two is, just about the XIAFLEX growth outlook for Peyronie's versus Dupuytren's not looking for specific guidance, but maybe you can speak to the runway you're seeing for the growth of the one indication versus the other? Thanks.

Paul Campanelli

Okay. Gregg, so I'll start-off and then I'm going to pass it over to Dominic on the VASOSTRICT side, and I'll pass it Pat to on the XIAFLEX. So I think the first thing though in terms of the growth with respect to the compounded product, I think we've seen some small benefits with respect to that opportunity. I think also there is a very, very small volume growth also in VASOSTRICT. So, I think it's a combination keep in mind, it's a large product so very small volume growth is also helping us with respect to the healthy revenue side. I'm going to pass it over to Dominic in case you'd like to add a little more color.

Dominic Ciarico

No, Paul, I agree with that assessment. I do think that, we're still seeing some of the return of the compounded product, but that's in small amount.

Paul Campanelli

Yeah, so at the end of the day, I think to Dominic's points, it's really at this point in time it's probably more tied to small volume growth. With respect to Peyronie's, Pat would you like to comment?

Pat Barry

Yeah. Sure. I mean, Paul you mentioned in your comments that we've experienced 29% net sales growth what we are excited about is that net sales growth is really fueled by very strong underlying demand growth. And so we saw about 21% demand growth and we want to continue to see both indications growing and so Peyronie's is growing at 24% and Dupuytren’s is growing at 15%. So that's exactly what we want to see healthy growth across both indications.

And in terms of the runway, Paul mentioned in his comments that we're projecting growth at the 20% tile with XIAFLEX. Again, that's going to continue to be fueled with underlying demand growth. We're not guiding obviously beyond 2019, but as we look at sustainable growth we get excited about the opportunity that is XIAFLEX. When you look at the medical literature up about 15 million Americans aged 35 an older have Dupuytren's contractions. Almost many of those – most of those go undiagnosed and of the 13% of men, we believe based on the literature suggest that have Peyronie's disease. And so with such low diagnosed rates and treatment rates, we feel like we have sustainable growth opportunities for both indications.

Paul Campanelli

And Gregg, I think your last question was going back to the VASOSTRICT Paragraph IV litigation. And as you – as I'm sure you can understand that it is active litigation at this point in time, we just cannot comment on the status of litigation. So more to follow, but we don't comment on active litigation. So, we can go to the next question.

Operator

And our next question comes from Gary Nachman with BMO Capital Markets. You may proceed.

Gary Nachman

Hi good morning. First, what additional prelaunch activities have you been doing to prepare for CCH for cellulite? When will you start hiring those reps? And how many will you have? And then how should we think about gross margins trending over time, will it however in the mid-60s range what are the pushes and pulls on that front going forward? Thanks.

Paul Campanelli

So, with respect to prelaunch activities, we are very excited about our ability to attract strong talent, we are active on the marketing side, more to follow on the sales rep. and Pat is going to add additional color on how we're looking at it.

Pat Barry

Yes. No, thanks for the question. We've been really busy. If you talk to key opinion leaders who have been at the medical meetings, we've been very active in establishing Endo as a new innovator and a future leader. We will -- you can expect that we would continue to elevate the importance of cellulite to our HCPs and consumers.

We will continue to highlight our R&D activities. We've got a strong phase 2b and Phase 3 data and we've got an aggressive data generation plant which we think will continue to build anticipation for potentially the first approved injectable for the treatment of cellulite.

We have hired credential -- we've hired credential medical aesthetics folks are already, we've built out our marketing team, and we will continue to add some strategic positions. We just recently hired two area Sales Director that are helping us refine our footprint.

We are not going to get into the specific guidance of the size of our footprint, but I think you can expect that obviously we would have a Specialty-focus footprint that would allow us to reach those core dedicated medical aesthetics positions.

So, again, within that OpEx profile that fits strategically nicely within our current vision of being a focused branded specialty organization.

Paul Campanelli

And I will pass it over to Blaise with respect to some of the pushes and pulls on the gross margin side.

Blaise Coleman

Yes, Gary, we're not providing any forward-looking shaping as it relates to gross margin. But what we would say in terms of pushes and pulls, these things are you would expect which would be product mix, competitive landscape assumptions, our cost profile over time, as well as a drug pricing. This will be the probably the four main factors that we'd be probably thinking about as we think about our gross margin shaping going forward.

Gary Nachman

Okay, just one follow-up. Would you plan to do anything substantial with your facilities to help improve COGS, is that part of the strategy?

Paul Campanelli

We're always looking at ways to improve our gross margins, Gary. And at the end of the day in ways which -- I wouldn’t really refer to that as normal course, right. So, as our portfolio reshapes, we really look at our portfolio footprint in that light. So, that's really normal course, that's always ongoing, that's just part of our DNA.

Gary Nachman

Okay, all right. Thank you.

Operator

And our next question comes from Annabel Samimy with Stifel. You may proceed.

Annabel Samimy

Hi, thanks for taking my questions. Just back on CCH, when the FDA has finally accepted the application, are they going to indicate that this is generally a separate BLA from XIAFLEX? Is it pretty established at this point that CCH is considered a completely different product from XIAFLEX?

And then separately just looking at SG&A and R&D, there seem to have been a tick-up in those two expenses and fiscal year guide looks like that it will come back down. Could you just help us understand some of the pushes and pulls there for the quarter, is it related specifically to preparing for the XIAFLEX launch or is there anything else going on there? Thanks.

Paul Campanelli

Again, Annabelle, with respect to the application, as we said that we submitted the BLA, we believe in our position, we're confident in it. But until we receive a BLA, we're just going to have to be silent on that. As soon as we understand from the FDA, we will communicate that we received the BLA. Again, we're confident in our position, but we can't definitively say one way or the other. I'll pass the call over to Blaise with respect to the financial question.

Blaise Coleman

Sure. So Annabelle, just in terms of your question operating expenses. We did see an increase sequentially from Q2 to Q3. And really related to R&D spend and that really just had to do with the phasing of project spend. So nothing unusual there and there was also a small increase in G&A cost.

In terms of our guidance for Q4, in the script we noted that we expect to see a slight increase in Q4 spend opposite of Q3, but that's really normal course and an aspect of that is, us planning for success commercially, both on the CCH cellulite product, but also as we continue to invest in XIAFLEX growth.

Operator

And our next question comes from Chris Schott with JPMorgan. You may proceed.

Chris Schott

Great. Thanks very much for the questions. I guess, the first one is just on the cellulite opportunity and following up on Gary's question, should we be thinking about a meaningful step up in SG&A associated with this launch, or can you pull resources from elsewhere in your organization to support the opportunity? Not asking for specific numbers, but more just directionally, so we're prepared for thinking about what ever spent might be associated there?

And my second question was on the generic Colcrys opportunity, I think it's become a large product for you, how are you thinking about the durability of the current environment for the product and just the competitive landscape over time? Thank you.

Paul Campanelli

Yeah. Sure, Chris. I'll start. On the cellulite opportunity, I'm going to pass this over to Pat here in a second. But I think as we've mentioned on several of the calls that, what we're excited about is that we have quite a bit of infrastructure supporting our specialty side that’s established, so from that standpoint we're certainly going to leverage what we have in house.

As Pat indicated already, we're going to be recruiting for a sales force, we have disclosed the specific numbers. But we have a very talented team specifically in house on the marketing side, but Pat why don't you add a little color.

Pat Barry

Yeah. I think that's right Paul. I mean, obviously, Chris, this would be a separate sales force, separate sales force footprint, unique call point dedicated marketing team, but what we've been working on over the course of the last three years is to really to have an infrastructure that scalable on the specialty side.

And so, when you think about the backroom support of sales operations, marketing operations, our ability to be able to master the distribution networks, our ability to already -- to infuse and already capable direct to consumer capability. Those are things that we would leverage and that was intentional.

We've been building that over the course of the last three years and now what we're doing is, we're complementing that with the right medical aesthetic expertise. So that we can be ready for launch and we can maximize the opportunity for cellulite.

Paul Campanelli

And then, Chris, going back to the Colcrys question, in terms of durability. Without going into the specifics of the contract, we are the authorized generic. I would tell you, from a time standpoint, that we have that for several more years. I'd probably leave it at that point here. So from a durability standpoint, several more years.

Chris Schott

Thank you.

Paul Campanelli

Okay. Next question, operator.

Operator

And our next question comes from Amy Fadia with SVB Leerink. You may proceed.

Sheldon Fan

Hi, this is Sheldon on for Ami. Thanks for taking our question. We have two if we may. The first is about some quarterly fluctuations of your numbers particularly in ADRENALIN and APLISOL. ADRENALIN number was -- in Q3 was slightly below consists of this quarter? And was there any pricing pressure or some destocking behaviors in regarding APLISOL, how much was the contribution from distributor restocking and how should we think about it quarterly?

And our second question is about ertapenem AG, do you see these products to have comparable revenue potential as the other AGs injectables you have launched recently like INVANZ?

Paul Campanelli

Hi, so I’ll take a crack at a couple of the questions. Regarding the authorized generic, the way you should look at it, I don't usually go into great detail, but I would say the standard way that you look at authorized generics is the way you should be looking at the ertapenem products. I think most people understand what that means.

With respect to fluctuation in numbers regarding ADRENALIN that product is behaving the way we've anticipated right? You have to keep in mind with respect to the one million, we've had 35% share and we've had that for a very long time. The 30 million, we've got 100% share. So I don't think there's any real fluctuation or surprise there.

Perhaps you're referencing the APLISOL question, now I think we addressed that in the prepared remarks that we had a raw material challenge we fixed it. We're back in the market and that had to do with some of our comments based upon restocking into the wholesaler, which we don't anticipate happening next quarter.

And have I left off anything else? I think that's it. I think I've answered your question.

Laure Park

Treprostinil

Paul Campanelli

Okay, I apologize. And the question on treprostinil, although, I didn’t -- I might have missed that.

Laure Park

Expectation on…

Paul Campanelli

I'm going to pass it over to Dominic with respect to the expectations on treprostinil, I know it's very early since the approval. But go ahead Dominic…

Dominic Ciarico

Sure. Thanks, Paul. Treprostinil injection is a very complex therapy this product has given us opportunity to reach further in our customers and build some commercial skills and attributes in our team that's going to help for future lunches as well. I will say that it's still early in the process. We have seen pull-through on all four of the strengths and we're very confident in our commercial strategy.

Paul Campanelli

Thank you. Operator, next question.

Operator

And our next question comes from Dana Flanders with Guggenheim. You may proceed. If you have your telephone mute, please unmute your line.

Dana Flanders

Hi. Thanks for the question. Sorry about that. May be just my first one on APLISOL. Blaise, I think you mentioned that there would be destocking in Q4, so should we think about that product declining into Q4 may be at a run rate below what's normalized for that product?

And then just my second one on Nevakar, I know you mentioned a launch upcoming at the end of 2020 as we just think about layering those products into our model, I know your Sterile Injectables margins are very attractive and high. How does Nevakar margins fall relative to the overall business and should we think about these products as big enough overtime to move the margin profile one way or the other? Thank you.

Blaise Coleman

Hey, Dana on the APLISOL question, yes, we would expect the run rate to come down. The benefit we saw in Q3 related to the restocking was somewhat between $10 million to $15 million, just to size that for you.

Paul Campanelli

And then, Dana, with respect to Nevakar, we're not going to be able to go too deeper into the margin profile. Just keep in mind this is a collaboration. And with the collaboration, there is a profit split arrangement. So you'll have to take into consideration.

We're not disclosing too much. I would say, the lion's share is tipping in the favor of Endo, but I think at this point in time it's probably as far as we're going to go in we're confident and excited about the potential launches in late 2020. As we get, closer we'll probably be able to add a little bit more color.

Dana Flanders

Thank you.

Paul Campanelli

Operator, we can take the next question.

Operator

And our next question comes from David Amsellem with Piper Jaffray. You may proceed.

David Amsellem

Thanks. So on XIAFLEX and maybe I missed this. But can you talk about the mix between Peyronie's and NDC and which market, if any, is driving the growth? And also, how are you thinking about your current penetration into both populations. That's number one.

And then, secondly, on VASOSTRICT and ADRENALIN in particular, I'm trying to get a read on the trajectory these two assets longer term, so with that in mind where are you in terms of account penetration there, can you just talk about how we should think about those two assets directionally longer term? Thanks.

Paul Campanelli

Sure, Dave. This is Paul. I'll start with the VASOSTRICT and then I'll pass it over to Pat regarding XIAFLEX. In terms of the trajectory of the assets, I think, you've got to look at these are all long-established assets. I think, Dominic's team has done an outstanding job with respect to market penetration.

I would say, at this point in time, there's 100% conversion in terms of volume. So what you're seeing is, when there's a modest price increases, that's really what the way I'm looking at VASOSTRICT and ADRENALIN.

As I've indicated earlier before, at this point in time, we've got 100% of the volume regarding the 30 ml and we've got about 35%, 37% of the volume on the 1 ml. So I think that's been pretty historic. Dominic, anything to add on ADRENALIN? So that's the way, David, I would look at VASOSTRICT. Regarding the split between Peyronie's and Dupuytren's, Pat?

Pat Barry

Yes. Sure. Thanks, Paul. David, just roughly speaking the split between Peyronie's and Dupuytren's is about a 60/40. I would also add to that that both indications are growing which is great. I had mentioned earlier in my comments that the Peyronie's indication is growing at about 24% and Dupuytren's contracture is growing at about 15%. That's the underlying demand that I'm referencing.

And then in terms of penetration, when a decision to treat is made by a physician for a Peyronie's, we have about -- between a 57% to 60% penetration rate, which is a really nice penetration rate. But, yet the decision to treat is still relatively low at about 14% and the diagnosis rate is less than 3%. So there's nice opportunity, nice runway there for us.

For Dupuytren's contracture, we're getting one out of every four patient. So we get about 25% from a market penetration perspective. The treatment rates are a little higher, about a 30% treatment rate, but again upstream at the top of the funnel, the diagnostic rate is really low. So, again, that's why we think it's a wonderful opportunity with XIAFLEX and that's why, as Paul mentioned, it's about execution, it's about investment and we feel like there's opportunities to continue that strategy.

Laure Park

Next question please.

Operator

And our next question comes from David Risinger with Morgan Stanley. You may proceed.

Yih-Jiunn Chiu

Hi, it's Yih-Jiunn on for Risinger. Could you please discuss Endo's pipeline and prospects for new launches over the next year or so? Thank you.

Paul Campanelli

Sure. So this is Paul. I think in our presentation, we outlined several key products that we're excited about. Now we don't go into the exact launch date, because we don't want to place ourselves at that competitive disadvantage. But as we have indicated in the slide presentation, we are a positive success for CCH will start by -- the goal here is to launch on success CCH in late down 2020. So that's the first product we'd like to outline.

We talked about our relationship with Nevakar regarding RTU, ready-to-use formulations in critical care in hospital settings, we’re excited about that. Our first product is a successful. We’re hoping we’ll launch also in late 2020. And then what we've done here on our side is we've talked about several key generic products that we are very excited about, however, we don't pinpoint the dates because the settlement terms and conditions are confidential.

But they're large hard to make an exciting products, products such as Generic DEXILANT, which is a proton pump inhibitor, very, very difficult challenging delayed released type product that we have on our portfolio.

AFINITOR is a product that we’re also very, very excited about. It has about four strengths, however, we have exclusivity on three out of the four strengths. The molecules are about $800 million, however, we have access in our first of all position to about half of that or $400 million, again a very, very challenging product to make.

We've talked AMITIZA, which is a product that is a soft gel that requires a clinical trial also a very, very hard product to make and that product is about $500 million in brand sales. So that just gives you a little bit of indication. If you go back to our presentation there's three more products that we also disclosed CIPRODEX, KUVAN and GATTEX that are all very difficult products that are in our future pipeline.

Thank you very much for the question.

Laure Park

Next question please.

Operator

And our next question comes from Kevin Kedra with G. Research. You may proceed.

Kevin Kedra

Hi, thanks for taking the questions. I apologize if this was asked earlier as I jump on late. But with the CEO transition, there's a lot going on at the company between opioids, you have businesses on the brand side and on the generic side and you're getting into aesthetics. So what one or two core capabilities, do you feel that the CEO of Endo going forward, should really bring to the table as you begin the process of looking for somebody to bring in?

And then secondly just wanted some clarification, I saw that on the balance sheet you talked about $9.1 million liability for legal settlement. It was a long-term liability. I assume that was tied to the track 1K settlement. So just surprise that this wouldn't be a near-term liability something that would be paid out soon given that there seems to be quite an emphasis for all the counties that they get paid immediately, so they can address the crisis. Just wondering where -- how that timeline plays out for paying up in that $10 million plus $1 million of drug?

Paul Campanelli

So, Kevin, hi, this is Paul. May be just a little uncertain regarding the balance sheet question, can I just get a little more color on that. I just want to make sure I fully understand.

Kevin Kedra

Yeah. Sure. So on the balance sheet it looks like there was the long-term liabilities that looked like there was an added line of $9.1 million related to legal settlement. I wasn't sure if that was actually tied to opioid.

Blaise Coleman

Kevin, let me just -- thanks for the question on the liabilities. We do take a net charge to the balance sheet this quarter related to legal liabilities. We had some reversal of some accruals that we had previously incurred for certain legal matters.

We took a charge from some other legal matters, just in terms of truing up some balances there. And the net impact there is at a portion of that does go to the long-term liability part of balance sheet. In terms of the opioid settlement, just to clarify that question, that's been settled and that's already been paid. So that's not part of the change we're seeing in the balance sheet.

Paul Campanelli

And then, Kevin, the question with respect to some of the aspects of CEO and the succession plan, a very broad question. I mean, we look at this company it's an incredibly exciting and dynamic company. You've got a look across we've got four segments here so we're going to need somebody that can look at our businesses objectively understand the growth areas of Sterile and Specialty.

We've got to be able to have excitement and build -- continue with the culture that we have across the segments. We've got 13 sites, we have 3,000 people. So we're going to need somebody that's going to be able to kind of rally -- continue to rally the group, but I would tell you that where we are as a company, while I'm excited about my next phase in life, I also believe that I'm leaving this company in very, very good and talented hands.

We have a lot of talented individuals in house that are going to have an opportunity to be considered. And at this stage of the game, we've got an exciting pipeline and a portfolio that is going to fuel this company for the long-term. So it's going to be an exciting opportunity, but we're going to need somebody that can look across multiple segments and also medical aesthetics. So thank you for that question.

Laure Park

Next question, please.

Operator

Ladies and gentlemen, this concludes our Q&A portion of today's call. I would now like to turn the call back over to Mr. Paul Campanelli, President and CEO, for any closing remarks.

Paul Campanelli

Thank you, operator. We appreciate your continued interest and support of the company and we look forward to providing you with updates as we move forward. I want to thank everybody for joining us this morning. Have a great day.

Operator

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

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