false2022FY0001593034http://fasb.org/us-gaap/2022#BusinessCombinationAcquisitionRelatedCostshttp://fasb.org/us-gaap/2022#BusinessCombinationAcquisitionRelatedCostshttp://fasb.org/us-gaap/2022#BusinessCombinationAcquisitionRelatedCostshttp://fasb.org/us-gaap/2022#BusinessCombinationAcquisitionRelatedCostshttp://fasb.org/us-gaap/2022#BusinessCombinationAcquisitionRelatedCostshttp://fasb.org/us-gaap/2022#BusinessCombinationAcquisitionRelatedCostshttp://fasb.org/us-gaap/2022#PropertyPlantAndEquipmentAndFinanceLeaseRightOfUseAssetAfterAccumulatedDepreciationAndAmortizationhttp://fasb.org/us-gaap/2022#PropertyPlantAndEquipmentAndFinanceLeaseRightOfUseAssetAfterAccumulatedDepreciationAndAmortizationhttp://fasb.org/us-gaap/2022#OperatingLeaseLiabilityCurrenthttp://fasb.org/us-gaap/2022#OperatingLeaseLiabilityCurrenthttp://fasb.org/us-gaap/2022#OperatingLeaseLiabilityNoncurrenthttp://fasb.org/us-gaap/2022#OperatingLeaseLiabilityNoncurrenthttp://fasb.org/us-gaap/2022#AccountsPayableAndAccruedLiabilitiesCurrenthttp://fasb.org/us-gaap/2022#AccountsPayableAndAccruedLiabilitiesCurrenthttp://fasb.org/us-gaap/2022#OtherLiabilitiesNoncurrenthttp://fasb.org/us-gaap/2022#OtherLiabilitiesNoncurrenthttp://fasb.org/us-gaap/2022#AssetImpairmentChargeshttp://fasb.org/us-gaap/2022#AssetImpairmentChargesP8DP3Y00015930342022-01-012022-12-3100015930342022-06-30iso4217:USD00015930342023-02-27xbrli:shares0001593034us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember2019-12-310001593034us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember2020-01-012020-12-310001593034us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember2020-12-310001593034us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember2021-01-012021-12-310001593034us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember2021-12-310001593034us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember2022-01-012022-12-310001593034us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember2022-12-310001593034endp:OpioidRelatedCasesMemberendp:AdHocFirstLienGroupMember2022-12-3100015930342022-12-3100015930342021-12-31iso4217:USDxbrli:shares00015930342021-01-012021-12-3100015930342020-01-012020-12-310001593034us-gaap:CommonStockMember2019-12-310001593034endp:EuroDeferredSharesMember2019-12-310001593034us-gaap:AdditionalPaidInCapitalMember2019-12-310001593034us-gaap:RetainedEarningsMember2019-12-310001593034us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-3100015930342019-12-310001593034us-gaap:RetainedEarningsMember2020-01-012020-12-310001593034us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-12-310001593034us-gaap:AdditionalPaidInCapitalMember2020-01-012020-12-310001593034us-gaap:CommonStockMember2020-01-012020-12-310001593034endp:EuroDeferredSharesMember2020-01-012020-12-310001593034us-gaap:CommonStockMember2020-12-310001593034endp:EuroDeferredSharesMember2020-12-310001593034us-gaap:AdditionalPaidInCapitalMember2020-12-310001593034us-gaap:RetainedEarningsMember2020-12-310001593034us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-3100015930342020-12-310001593034us-gaap:RetainedEarningsMember2021-01-012021-12-310001593034us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-12-310001593034us-gaap:AdditionalPaidInCapitalMember2021-01-012021-12-310001593034us-gaap:CommonStockMember2021-01-012021-12-310001593034endp:EuroDeferredSharesMember2021-01-012021-12-310001593034us-gaap:CommonStockMember2021-12-310001593034endp:EuroDeferredSharesMember2021-12-310001593034us-gaap:AdditionalPaidInCapitalMember2021-12-310001593034us-gaap:RetainedEarningsMember2021-12-310001593034us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310001593034us-gaap:RetainedEarningsMember2022-01-012022-12-310001593034us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-12-310001593034us-gaap:AdditionalPaidInCapitalMember2022-01-012022-12-310001593034us-gaap:CommonStockMember2022-01-012022-12-310001593034endp:EuroDeferredSharesMember2022-01-012022-12-310001593034us-gaap:CommonStockMember2022-12-310001593034endp:EuroDeferredSharesMember2022-12-310001593034us-gaap:AdditionalPaidInCapitalMember2022-12-310001593034us-gaap:RetainedEarningsMember2022-12-310001593034us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310001593034endp:RestructuringSupportAgreementMember2022-08-16xbrli:pure0001593034endp:StalingHorseBidMember2022-08-160001593034endp:StalingHorseBidMember2022-08-162022-08-160001593034endp:StalingHorseBidMember2022-08-172022-08-1700015930342022-10-3100015930342022-08-172022-12-310001593034us-gaap:CustomerConcentrationRiskMemberus-gaap:RevenueFromContractWithCustomerMemberendp:AmerisourceBergenCorporationMember2022-01-012022-12-310001593034us-gaap:CustomerConcentrationRiskMemberus-gaap:RevenueFromContractWithCustomerMemberendp:AmerisourceBergenCorporationMember2021-01-012021-12-310001593034us-gaap:CustomerConcentrationRiskMemberus-gaap:RevenueFromContractWithCustomerMemberendp:AmerisourceBergenCorporationMember2020-01-012020-12-310001593034us-gaap:CustomerConcentrationRiskMemberendp:MckessonCorporationMemberus-gaap:RevenueFromContractWithCustomerMember2022-01-012022-12-310001593034us-gaap:CustomerConcentrationRiskMemberendp:MckessonCorporationMemberus-gaap:RevenueFromContractWithCustomerMember2021-01-012021-12-310001593034us-gaap:CustomerConcentrationRiskMemberendp:MckessonCorporationMemberus-gaap:RevenueFromContractWithCustomerMember2020-01-012020-12-310001593034us-gaap:CustomerConcentrationRiskMemberendp:CardinalHealthIncMemberus-gaap:RevenueFromContractWithCustomerMember2022-01-012022-12-310001593034us-gaap:CustomerConcentrationRiskMemberendp:CardinalHealthIncMemberus-gaap:RevenueFromContractWithCustomerMember2021-01-012021-12-310001593034us-gaap:CustomerConcentrationRiskMemberendp:CardinalHealthIncMemberus-gaap:RevenueFromContractWithCustomerMember2020-01-012020-12-310001593034endp:XiaflexMemberus-gaap:ProductConcentrationRiskMemberus-gaap:RevenueFromContractWithCustomerMember2022-01-012022-12-310001593034endp:XiaflexMemberus-gaap:ProductConcentrationRiskMemberus-gaap:RevenueFromContractWithCustomerMember2021-01-012021-12-310001593034endp:XiaflexMemberus-gaap:ProductConcentrationRiskMemberus-gaap:RevenueFromContractWithCustomerMember2020-01-012020-12-310001593034us-gaap:ProductConcentrationRiskMemberendp:VareniclineTabletsMemberus-gaap:RevenueFromContractWithCustomerMembersrt:MaximumMember2022-01-012022-12-310001593034us-gaap:ProductConcentrationRiskMemberus-gaap:RevenueFromContractWithCustomerMemberendp:VasostrictMember2022-01-012022-12-310001593034us-gaap:ProductConcentrationRiskMemberus-gaap:RevenueFromContractWithCustomerMemberendp:VasostrictMember2021-01-012021-12-310001593034us-gaap:ProductConcentrationRiskMemberus-gaap:RevenueFromContractWithCustomerMemberendp:VasostrictMember2020-01-012020-12-310001593034srt:MinimumMember2022-01-012022-12-310001593034us-gaap:TradeAccountsReceivableMemberendp:AmerisourceBergenCorporationMemberus-gaap:CreditConcentrationRiskMember2022-01-012022-12-310001593034endp:CardinalHealthIncMemberus-gaap:TradeAccountsReceivableMemberus-gaap:CreditConcentrationRiskMember2022-01-012022-12-310001593034endp:MckessonCorporationMemberus-gaap:TradeAccountsReceivableMemberus-gaap:CreditConcentrationRiskMember2022-01-012022-12-310001593034endp:CardinalHealthIncMemberus-gaap:TradeAccountsReceivableMemberus-gaap:CreditConcentrationRiskMember2021-01-012021-12-310001593034endp:MckessonCorporationMemberus-gaap:TradeAccountsReceivableMemberus-gaap:CreditConcentrationRiskMember2021-01-012021-12-310001593034us-gaap:TradeAccountsReceivableMemberendp:AmerisourceBergenCorporationMemberus-gaap:CreditConcentrationRiskMember2021-01-012021-12-310001593034srt:MinimumMemberus-gaap:BuildingMember2022-01-012022-12-310001593034us-gaap:BuildingMembersrt:MaximumMember2022-01-012022-12-310001593034us-gaap:MachineryAndEquipmentMember2022-01-012022-12-310001593034endp:ComputerEquipmentAndSoftwareMember2022-01-012022-12-310001593034us-gaap:FurnitureAndFixturesMember2022-01-012022-12-310001593034srt:MinimumMemberus-gaap:DevelopedTechnologyRightsMember2022-01-012022-12-310001593034us-gaap:DevelopedTechnologyRightsMembersrt:MaximumMember2022-01-012022-12-310001593034srt:WeightedAverageMemberus-gaap:DevelopedTechnologyRightsMember2022-01-012022-12-310001593034srt:MinimumMemberus-gaap:LicensingAgreementsMember2022-01-012022-12-310001593034us-gaap:LicensingAgreementsMembersrt:MaximumMember2022-01-012022-12-310001593034srt:WeightedAverageMemberus-gaap:LicensingAgreementsMember2022-01-012022-12-310001593034endp:AstoraMemberus-gaap:DiscontinuedOperationsDisposedOfByMeansOtherThanSaleAbandonmentMember2022-01-012022-12-310001593034endp:AstoraMemberus-gaap:DiscontinuedOperationsDisposedOfByMeansOtherThanSaleAbandonmentMember2021-01-012021-12-310001593034endp:AstoraMemberus-gaap:DiscontinuedOperationsDisposedOfByMeansOtherThanSaleAbandonmentMember2020-01-012020-12-310001593034endp:ManufacturingFacilitiesInChestnutRidgeNYAndIrvineCAAndUSProductRegulatoryApprovalsAndCertainRelatedProductInventoryMemberus-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember2021-01-012021-12-310001593034us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMemberendp:EndoInternationalPLCMember2021-01-012021-12-310001593034endp:ManufacturingFacilitiesInChestnutRidgeNYAndIrvineCAAndUSProductRegulatoryApprovalsAndCertainRelatedProductInventoryMemberus-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember2022-10-012022-12-310001593034endp:ManufacturingFacilitiesInChestnutRidgeNYAndIrvineCAAndUSProductRegulatoryApprovalsAndCertainRelatedProductInventoryMemberus-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMemberendp:RestructuringInitiative2020Member2022-10-012022-12-310001593034endp:RestructuringInitiative2020Member2020-11-012020-11-30endp:position0001593034srt:MinimumMemberendp:RestructuringInitiative2020Member2020-11-300001593034endp:RestructuringInitiative2020Membersrt:MaximumMember2020-11-300001593034us-gaap:CostOfSalesMembersrt:MinimumMemberendp:RestructuringInitiative2020Member2020-11-300001593034us-gaap:CostOfSalesMemberendp:RestructuringInitiative2020Membersrt:MaximumMember2020-11-300001593034srt:MinimumMemberendp:OtherExpensesMemberendp:RestructuringInitiative2020Member2020-11-300001593034endp:OtherExpensesMemberendp:RestructuringInitiative2020Membersrt:MaximumMember2020-11-300001593034endp:RestructuringInitiative2020Member2022-01-012022-12-310001593034endp:RestructuringInitiative2020Member2021-01-012021-12-310001593034endp:RestructuringInitiative2020Member2020-01-012020-12-310001593034endp:RestructuringInitiative2020Memberus-gaap:OperatingSegmentsMemberendp:GenericPharmaceuticalsSegmentMember2022-01-012022-12-310001593034endp:RestructuringInitiative2020Memberus-gaap:OperatingSegmentsMemberendp:GenericPharmaceuticalsSegmentMember2021-01-012021-12-310001593034endp:RestructuringInitiative2020Memberus-gaap:OperatingSegmentsMemberendp:GenericPharmaceuticalsSegmentMember2020-01-012020-12-310001593034endp:RestructuringInitiative2020Memberendp:AcceleratedDepreciationChargesMember2022-12-310001593034endp:RestructuringInitiative2020Memberendp:AssetImpairmentChargesMember2022-12-310001593034endp:RestructuringInitiative2020Memberendp:InventoryAdjustmentsMember2022-12-310001593034endp:RestructuringInitiative2020Memberendp:EmployeeSeparationContinuityAndOtherBenefitRelatedCostsMember2022-12-310001593034us-gaap:OtherRestructuringMemberendp:RestructuringInitiative2020Member2022-12-310001593034endp:RestructuringInitiative2020Memberus-gaap:OperatingSegmentsMemberendp:GenericPharmaceuticalsSegmentMember2022-12-310001593034us-gaap:CostOfSalesMemberendp:RestructuringInitiative2020Member2022-01-012022-12-310001593034us-gaap:CostOfSalesMemberendp:RestructuringInitiative2020Member2021-01-012021-12-310001593034us-gaap:CostOfSalesMemberendp:RestructuringInitiative2020Member2020-01-012020-12-310001593034endp:RestructuringInitiative2020Memberus-gaap:SellingGeneralAndAdministrativeExpensesMember2022-01-012022-12-310001593034endp:RestructuringInitiative2020Memberus-gaap:SellingGeneralAndAdministrativeExpensesMember2021-01-012021-12-310001593034endp:RestructuringInitiative2020Memberus-gaap:SellingGeneralAndAdministrativeExpensesMember2020-01-012020-12-310001593034endp:RestructuringInitiative2020Memberus-gaap:ResearchAndDevelopmentExpenseMember2022-01-012022-12-310001593034endp:RestructuringInitiative2020Memberus-gaap:ResearchAndDevelopmentExpenseMember2021-01-012021-12-310001593034endp:RestructuringInitiative2020Memberus-gaap:ResearchAndDevelopmentExpenseMember2020-01-012020-12-310001593034endp:AssetImpairmentChargesMemberendp:RestructuringInitiative2020Member2022-01-012022-12-310001593034endp:AssetImpairmentChargesMemberendp:RestructuringInitiative2020Member2021-01-012021-12-310001593034endp:AssetImpairmentChargesMemberendp:RestructuringInitiative2020Member2020-01-012020-12-310001593034endp:RestructuringInitiative2020Memberus-gaap:OtherOperatingIncomeExpenseMember2022-01-012022-12-310001593034endp:RestructuringInitiative2020Memberus-gaap:OtherOperatingIncomeExpenseMember2021-01-012021-12-310001593034endp:RestructuringInitiative2020Memberus-gaap:OtherOperatingIncomeExpenseMember2020-01-012020-12-310001593034endp:RestructuringInitiative2020Memberendp:EmployeeSeparationContinuityAndOtherBenefitRelatedCostsMember2019-12-310001593034us-gaap:OtherRestructuringMemberendp:RestructuringInitiative2020Member2019-12-310001593034endp:RestructuringInitiative2020Memberendp:EmployeeSeparationContinuityAndOtherBenefitRelatedCostsAndOtherRestructuringCostsMember2019-12-310001593034endp:RestructuringInitiative2020Memberendp:EmployeeSeparationContinuityAndOtherBenefitRelatedCostsMember2020-01-012020-12-310001593034us-gaap:OtherRestructuringMemberendp:RestructuringInitiative2020Member2020-01-012020-12-310001593034endp:RestructuringInitiative2020Memberendp:EmployeeSeparationContinuityAndOtherBenefitRelatedCostsAndOtherRestructuringCostsMember2020-01-012020-12-310001593034endp:RestructuringInitiative2020Memberendp:EmployeeSeparationContinuityAndOtherBenefitRelatedCostsMember2020-12-310001593034us-gaap:OtherRestructuringMemberendp:RestructuringInitiative2020Member2020-12-310001593034endp:RestructuringInitiative2020Memberendp:EmployeeSeparationContinuityAndOtherBenefitRelatedCostsAndOtherRestructuringCostsMember2020-12-310001593034endp:RestructuringInitiative2020Memberendp:EmployeeSeparationContinuityAndOtherBenefitRelatedCostsMember2021-01-012021-12-310001593034us-gaap:OtherRestructuringMemberendp:RestructuringInitiative2020Member2021-01-012021-12-310001593034endp:RestructuringInitiative2020Memberendp:EmployeeSeparationContinuityAndOtherBenefitRelatedCostsAndOtherRestructuringCostsMember2021-01-012021-12-310001593034endp:RestructuringInitiative2020Memberendp:EmployeeSeparationContinuityAndOtherBenefitRelatedCostsMember2021-12-310001593034us-gaap:OtherRestructuringMemberendp:RestructuringInitiative2020Member2021-12-310001593034endp:RestructuringInitiative2020Memberendp:EmployeeSeparationContinuityAndOtherBenefitRelatedCostsAndOtherRestructuringCostsMember2021-12-310001593034endp:RestructuringInitiative2020Memberendp:EmployeeSeparationContinuityAndOtherBenefitRelatedCostsMember2022-01-012022-12-310001593034us-gaap:OtherRestructuringMemberendp:RestructuringInitiative2020Member2022-01-012022-12-310001593034endp:RestructuringInitiative2020Memberendp:EmployeeSeparationContinuityAndOtherBenefitRelatedCostsAndOtherRestructuringCostsMember2022-01-012022-12-310001593034endp:RestructuringInitiative2020Memberendp:EmployeeSeparationContinuityAndOtherBenefitRelatedCostsAndOtherRestructuringCostsMember2022-12-310001593034endp:RestructuringInitiativeApril2022Member2022-04-012022-04-300001593034srt:MinimumMemberendp:RestructuringInitiativeApril2022Member2022-04-300001593034endp:RestructuringInitiativeApril2022Membersrt:MaximumMember2022-04-300001593034endp:RestructuringInitiativeApril2022Member2022-01-012022-12-310001593034endp:RestructuringInitiativeApril2022Memberus-gaap:OperatingSegmentsMemberendp:GenericPharmaceuticalsSegmentMember2022-01-012022-12-310001593034us-gaap:CostOfSalesMemberendp:RestructuringInitiativeApril2022Member2022-01-012022-12-310001593034endp:RestructuringInitiativeApril2022Memberus-gaap:SellingGeneralAndAdministrativeExpensesMember2022-01-012022-12-310001593034endp:RestructuringInitiativeApril2022Memberus-gaap:ResearchAndDevelopmentExpenseMember2022-01-012022-12-310001593034endp:AssetImpairmentChargesMemberendp:RestructuringInitiativeApril2022Member2022-01-012022-12-310001593034endp:RestructuringInitiativeApril2022Memberendp:EmployeeSeparationContinuityAndOtherBenefitRelatedCostsMember2021-12-310001593034us-gaap:OtherRestructuringMemberendp:RestructuringInitiativeApril2022Member2021-12-310001593034endp:RestructuringInitiativeApril2022Memberendp:EmployeeSeparationContinuityAndOtherBenefitRelatedCostsAndOtherRestructuringCostsMember2021-12-310001593034endp:RestructuringInitiativeApril2022Memberendp:EmployeeSeparationContinuityAndOtherBenefitRelatedCostsMember2022-01-012022-12-310001593034us-gaap:OtherRestructuringMemberendp:RestructuringInitiativeApril2022Member2022-01-012022-12-310001593034endp:RestructuringInitiativeApril2022Memberendp:EmployeeSeparationContinuityAndOtherBenefitRelatedCostsAndOtherRestructuringCostsMember2022-01-012022-12-310001593034endp:RestructuringInitiativeApril2022Memberendp:EmployeeSeparationContinuityAndOtherBenefitRelatedCostsMember2022-12-310001593034us-gaap:OtherRestructuringMemberendp:RestructuringInitiativeApril2022Member2022-12-310001593034endp:RestructuringInitiativeApril2022Memberendp:EmployeeSeparationContinuityAndOtherBenefitRelatedCostsAndOtherRestructuringCostsMember2022-12-31endp:segment0001593034endp:BrandedPharmaceuticalsSegmentMember2022-01-012022-12-310001593034endp:BrandedPharmaceuticalsSegmentMember2021-01-012021-12-310001593034endp:BrandedPharmaceuticalsSegmentMember2020-01-012020-12-310001593034endp:SterileInjectablesSegmentMember2022-01-012022-12-310001593034endp:SterileInjectablesSegmentMember2021-01-012021-12-310001593034endp:SterileInjectablesSegmentMember2020-01-012020-12-310001593034endp:GenericPharmaceuticalsSegmentMember2022-01-012022-12-310001593034endp:GenericPharmaceuticalsSegmentMember2021-01-012021-12-310001593034endp:GenericPharmaceuticalsSegmentMember2020-01-012020-12-310001593034endp:InternationalPharmaceuticalsSegmentMember2022-01-012022-12-310001593034endp:InternationalPharmaceuticalsSegmentMember2021-01-012021-12-310001593034endp:InternationalPharmaceuticalsSegmentMember2020-01-012020-12-310001593034us-gaap:MaterialReconcilingItemsMember2022-01-012022-12-310001593034us-gaap:MaterialReconcilingItemsMember2021-01-012021-12-310001593034us-gaap:MaterialReconcilingItemsMember2020-01-012020-12-310001593034us-gaap:OperatingSegmentsMember2022-01-012022-12-310001593034us-gaap:OperatingSegmentsMember2021-01-012021-12-310001593034us-gaap:OperatingSegmentsMember2020-01-012020-12-310001593034endp:CostReductionMemberus-gaap:EmployeeSeveranceMember2022-01-012022-12-310001593034endp:CostReductionMember2022-01-012022-12-310001593034endp:CostReductionMemberendp:InventoryAdjustmentsMember2022-01-012022-12-310001593034us-gaap:OtherRestructuringMemberendp:CostReductionMember2022-01-012022-12-310001593034endp:CostReductionMemberus-gaap:EmployeeSeveranceMember2021-01-012021-12-310001593034endp:CostReductionMember2021-01-012021-12-310001593034us-gaap:OtherRestructuringMemberendp:CostReductionMember2021-01-012021-12-310001593034endp:CostReductionMemberus-gaap:EmployeeSeveranceMember2020-01-012020-12-310001593034endp:CostReductionMember2020-01-012020-12-310001593034us-gaap:OtherRestructuringMemberendp:CostReductionMember2020-01-012020-12-310001593034us-gaap:SellingGeneralAndAdministrativeExpensesMemberendp:SixPointOneTwoFivePercentSeniorNotesDueTwoThousandTwentyNineMember2021-01-012021-12-310001593034us-gaap:SellingGeneralAndAdministrativeExpensesMemberendp:SixPointOneTwoFivePercentSeniorNotesDueTwoThousandTwentyNineMember2020-01-012020-12-310001593034endp:BrandedPharmaceuticalsSegmentMemberendp:XiaflexMember2022-01-012022-12-310001593034endp:BrandedPharmaceuticalsSegmentMemberendp:XiaflexMember2021-01-012021-12-310001593034endp:BrandedPharmaceuticalsSegmentMemberendp:XiaflexMember2020-01-012020-12-310001593034endp:BrandedPharmaceuticalsSegmentMemberendp:SUPPRELINLAMember2022-01-012022-12-310001593034endp:BrandedPharmaceuticalsSegmentMemberendp:SUPPRELINLAMember2021-01-012021-12-310001593034endp:BrandedPharmaceuticalsSegmentMemberendp:SUPPRELINLAMember2020-01-012020-12-310001593034endp:BrandedPharmaceuticalsSegmentMemberendp:OtherSpecialtyProductsMember2022-01-012022-12-310001593034endp:BrandedPharmaceuticalsSegmentMemberendp:OtherSpecialtyProductsMember2021-01-012021-12-310001593034endp:BrandedPharmaceuticalsSegmentMemberendp:OtherSpecialtyProductsMember2020-01-012020-12-310001593034endp:BrandedPharmaceuticalsSegmentMemberendp:SpecialtyProductsMember2022-01-012022-12-310001593034endp:BrandedPharmaceuticalsSegmentMemberendp:SpecialtyProductsMember2021-01-012021-12-310001593034endp:BrandedPharmaceuticalsSegmentMemberendp:SpecialtyProductsMember2020-01-012020-12-310001593034endp:BrandedPharmaceuticalsSegmentMemberendp:PERCOCETMember2022-01-012022-12-310001593034endp:BrandedPharmaceuticalsSegmentMemberendp:PERCOCETMember2021-01-012021-12-310001593034endp:BrandedPharmaceuticalsSegmentMemberendp:PERCOCETMember2020-01-012020-12-310001593034endp:BrandedPharmaceuticalsSegmentMemberendp:LidodermMember2022-01-012022-12-310001593034endp:BrandedPharmaceuticalsSegmentMemberendp:LidodermMember2021-01-012021-12-310001593034endp:BrandedPharmaceuticalsSegmentMemberendp:LidodermMember2020-01-012020-12-310001593034endp:BrandedPharmaceuticalsSegmentMemberendp:OtherEstablishedProductsMember2022-01-012022-12-310001593034endp:BrandedPharmaceuticalsSegmentMemberendp:OtherEstablishedProductsMember2021-01-012021-12-310001593034endp:BrandedPharmaceuticalsSegmentMemberendp:OtherEstablishedProductsMember2020-01-012020-12-310001593034endp:BrandedPharmaceuticalsSegmentMemberendp:EstablishedProductsMember2022-01-012022-12-310001593034endp:BrandedPharmaceuticalsSegmentMemberendp:EstablishedProductsMember2021-01-012021-12-310001593034endp:BrandedPharmaceuticalsSegmentMemberendp:EstablishedProductsMember2020-01-012020-12-310001593034endp:SterileInjectablesSegmentMemberendp:VasostrictMember2022-01-012022-12-310001593034endp:SterileInjectablesSegmentMemberendp:VasostrictMember2021-01-012021-12-310001593034endp:SterileInjectablesSegmentMemberendp:VasostrictMember2020-01-012020-12-310001593034endp:AdrenalinMemberendp:SterileInjectablesSegmentMember2022-01-012022-12-310001593034endp:AdrenalinMemberendp:SterileInjectablesSegmentMember2021-01-012021-12-310001593034endp:AdrenalinMemberendp:SterileInjectablesSegmentMember2020-01-012020-12-310001593034endp:OtherSterileInjectablesMemberendp:SterileInjectablesSegmentMember2022-01-012022-12-310001593034endp:OtherSterileInjectablesMemberendp:SterileInjectablesSegmentMember2021-01-012021-12-310001593034endp:OtherSterileInjectablesMemberendp:SterileInjectablesSegmentMember2020-01-012020-12-310001593034us-gaap:ProductConcentrationRiskMemberus-gaap:RevenueFromContractWithCustomerMemberendp:InternationalPharmaceuticalsSegmentMembersrt:MaximumMember2022-01-012022-12-310001593034us-gaap:ProductConcentrationRiskMemberus-gaap:RevenueFromContractWithCustomerMemberendp:InternationalPharmaceuticalsSegmentMembersrt:MaximumMember2021-01-012021-12-310001593034endp:BrandedPharmaceuticalsSegmentMemberus-gaap:OperatingSegmentsMember2022-01-012022-12-310001593034endp:BrandedPharmaceuticalsSegmentMemberus-gaap:OperatingSegmentsMember2021-01-012021-12-310001593034endp:BrandedPharmaceuticalsSegmentMemberus-gaap:OperatingSegmentsMember2020-01-012020-12-310001593034us-gaap:OperatingSegmentsMemberendp:SterileInjectablesSegmentMember2022-01-012022-12-310001593034us-gaap:OperatingSegmentsMemberendp:SterileInjectablesSegmentMember2021-01-012021-12-310001593034us-gaap:OperatingSegmentsMemberendp:SterileInjectablesSegmentMember2020-01-012020-12-310001593034us-gaap:OperatingSegmentsMemberendp:GenericPharmaceuticalsSegmentMember2022-01-012022-12-310001593034us-gaap:OperatingSegmentsMemberendp:GenericPharmaceuticalsSegmentMember2021-01-012021-12-310001593034us-gaap:OperatingSegmentsMemberendp:GenericPharmaceuticalsSegmentMember2020-01-012020-12-310001593034us-gaap:OperatingSegmentsMemberendp:InternationalPharmaceuticalsSegmentMember2022-01-012022-12-310001593034us-gaap:OperatingSegmentsMemberendp:InternationalPharmaceuticalsSegmentMember2021-01-012021-12-310001593034us-gaap:OperatingSegmentsMemberendp:InternationalPharmaceuticalsSegmentMember2020-01-012020-12-310001593034us-gaap:CorporateNonSegmentMember2022-01-012022-12-310001593034us-gaap:CorporateNonSegmentMember2021-01-012021-12-310001593034us-gaap:CorporateNonSegmentMember2020-01-012020-12-310001593034endp:OpioidRelatedCasesAndMeshRelatedCasesMember2022-12-310001593034endp:OpioidRelatedCasesAndMeshRelatedCasesMember2021-12-310001593034endp:RestrictedCashAndCashEquivalentsInsuranceCoverageMember2022-12-310001593034endp:RestrictedCashAndCashEquivalentsInsuranceCoverageMember2021-12-310001593034us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Member2022-12-310001593034us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel2Member2022-12-310001593034us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel3Member2022-12-310001593034us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2022-12-310001593034endp:AcquisitionRelatedContingentConsiderationMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2022-12-310001593034endp:AcquisitionRelatedContingentConsiderationMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2022-12-310001593034endp:AcquisitionRelatedContingentConsiderationMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2022-12-310001593034endp:AcquisitionRelatedContingentConsiderationMemberus-gaap:FairValueMeasurementsRecurringMember2022-12-310001593034us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Member2021-12-310001593034us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel2Member2021-12-310001593034us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel3Member2021-12-310001593034us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2021-12-310001593034endp:AcquisitionRelatedContingentConsiderationMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2021-12-310001593034endp:AcquisitionRelatedContingentConsiderationMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2021-12-310001593034endp:AcquisitionRelatedContingentConsiderationMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2021-12-310001593034endp:AcquisitionRelatedContingentConsiderationMemberus-gaap:FairValueMeasurementsRecurringMember2021-12-310001593034us-gaap:MoneyMarketFundsMemberendp:RestrictedCashAndCashEquivalentsMember2022-12-310001593034us-gaap:MoneyMarketFundsMemberendp:RestrictedCashAndCashEquivalentsMember2021-12-310001593034endp:AcquisitionRelatedContingentConsiderationMemberus-gaap:AccountsPayableAndAccruedLiabilitiesMember2021-12-310001593034endp:AcquisitionRelatedContingentConsiderationMemberus-gaap:OtherLiabilitiesMember2021-12-310001593034endp:AcquisitionRelatedContingentConsiderationMember2021-12-310001593034endp:AcquisitionRelatedContingentConsiderationMember2020-12-310001593034endp:AcquisitionRelatedContingentConsiderationMember2022-01-012022-12-310001593034endp:AcquisitionRelatedContingentConsiderationMember2021-01-012021-12-310001593034endp:AcquisitionRelatedContingentConsiderationMember2022-12-310001593034srt:MinimumMemberus-gaap:MeasurementInputDiscountRateMember2022-12-310001593034srt:MaximumMemberus-gaap:MeasurementInputDiscountRateMember2022-12-310001593034srt:WeightedAverageMemberus-gaap:MeasurementInputDiscountRateMember2022-12-310001593034endp:AcquisitionRelatedContingentConsiderationMemberendp:AuxiliumPharmaceuticalsInc.Member2021-12-310001593034endp:AcquisitionRelatedContingentConsiderationMemberendp:AuxiliumPharmaceuticalsInc.Member2022-01-012022-12-310001593034endp:AcquisitionRelatedContingentConsiderationMemberendp:AuxiliumPharmaceuticalsInc.Member2022-12-310001593034endp:AcquisitionRelatedContingentConsiderationMemberendp:LehighValleyTechnologiesInc.Member2021-12-310001593034endp:AcquisitionRelatedContingentConsiderationMemberendp:LehighValleyTechnologiesInc.Member2022-01-012022-12-310001593034endp:AcquisitionRelatedContingentConsiderationMemberendp:LehighValleyTechnologiesInc.Member2022-12-310001593034endp:AcquisitionRelatedContingentConsiderationMemberendp:OtherAcquisitionsExcludingVoltarenMember2021-12-310001593034endp:AcquisitionRelatedContingentConsiderationMemberendp:OtherAcquisitionsExcludingVoltarenMember2022-01-012022-12-310001593034endp:AcquisitionRelatedContingentConsiderationMemberendp:OtherAcquisitionsExcludingVoltarenMember2022-12-310001593034endp:AcquisitionRelatedContingentConsiderationMemberendp:AuxiliumPharmaceuticalsInc.Member2020-12-310001593034endp:AcquisitionRelatedContingentConsiderationMemberendp:AuxiliumPharmaceuticalsInc.Member2021-01-012021-12-310001593034endp:AcquisitionRelatedContingentConsiderationMemberendp:LehighValleyTechnologiesInc.Member2020-12-310001593034endp:AcquisitionRelatedContingentConsiderationMemberendp:LehighValleyTechnologiesInc.Member2021-01-012021-12-310001593034endp:AcquisitionRelatedContingentConsiderationMemberendp:OtherAcquisitionsExcludingVoltarenMember2020-12-310001593034endp:AcquisitionRelatedContingentConsiderationMemberendp:OtherAcquisitionsExcludingVoltarenMember2021-01-012021-12-310001593034us-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:FairValueInputsLevel1Member2022-12-310001593034us-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:FairValueInputsLevel2Member2022-12-310001593034us-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:FairValueInputsLevel3Member2022-12-310001593034us-gaap:FairValueMeasurementsNonrecurringMember2022-01-012022-12-310001593034us-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:FairValueInputsLevel1Member2021-12-310001593034us-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:FairValueInputsLevel2Member2021-12-310001593034us-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:FairValueInputsLevel3Member2021-12-310001593034us-gaap:FairValueMeasurementsNonrecurringMember2021-01-012021-12-310001593034us-gaap:FairValueMeasurementsNonrecurringMembersrt:MinimumMemberus-gaap:MeasurementInputDiscountRateMember2022-12-310001593034us-gaap:FairValueMeasurementsNonrecurringMembersrt:MaximumMemberus-gaap:MeasurementInputDiscountRateMember2022-12-310001593034srt:WeightedAverageMemberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:MeasurementInputDiscountRateMember2022-12-310001593034us-gaap:FairValueMeasurementsNonrecurringMembersrt:MinimumMemberus-gaap:MeasurementInputDiscountRateMember2021-12-310001593034us-gaap:FairValueMeasurementsNonrecurringMembersrt:MaximumMemberus-gaap:MeasurementInputDiscountRateMember2021-12-310001593034srt:WeightedAverageMemberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:MeasurementInputDiscountRateMember2021-12-31endp:renewal_options0001593034us-gaap:CostOfSalesMember2022-01-012022-12-310001593034us-gaap:CostOfSalesMember2021-01-012021-12-310001593034us-gaap:CostOfSalesMember2020-01-012020-12-310001593034us-gaap:SellingGeneralAndAdministrativeExpensesMember2022-01-012022-12-310001593034us-gaap:SellingGeneralAndAdministrativeExpensesMember2021-01-012021-12-310001593034us-gaap:SellingGeneralAndAdministrativeExpensesMember2020-01-012020-12-310001593034us-gaap:ResearchAndDevelopmentExpenseMember2022-01-012022-12-310001593034us-gaap:ResearchAndDevelopmentExpenseMember2021-01-012021-12-310001593034us-gaap:ResearchAndDevelopmentExpenseMember2020-01-012020-12-310001593034us-gaap:LandAndBuildingMember2022-12-310001593034us-gaap:LandAndBuildingMember2021-12-310001593034us-gaap:MachineryAndEquipmentMember2022-12-310001593034us-gaap:MachineryAndEquipmentMember2021-12-310001593034us-gaap:LeaseholdImprovementsMember2022-12-310001593034us-gaap:LeaseholdImprovementsMember2021-12-310001593034endp:ComputerEquipmentAndSoftwareMember2022-12-310001593034endp:ComputerEquipmentAndSoftwareMember2021-12-310001593034us-gaap:FurnitureAndFixturesMember2022-12-310001593034us-gaap:FurnitureAndFixturesMember2021-12-310001593034us-gaap:AssetUnderConstructionMember2022-12-310001593034us-gaap:AssetUnderConstructionMember2021-12-310001593034country:IN2022-12-310001593034country:IN2021-12-310001593034endp:BrandedPharmaceuticalsSegmentMember2020-12-310001593034endp:SterileInjectablesSegmentMember2020-12-310001593034endp:GenericPharmaceuticalsSegmentMember2020-12-310001593034endp:InternationalPharmaceuticalsSegmentMember2020-12-310001593034endp:BrandedPharmaceuticalsSegmentMember2021-12-310001593034endp:SterileInjectablesSegmentMember2021-12-310001593034endp:GenericPharmaceuticalsSegmentMember2021-12-310001593034endp:InternationalPharmaceuticalsSegmentMember2021-12-310001593034endp:BrandedPharmaceuticalsSegmentMember2022-12-310001593034endp:SterileInjectablesSegmentMember2022-12-310001593034endp:GenericPharmaceuticalsSegmentMember2022-12-310001593034endp:InternationalPharmaceuticalsSegmentMember2022-12-310001593034us-gaap:DevelopedTechnologyRightsMember2022-01-012022-12-310001593034us-gaap:LicensingAgreementsMember2021-12-310001593034us-gaap:LicensingAgreementsMember2022-01-012022-12-310001593034us-gaap:LicensingAgreementsMember2022-12-310001593034us-gaap:TradeNamesMember2021-12-310001593034us-gaap:TradeNamesMember2022-01-012022-12-310001593034us-gaap:TradeNamesMember2022-12-310001593034us-gaap:DevelopedTechnologyRightsMember2021-12-310001593034us-gaap:DevelopedTechnologyRightsMember2022-12-310001593034srt:WeightedAverageMember2022-01-012022-12-310001593034endp:BrandedPharmaceuticalsSegmentMemberus-gaap:MeasurementInputDiscountRateMember2022-10-010001593034endp:BrandedPharmaceuticalsSegmentMemberus-gaap:MeasurementInputDiscountRateMember2021-10-010001593034endp:BrandedPharmaceuticalsSegmentMemberus-gaap:MeasurementInputDiscountRateMember2020-10-010001593034endp:SterileInjectablesSegmentMemberus-gaap:MeasurementInputDiscountRateMember2022-10-010001593034endp:SterileInjectablesSegmentMemberus-gaap:MeasurementInputDiscountRateMember2021-10-010001593034endp:SterileInjectablesSegmentMemberus-gaap:MeasurementInputDiscountRateMember2020-10-010001593034endp:SterileInjectablesSegmentMember2021-10-012021-12-310001593034endp:PaladinLabsInc.Memberus-gaap:MeasurementInputDiscountRateMember2020-03-310001593034endp:PaladinLabsInc.Member2020-01-012020-03-310001593034endp:SterileInjectablesMember2022-04-012022-06-300001593034endp:BrandedPharmaceuticalsSegmentMemberus-gaap:MeasurementInputDiscountRateMember2022-07-012022-09-300001593034endp:BrandedPharmaceuticalsSegmentMemberus-gaap:MeasurementInputDiscountRateMember2022-06-300001593034endp:SterileInjectablesSegmentMemberus-gaap:MeasurementInputDiscountRateMember2022-06-300001593034endp:SterileInjectablesMember2022-07-012022-09-300001593034endp:BrandedPharmaceuticalsSegmentMemberus-gaap:MeasurementInputDiscountRateMember2022-09-300001593034endp:SterileInjectablesSegmentMemberus-gaap:MeasurementInputDiscountRateMember2022-09-300001593034endp:BioSpecificsMember2020-10-190001593034endp:BioSpecificsMember2020-12-012020-12-010001593034srt:MinimumMember2020-12-012020-12-010001593034srt:MaximumMember2020-12-012020-12-010001593034endp:BioSpecificsMember2020-12-022020-12-020001593034endp:BioSpecificsMember2020-12-010001593034endp:BioSpecificsMember2020-12-020001593034endp:BioSpecificsMember2020-12-030001593034endp:XIAFLEXAndQWOMemberendp:BioSpecificsMember2022-01-012022-12-310001593034endp:NevakarInjectablesIncMember2022-05-012022-05-31endp:project0001593034endp:TLCAgreementMember2022-04-012022-06-300001593034endp:TLCAgreementMember2022-12-310001593034endp:SevenPointTwoFivePercentSeniorNotesDueTwoThousandTwentyTwoMember2022-12-310001593034endp:SevenPointTwoFivePercentSeniorNotesDueTwoThousandTwentyTwoMember2021-12-310001593034endp:FivePointSevenFiveSeniorNotesDueOnTwoThousandTwentyTwoMember2022-12-310001593034endp:FivePointSevenFiveSeniorNotesDueOnTwoThousandTwentyTwoMember2021-12-310001593034endp:FivePointThreeSevenFiveSeniorNotesDueOnTwoThousandTwentyThreeMember2022-06-300001593034endp:FivePointThreeSevenFiveSeniorNotesDueOnTwoThousandTwentyThreeMember2022-12-310001593034endp:FivePointThreeSevenFiveSeniorNotesDueOnTwoThousandTwentyThreeMember2021-12-310001593034endp:SixPointZeroPercentSeniorNotesDueTwoThousandTwentyThreeMember2022-06-300001593034endp:SixPointZeroPercentSeniorNotesDueTwoThousandTwentyThreeMember2022-12-310001593034endp:SixPointZeroPercentSeniorNotesDueTwoThousandTwentyThreeMember2021-12-310001593034endp:FivePointEightSevenFivePercentSeniorSecuredNotesDueTwentyTwentyFourMember2022-12-310001593034endp:FivePointEightSevenFivePercentSeniorSecuredNotesDueTwentyTwentyFourMember2021-12-310001593034endp:SixPercentSeniorNotesDueTwoThousandTwentyFiveMember2022-06-300001593034endp:SixPercentSeniorNotesDueTwoThousandTwentyFiveMember2022-12-310001593034endp:SixPercentSeniorNotesDueTwoThousandTwentyFiveMember2021-12-310001593034endp:SevenPointFivePercentSeniorSecuredNotesDueTwentyTwentySevenMember2022-12-310001593034endp:SevenPointFivePercentSeniorSecuredNotesDueTwentyTwentySevenMember2021-12-310001593034endp:NinePointFivePercentSeniorNotesDueTwoThousandTwentySevenMember2022-06-300001593034endp:NinePointFivePercentSeniorNotesDueTwoThousandTwentySevenMember2022-12-310001593034endp:NinePointFivePercentSeniorNotesDueTwoThousandTwentySevenMember2021-12-310001593034endp:SixPercentSeniorNotesDueTwoThousandTwentyEightMember2022-06-300001593034endp:SixPercentSeniorNotesDueTwoThousandTwentyEightMember2022-12-310001593034endp:SixPercentSeniorNotesDueTwoThousandTwentyEightMember2021-12-310001593034endp:SixPointOneTwoFivePercentSeniorNotesDueTwoThousandTwentyNineMember2022-12-310001593034endp:SixPointOneTwoFivePercentSeniorNotesDueTwoThousandTwentyNineMember2021-12-310001593034endp:TermLoanFacilityMember2022-12-310001593034endp:TermLoanFacilityMember2021-12-310001593034us-gaap:RevolvingCreditFacilityMember2022-12-310001593034us-gaap:RevolvingCreditFacilityMember2021-12-3100015930342022-07-012022-09-300001593034us-gaap:RevolvingCreditFacilityMemberendp:A2017CreditAgreementMember2022-12-310001593034endp:A2017CreditAgreementMemberus-gaap:SecuredDebtMember2022-12-310001593034endp:TermLoanFacilityMember2022-12-310001593034us-gaap:LondonInterbankOfferedRateLIBORMembersrt:MinimumMemberus-gaap:RevolvingCreditFacilityMember2022-01-012022-12-310001593034us-gaap:LondonInterbankOfferedRateLIBORMemberus-gaap:RevolvingCreditFacilityMembersrt:MaximumMember2022-01-012022-12-310001593034us-gaap:BaseRateMembersrt:MinimumMemberus-gaap:RevolvingCreditFacilityMember2022-01-012022-12-310001593034us-gaap:BaseRateMemberus-gaap:RevolvingCreditFacilityMembersrt:MaximumMember2022-01-012022-12-310001593034us-gaap:LondonInterbankOfferedRateLIBORMemberus-gaap:SecuredDebtMember2022-01-012022-12-310001593034us-gaap:LondonInterbankOfferedRateLIBORMemberus-gaap:SecuredDebtMember2022-12-310001593034us-gaap:BaseRateMemberus-gaap:SecuredDebtMember2022-01-012022-12-310001593034us-gaap:BaseRateMemberus-gaap:SecuredDebtMember2022-12-3100015930342022-04-012022-06-3000015930342022-10-012022-12-310001593034us-gaap:SeniorNotesMember2022-12-310001593034us-gaap:RevolvingCreditFacilityMember2022-01-012022-12-310001593034endp:TermLoanFacilityMember2022-01-012022-12-310001593034us-gaap:SeniorNotesMember2022-01-012022-12-3100015930342020-06-012020-06-3000015930342020-04-012020-06-300001593034endp:FivePointSevenFiveSeniorNotesDueOnTwoThousandTwentyTwoMember2020-08-310001593034endp:TermLoanFacilityMember2021-02-280001593034endp:TermLoanFacilityMember2021-03-012021-03-310001593034endp:SixPointOneTwoFivePercentSeniorNotesDueTwoThousandTwentyNineMember2021-03-310001593034us-gaap:RevolvingCreditFacilityMember2021-03-310001593034endp:TermLoanFacilityMember2021-01-012021-03-310001593034endp:SixPointOneTwoFivePercentSeniorNotesDueTwoThousandTwentyNineMember2021-01-012021-03-310001593034us-gaap:SellingGeneralAndAdministrativeExpensesMemberendp:SixPointOneTwoFivePercentSeniorNotesDueTwoThousandTwentyNineMember2021-01-012021-03-310001593034us-gaap:RevolvingCreditFacilityMember2021-01-012021-03-310001593034us-gaap:RevolvingCreditFacilityMember2021-10-012021-10-310001593034endp:SevenPointTwoFivePercentSeniorNotesDueTwoThousandTwentyTwoMember2021-10-310001593034endp:FivePointSevenFiveSeniorNotesDueOnTwoThousandTwentyTwoMember2021-10-310001593034us-gaap:SeniorNotesMember2021-10-012021-10-310001593034endp:PropertyPlantAndEquipmentsMember2022-01-012022-12-310001593034us-gaap:OtherLiabilitiesMember2022-01-012022-12-310001593034endp:SellingGeneralAndAdministrativeExpensesAndCostOfRevenuesMember2022-01-012022-12-310001593034endp:MeshRelatedCasesMemberendp:AmericanMedicalSystemsMember2022-01-012022-12-31endp:case0001593034endp:MeshRelatedCasesMember2021-12-310001593034endp:MeshRelatedCasesMemberendp:ProductLiabilityMember2021-12-310001593034endp:MeshRelatedCasesMember2022-01-012022-12-310001593034endp:MeshRelatedCasesMemberendp:ProductLiabilityMember2022-01-012022-12-310001593034endp:MeshRelatedCasesMember2022-12-310001593034endp:MeshRelatedCasesMemberendp:ProductLiabilityMember2022-12-310001593034endp:OpioidRelatedCasesMemberus-gaap:SubsequentEventMember2023-02-270001593034endp:OpioidRelatedCasesMember2022-01-012022-12-31endp:lawsuit0001593034endp:OpioidRelatedCasesMember2019-09-012019-09-300001593034endp:VASOSTRICTandorADRENALINMemberendp:OpioidRelatedCasesMember2019-09-012019-09-300001593034endp:OpioidRelatedCasesMember2020-01-012020-01-310001593034endp:OpioidRelatedCasesMember2021-08-012021-08-31endp:countyendp:municipality0001593034endp:OpioidRelatedCasesMemberstpr:NY2021-09-012021-09-300001593034endp:OpioidRelatedCasesMember2021-09-012021-09-300001593034endp:OpioidRelatedCasesMemberendp:EndoInternationalPLCMember2021-10-012021-10-310001593034endp:OpioidRelatedCasesMemberstpr:TX2021-12-012021-12-310001593034endp:OpioidRelatedCasesMemberendp:EndoInternationalPLCMember2021-12-012021-12-310001593034endp:OpioidRelatedCasesMemberendp:EndoInternationalPLCMember2022-01-012022-01-310001593034endp:OpioidRelatedCasesMemberendp:EndoInternationalPLCMember2022-02-012022-02-280001593034endp:OpioidRelatedCasesMemberendp:EndoInternationalPLCMember2022-03-012022-03-310001593034endp:OpioidRelatedCasesMemberendp:EndoInternationalPLCMember2022-06-012022-06-300001593034endp:OpioidRelatedCasesMemberendp:EndoInternationalPLCMember2022-07-012022-07-310001593034endp:OpioidRelatedCasesMemberendp:SanFranciscoMember2022-07-012022-07-310001593034endp:OpioidRelatedCasesMemberendp:AdHocFirstLienGroupMember2022-08-160001593034endp:OpioidRelatedCasesMemberendp:AdHocFirstLienGroupMember2022-08-162022-08-160001593034endp:OpioidRelatedCasesMemberendp:AdHocFirstLienGroupMember2022-07-012022-09-300001593034endp:OpioidRelatedCasesMemberendp:AdHocFirstLienGroupMember2022-09-300001593034endp:OpioidRelatedCasesMemberendp:AdHocFirstLienGroupMemberus-gaap:SubsequentEventMember2023-03-030001593034endp:OpioidRelatedCasesMemberendp:AdHocFirstLienGroupMember2022-10-012022-12-310001593034endp:DistrictCourtForTheEasternDistrictOfPennsylvaniaMember2016-03-310001593034endp:VASOSTRICTRelatedMattersMemberendp:ParPharmaceuticalIncMember2022-03-012022-03-31endp:shareholder0001593034endp:A2015ShareBuybackProgramMember2022-12-310001593034endp:A2015ShareBuybackProgramMember2022-01-012022-12-310001593034endp:PlansOtherThan2015PlanMember2022-12-310001593034endp:TwoThousandFifteenStockIncentivePlanMember2022-12-310001593034us-gaap:EmployeeStockOptionMembersrt:MinimumMember2022-01-012022-12-310001593034us-gaap:EmployeeStockOptionMembersrt:MaximumMember2022-01-012022-12-310001593034us-gaap:EmployeeStockOptionMember2022-01-012022-12-310001593034srt:MinimumMemberus-gaap:RestrictedStockUnitsRSUMember2022-01-012022-12-310001593034us-gaap:PerformanceSharesMember2022-01-012022-12-310001593034us-gaap:PerformanceSharesMembersrt:MinimumMember2022-01-012022-12-310001593034us-gaap:PerformanceSharesMembersrt:MaximumMember2022-01-012022-12-310001593034endp:RestrictedStockUnitsAndPerformanceStockUnitsMember2019-12-310001593034endp:RestrictedStockUnitsAndPerformanceStockUnitsMember2020-01-012020-12-310001593034endp:RestrictedStockUnitsAndPerformanceStockUnitsMember2020-12-310001593034endp:RestrictedStockUnitsAndPerformanceStockUnitsMember2021-01-012021-12-310001593034endp:RestrictedStockUnitsAndPerformanceStockUnitsMember2021-12-310001593034endp:RestrictedStockUnitsAndPerformanceStockUnitsMember2022-01-012022-12-310001593034endp:RestrictedStockUnitsAndPerformanceStockUnitsMember2022-12-310001593034us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-12-310001593034us-gaap:RestrictedStockUnitsRSUMember2022-12-310001593034us-gaap:PerformanceSharesMember2022-12-310001593034us-gaap:RestrictedStockUnitsRSUMember2021-12-310001593034us-gaap:RestrictedStockUnitsRSUMember2020-12-310001593034us-gaap:ForeignCountryMemberus-gaap:RevenueCommissionersIrelandMember2022-12-310001593034us-gaap:ForeignCountryMemberus-gaap:LuxembourgInlandRevenueMember2022-12-310001593034country:US2022-12-310001593034us-gaap:CapitalLossCarryforwardMembercountry:US2022-12-310001593034us-gaap:GeneralBusinessMembercountry:US2022-12-310001593034us-gaap:StateAndLocalJurisdictionMember2022-12-310001593034us-gaap:CapitalLossCarryforwardMemberus-gaap:StateAndLocalJurisdictionMember2022-12-310001593034us-gaap:StateAndLocalJurisdictionMemberus-gaap:GeneralBusinessMember2022-12-310001593034us-gaap:InternalRevenueServiceIRSMembercountry:US2022-12-310001593034endp:CARESActMember2022-01-012022-12-310001593034endp:CARESActMember2020-01-012020-12-310001593034srt:MaximumMember2022-01-012022-12-310001593034us-gaap:ScenarioPlanMembersrt:MinimumMember2021-04-012021-04-300001593034us-gaap:ScenarioPlanMembersrt:MaximumMember2021-04-012021-04-300001593034us-gaap:EmployeeStockOptionMember2021-01-012021-12-310001593034us-gaap:EmployeeStockOptionMember2020-01-012020-12-310001593034endp:StockAwardMember2022-01-012022-12-310001593034endp:StockAwardMember2021-01-012021-12-310001593034endp:StockAwardMember2020-01-012020-12-310001593034us-gaap:ReorganizationChapter11DebtorInPossessionMember2022-12-310001593034us-gaap:ReorganizationChapter11DebtorInPossessionMember2022-01-012022-12-310001593034us-gaap:ReorganizationChapter11DebtorInPossessionMember2021-12-310001593034endp:Endo401kPlanMatchingTierOneMember2022-01-012022-12-310001593034endp:Endo401kPlanMatchingTierTwoMember2022-01-012022-12-310001593034endp:Endo401kPlanMember2022-01-012022-12-31
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________________________________________________
FORM 10-K
____________________________________________________________________________________________
(Mark One)
☒ ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2022
or
☐ TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period
from to
Commission file number 001-36326
____________________________________________________________________________________________
Endo International plc
(Exact name of registrant as specified in its charter)
____________________________________________________________________________________________
|
|
|
|
|
|
|
|
|
Ireland |
68-0683755 |
State or other jurisdiction of incorporation or
organization |
(I.R.S. Employer Identification No.) |
|
|
|
First Floor, Minerva House, Simmonscourt Road |
|
Ballsbridge, Dublin 4, |
Ireland |
Not Applicable |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code:
011-353-1-268-2000
Securities registered pursuant to Section 12(b) of the Act:
None (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
On August 26, 2022, Endo International plc’s ordinary shares, which
previously traded on the Nasdaq Global Select Market under the
symbol ENDP, began trading exclusively on the over-the-counter
market under the symbol ENDPQ. On September 14, 2022, Nasdaq filed
a Form 25-NSE with the United States Securities and Exchange
Commission and Endo International plc’s ordinary shares were
subsequently delisted from the Nasdaq Global Select Market. On
December 13, 2022, Endo International plc’s ordinary shares were
deregistered under Section 12(b) of the Securities Exchange Act of
1934, as amended. |
Securities registered pursuant to Section 12(g) of the Act:
None
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act. |
Yes |
☐ |
No |
☒ |
|
|
|
|
|
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. |
Yes |
☐ |
No |
☒ |
|
|
|
|
|
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. |
Yes |
☒ |
No |
☐ |
|
|
|
|
|
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files).
|
Yes |
☒ |
No |
☐ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
|
Large
accelerated filer |
☐ |
|
Accelerated filer |
☒ |
Non-accelerated filer |
☐ |
|
Smaller reporting company |
☒ |
|
|
|
Emerging growth company |
☐ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act. |
|
|
|
☐ |
|
|
|
|
|
Indicate by check mark whether the registrant has filed a report on
and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section
404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the
registered public accounting firm that prepared or issued its audit
report. |
|
|
|
☒ |
|
|
|
|
|
If securities are registered pursuant to Section 12(b) of the Act,
indicate by check mark whether the financial statements of the
registrant included in the filing reflect the correction of an
error to previously issued financial statements. |
|
|
|
☐ |
|
|
|
|
|
Indicate by check mark whether any of those error corrections are
restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers
during the relevant recovery period pursuant to §
240.10D-1(b). |
|
|
|
☐ |
|
|
|
|
|
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Act). |
Yes |
☐ |
No |
☒ |
|
|
|
|
|
|
|
|
|
The aggregate market value of the voting common equity (ordinary
shares) held by non-affiliates as of June 30, 2022 (the last
business day of the registrant’s most recently completed second
fiscal quarter) was $109,653,452 based on a closing sale price of
$0.47 per share as reported on The Nasdaq Global Select Market on
that date. Ordinary shares held by each officer and director have
been excluded since such persons and beneficial owners may be
deemed to be affiliates. This determination of affiliate status is
not necessarily a conclusive determination for other purposes. The
registrant has no non-voting ordinary shares authorized or
outstanding.
|
|
The number of ordinary shares, nominal value $0.0001 per share
outstanding as of February 27, 2023 was
235,219,612.
|
|
|
|
|
|
ENDO INTERNATIONAL PLC
(DEBTOR-IN-POSSESSION)
INDEX TO FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2022
FORWARD-LOOKING STATEMENTS
Statements contained or incorporated by reference in this document
contain information that includes or is based on “forward-looking
statements” within the meaning of Section 27A of the Securities Act
of 1933, as amended (Securities Act) and Section 21E of the
Securities Exchange Act of 1934, as amended (Exchange Act) and the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements include, without limitation, any statements relating to
future financial results, cost savings, revenues, expenses, net
income and income per share; the status, progress and/or outcome of
litigation, proceedings under chapter 11 of title 11 of the United
States (U.S.) Code (the Bankruptcy Code) and/or any other
contingency planning initiatives, including the application and
effect of the automatic stay thereunder; future financing
activities; the impact of COVID-19 on the health and welfare of our
employees and on our business (including any economic impact,
anticipated return to historical purchasing decisions by customers,
changes in consumer spending, decisions to engage in certain
medical procedures, future governmental orders that could impact
our operations and the ability of our manufacturing facilities and
suppliers to fulfill their obligations to us); the expansion of our
product pipeline and any development, approval, launch or
commercialization activities; and any other statements that refer
to Endo’s expected, estimated or anticipated future results. We
have tried, whenever possible, to identify such statements with
words such as “believe,” “expect,” “anticipate,” “intend,”
“estimate,” “plan,” “project,” “forecast,” “will,” “may” or similar
expressions. We have based these forward-looking statements on our
current expectations, assumptions and projections about, among
other things, the growth of our business, our financial performance
and the development of our industry.
Because these statements reflect our current views concerning
future events, these forward-looking statements involve risks and
uncertainties including, without limitation, the timing or results
of any pending or future litigation, investigations, claims, actual
or contingent liabilities, settlement discussions, negotiations or
other adverse proceedings, including proceedings involving
opioid-related matters, antitrust matters and tax matters with the
U.S. Internal Revenue Service (IRS); unfavorable publicity
regarding the misuse of opioids; the status, progress and/or
outcome of our ongoing bankruptcy proceedings; changing
competitive, market and regulatory conditions; changes in
legislation; our ability to obtain and maintain adequate protection
for our intellectual property rights; the impacts of competition
such as those related to the loss of VASOSTRICT®
exclusivity; the timing and uncertainty of the results of both the
research and development and regulatory processes, including
regulatory decisions, product recalls, withdrawals and other
unusual items; domestic and foreign health care and cost
containment reforms, including government pricing, tax and
reimbursement policies; technological advances and patents obtained
by competitors; the performance, including the approval,
introduction and consumer and physician acceptance of new products
and the continuing acceptance of currently marketed products; our
ability to develop or expand our product pipeline and to continue
to develop the market for XIAFLEX®
and other branded or unbranded products; the impact that known and
unknown side effects may have on market perception and consumer
preference; the success of any acquisition, licensing or
commercialization; the effectiveness of advertising and other
promotional campaigns; the timely and successful implementation of
any strategic and/or optimization initiatives; the uncertainty
associated with the identification of and successful consummation
and execution of external corporate development initiatives and
strategic partnering transactions; our ability to obtain and
successfully manufacture, maintain and distribute a sufficient
supply of products to meet market demand in a timely manner; and
the other risks and uncertainties more fully described under the
caption “Risk Factors” in Part I, Item 1A of this Annual Report on
Form 10-K and in other reports that we file with the Securities and
Exchange Commission (SEC).
These risks and uncertainties, many of which are outside of our
control, and any other risks and uncertainties that we are not
currently able to predict or identify, individually or in the
aggregate, could have a material adverse effect on our business,
financial condition, results of operations and cash flows and could
cause our actual results to differ materially and adversely from
those expressed in forward-looking statements contained or
referenced in this document, including with respect to opioid, tax
or antitrust related proceedings or any other litigation; the
effects of our ongoing bankruptcy proceedings and the related
events of default under our indebtedness on our current and future
liquidity and ability to fund our working capital, capital
expenditures, business development, debt service requirements,
acquisitions and any other obligations; our ability to attract and
retain key personnel; our ability to adjust to changing market
conditions; and/or the potential for a significant reduction in our
short-term and long-term revenues and/or any other factor that
could cause us to be unable to fund our operations and liquidity
needs.
We do not undertake any obligation to update our forward-looking
statements after the date of this document for any reason, even if
new information becomes available or other events occur in the
future, except as may be required under applicable securities laws.
You are advised to consult any further disclosures we make on
related subjects in our reports filed with the SEC and with
securities regulators in Canada on the System for Electronic
Document Analysis and Retrieval (SEDAR). Also note that, in Part I,
Item 1A, we provide a cautionary discussion of risks, uncertainties
and possibly inaccurate assumptions relevant to our business. These
are factors that, individually or in the aggregate, we think could
cause our actual results to differ materially from expected and
historical results. We note these factors for investors as
permitted by Section 27A of the Securities Act and Section 21E of
the Exchange Act. You should understand that it is not possible to
predict or identify all such factors. Consequently, you should not
consider this to be a complete discussion of all potential risks or
uncertainties.
PART I
Item
1. Business
Overview
Unless otherwise indicated or required by the context, references
throughout to “Endo,” the “Company,” “we,” “our” or “us” refer to
Endo International plc and its subsidiaries.
Endo International plc is an Ireland-domiciled specialty
pharmaceutical company. Endo International plc was incorporated in
Ireland in 2013 as a private limited company and re-registered
effective February 18, 2014 as a public limited company. Endo
International plc is a holding company that conducts business
through its operating subsidiaries.
Our ordinary shares, which previously traded on the Nasdaq Global
Select Market under the ticker symbol “ENDP,” are currently quoted
on the over-the-counter market using the ticker symbol “ENDPQ.”
References throughout to “ordinary shares” refer to Endo
International plc’s ordinary shares (1,000,000,000 authorized, par
value of $0.0001 per share). In addition, we have 4,000,000 euro
deferred shares outstanding (par value of $0.01 per
share).
The address of Endo International plc’s headquarters is Minerva
House, Simmonscourt Road, Ballsbridge, Dublin 4, Ireland (telephone
number: 011-353-1-268-2000).
Our focus is on pharmaceutical products and we target areas where
we believe we can build leading positions. Our operating model is
based on a lean and nimble structure, the rational allocation of
capital and an emphasis on high-value research and development
(R&D) targets. While our primary focus is on organic growth, we
evaluate and, where appropriate, execute on opportunities to expand
through the licensing or acquisition of products or companies in
areas that we believe serve patients and customers while offering
attractive growth characteristics and margins. We believe our
operating model and the execution of our corporate strategy will
enable us to create shareholder value over the
long-term.
The four reportable business segments in which we operate are: (1)
Branded Pharmaceuticals, (2) Sterile Injectables, (3) Generic
Pharmaceuticals and (4) International Pharmaceuticals. Additional
information about our reportable business segments is included
throughout this Part I. The results of operations of our reportable
business segments are discussed in Part II, Item 7 of this report
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations” under the heading “RESULTS OF OPERATIONS.”
Across all of our reportable business segments, we generated total
revenues of $2.32 billion, $2.99 billion and $2.90 billion in 2022,
2021 and 2020, respectively.
For branded products, which we sell primarily through our Branded
Pharmaceuticals and Sterile Injectables segments, we seek to invest
in products or product candidates that have inherent scientific,
regulatory, legal and technical complexities and market such
products under recognizable brand names that are trademarked. For
products we develop for the U.S. market, after the completion of
required clinical trials and testing, we seek approvals from
regulatory bodies such as through the submission of New Drug
Applications (NDAs) or Biologics License Applications (BLAs) to the
U.S. Food and Drug Administration (FDA). We believe that our
patents, the protection of discoveries in connection with our
development activities, our proprietary products, technologies,
processes, trade secrets, know-how, innovations and all of our
intellectual property are important to our business and achieving a
competitive position. However, there can be no assurance that any
of our patents, licenses or other intellectual property rights will
afford us any protection from competition. Additional information
is included throughout this Part I, Item 1.
Generic products are the pharmaceutical and therapeutic equivalents
of branded products and are generally sold under their generic
(chemical) names rather than their brand names. For generic
products, which we sell primarily through our Sterile Injectables
and Generic Pharmaceuticals segments, our focus is on
high-barrier-to-entry products, with an emphasis on complex sterile
injectable products, such as ready-to-use (RTU) products, and
first-to-file or first-to-market opportunities that are difficult
to formulate or manufacture or face complex legal and regulatory
challenges. In the U.S., first-to-file products refer to generic
products for which the Abbreviated New Drug Applications (ANDAs)
containing patent challenges (or Paragraph IV certifications) to
the corresponding branded products’ listed patents were the first
to be filed with the FDA. In the U.S., manufacturers that launch
first-to-file products, after success in litigating or otherwise
resolving related patent challenges, and receive final FDA approval
have the opportunity for 180 days of generic marketing exclusivity
from competing generic products other than authorized generics.
First-to-market products refer to products that are the first
marketed generic equivalents of the corresponding branded products
for reasons apart from statutory marketing exclusivity. This can
occur, for example, when a generic product is difficult to
formulate or manufacture. First-to-market products allow
manufacturers to mitigate risks from competitive pressures commonly
associated with commoditized generic products. Additional
information is included throughout this Part I, Item
1.
Bankruptcy Proceedings
On August 16, 2022 (the Petition Date), Endo International plc,
together with certain of its direct and indirect subsidiaries (the
Debtors), filed voluntary petitions for relief under the Bankruptcy
Code, which constituted an event of default that accelerated our
obligations under substantially all of our then-outstanding debt
instruments. However, section 362 of the Bankruptcy Code stays
creditors from taking any action to enforce the related financial
obligations and creditors’ rights of enforcement in respect of the
debt instruments are subject to the applicable provisions of the
Bankruptcy Code. As a result of these conditions and events,
management continues to believe there is substantial doubt about
our ability to continue as a going concern within one year after
the date of issuance of the Consolidated Financial Statements
included in Part IV, Item 15 of this report. Additional information
regarding our ongoing bankruptcy proceedings is included throughout
this report including, without limitation, information about recent
and potential future developments related to our bankruptcy
proceedings and certain related transactions, the effects of our
ongoing bankruptcy proceedings and certain related transactions on
our business and financial statements to date and the potential
future effects of such proceedings and transactions, including
discussions of related risks and uncertainties.
Our Strategy
Endo International plc is a specialty pharmaceutical company
committed to helping everyone we serve live their best life through
the delivery of high-quality, life-enhancing therapies. We are
focused on driving long-term growth through a diversified and
durable portfolio of businesses, continuing product development and
manufacturing and commercialization excellence. Our strategic
priorities include expanding and enhancing our portfolio with
differentiated and durable products; reinventing how we work to
better serve our customers, promote innovation and improve
productivity; and being a force for good by embracing and adopting
sustainable practices that benefit all of our stakeholders.
Specific areas of management’s focus include:
•Branded
Pharmaceuticals: Accelerating performance of organic growth drivers
in our Specialty Products portfolio and expanding margin in our
Established Products portfolio. As further described below under
the heading “Select Development Projects,” management is also
focused on investing in key product life cycle management and other
development opportunities, with a focus on non-surgical orthopedic
care interventions.
•Sterile
Injectables: Focusing on developing injectable products with
inherent scientific, regulatory, legal and technical complexities,
expanding the product portfolio to include other dosages and
technologies and developing or acquiring high-barrier-to-entry
products that are difficult to manufacture.
•Generic
Pharmaceuticals: Focusing on developing or acquiring
high-barrier-to-entry products, including first-to-file or
first-to-market opportunities that are difficult to formulate or
manufacture or face complex legal and regulatory
challenges.
Additionally, as part of our Environmental, Social and Governance
(ESG) strategy, we are committed to the adoption of more
sustainable practices, including the promotion of Diversity, Equity
and Inclusion (DE&I) in all that we do, and to operating our
business in a responsible manner that seeks to minimize
environmental impact, while promoting the safe, efficient and
responsible use of global resources.
While our primary focus is on organic growth, we plan to continue
to evaluate and, where appropriate, execute on opportunities to
expand through the licensing or acquisition of products or
companies. There can be no assurance that we will be successful in
executing on our strategy.
Our Competitive Strengths
To successfully execute our strategy, we must continue to
capitalize on our following core strengths:
Experienced and dedicated management team.
We have a highly skilled and customer-focused management team in
critical leadership positions across Endo. Our senior management
team has extensive experience in the pharmaceutical industry,
including improving business performance through organic revenue
growth, operational and commercial excellence and through the
identification, consummation and integration of licensing and
acquisition opportunities. This experience is demonstrated through
a proven track record of developing products and
businesses.
Operational excellence.
We have efficient, high-quality manufacturing capabilities across a
diversified array of dosage forms in the U.S. and India. We believe
our comprehensive suite of technology, manufacturing and
development competencies increases the likelihood of success in
commercializing high-barrier-to-entry products and obtaining
first-to-file and first-to-market status on future products,
yielding more sustainable market share and profitability. For
example, our expanding capabilities in the rapidly growing U.S.
market for sterile products afford us with a broader and more
diversified product portfolio and a greater selection of targets
for potential development.
We believe that our competitive advantages include our integrated
team-based approach to product development that combines our global
formulation, regulatory, legal, manufacturing and commercial
capabilities; our ability to introduce new generic equivalents for
brand-name products; our quality and cost-effective production; our
ability to meet customer and/or patient expectations and the
breadth of our existing product offerings.
Growth of our branded Specialty Products portfolio while leveraging
the strength of our Established Products portfolio.
We have assembled a portfolio of branded products offered by our
Branded Pharmaceuticals segment in the areas of urology,
orthopedics, endocrinology and bariatrics, among others. Additional
information on these product portfolios is included below under the
heading “Products Overview.”
Optimizing our portfolios to focus on differentiated
products.
By leveraging operational efficiency and taking actions to optimize
our cost structure when appropriate, we aim to be low-cost
producers of high-barrier-to-entry products, including products
that meet the evolving needs of hospitals and health systems,
including RTU sterile injectable products, and first-to-file and
first-to-market generic opportunities that are difficult to
formulate or manufacture or face complex legal and regulatory
challenges. We believe that focusing on products with these
characteristics will result in products with longer life cycles and
higher profitability than products without these
characteristics.
Continuing proactive diversification of our business.
Our primary focus is on organic growth. However, we plan to
continue to evaluate and, where appropriate, execute on
opportunities to expand through the licensing or acquisition of
products or companies in areas that will serve patients and
customers and that we believe will offer attractive growth
characteristics and margins. In particular, we intend to continue
to enhance our product lines by acquiring or licensing rights to
additional products and regularly evaluating selective acquisition
opportunities.
R&D expertise.
Our R&D efforts are focused on the development of a diversified
portfolio of innovative and clinically differentiated product
candidates. For example, in recent years, our Branded
Pharmaceuticals research has focused on leveraging our expertise in
collagenase clostridium histolyticum (CCH) and seeking additional
novel indications for this class of biologics. Our Sterile
Injectables and Generic Pharmaceuticals segments seek out and
develop high-barrier-to-entry products, with an emphasis on complex
sterile injectable products, such as RTU products, and
first-to-file or first-to-market opportunities. We periodically
review our R&D pipeline in order to better direct investment
toward those opportunities that we expect will deliver the greatest
returns. Our current R&D pipeline consists of products in
various stages of development and reflects our expanded focus on
Sterile Injectables products and solutions. For additional detail,
see “Select Development Projects.” Our R&D and regulatory
affairs staff is based primarily in India and the U.S.
Targeted sales and marketing capabilities.
Our sales and marketing activities are based in the U.S. and Canada
and primarily focus on the promotion of our Specialty Products
portfolio and Sterile Injectables segment.
We market our Specialty Products directly to specialty physicians,
including those specializing in urology, orthopedics, pediatric
endocrinology and bariatric surgery. Our sales force also directs
its marketing efforts on retail pharmacies and other healthcare
professionals. We distribute our Specialty Products through
independent wholesale distributors, but we also sell directly to
retailers, clinics, government agencies, doctors, independent
retail and specialty pharmacies and independent specialty
distributors. Our marketing policy is designed to provide
physicians, pharmacies, hospitals, public and private payers and
appropriate healthcare professionals with products and appropriate
medical information. We work to gain access to various formularies
(lists of recommended or approved medicines and other products) and
reimbursement lists by demonstrating the qualities and treatment
benefits of our products within their approved
indications.
In addition to advertising in professional journals, participating
in medical meetings and conventions and utilizing direct mail and
internet programs to provide descriptive product literature and
scientific information, we have also utilized both branded and
unbranded marketing and public relations campaigns across digital,
social and television platforms to reach our target consumers. For
example, during the first quarter of 2022, we launched a new
Dupuytren’s contracture (DC) condition awareness campaign featuring
real patients and, during the fourth quarter of 2021, we launched a
new multi-channel branded advertising campaign for
XIAFLEX®
for the treatment of Peyronie’s disease (PD), including our
first-ever television commercial for XIAFLEX®.
Our dedicated Sterile Injectables sales and marketing team is
focused on health systems and national group purchasing
organizations (GPOs). Our customers’ growing complexity requires us
to engage directly with key stakeholders and decision makers. Our
experienced sales and marketing team is key to growing our existing
portfolio and executing on new product launches.
Products Overview
Branded Pharmaceuticals
The following table displays the revenues from external customers
of our Branded Pharmaceuticals segment for the years ended December
31, 2022, 2021 and 2020 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
2021 |
|
2020 |
Specialty Products: |
|
|
|
|
|
XIAFLEX® |
$ |
438,680 |
|
|
$ |
432,344 |
|
|
$ |
316,234 |
|
SUPPRELIN® LA |
113,011 |
|
|
114,374 |
|
|
88,182 |
|
Other Specialty (1) |
70,009 |
|
|
86,432 |
|
|
92,662 |
|
Total Specialty Products |
$ |
621,700 |
|
|
$ |
633,150 |
|
|
$ |
497,078 |
|
Established Products: |
|
|
|
|
|
PERCOCET® |
$ |
103,943 |
|
|
$ |
103,788 |
|
|
$ |
110,112 |
|
TESTOPEL® |
38,727 |
|
|
43,636 |
|
|
35,234 |
|
Other Established (2) |
86,772 |
|
|
113,043 |
|
|
139,356 |
|
Total Established Products |
$ |
229,442 |
|
|
$ |
260,467 |
|
|
$ |
284,702 |
|
Total Branded Pharmaceuticals (3) |
$ |
851,142 |
|
|
$ |
893,617 |
|
|
$ |
781,780 |
|
__________
(1) Products included within Other Specialty
include AVEED®,
NASCOBAL®
Nasal Spray and QWO®.
(2) Products included within Other
Established include, but are not limited to,
EDEX®.
(3) Individual products presented above
represent the top two performing products in each product category
for the year ended December 31, 2022 and/or any product having
revenues in excess of $25 million during any completed quarterly
period in 2022 or 2021.
Specialty Products Portfolio
Endo commercializes a number of products within the market served
by specialty distributors and specialty pharmacies and in which
healthcare practitioners can purchase and bill payers directly (the
buy and bill market). Our current offerings primarily relate to the
following areas: (i) urology treatments, which currently focus
mainly on PD and testosterone replacement therapies (TRT) for
hypogonadism; (ii) orthopedics treatments, which currently focus on
DC; and (iii) pediatric endocrinology treatments, which currently
focus on central precocious puberty (CPP). Key product offerings in
this portfolio include the following:
•XIAFLEX®,
which is a non-surgical treatment for both DC (for adult patients
with an abnormal buildup of collagen in the fingers that limits or
disables hand function) and PD (for adult men with a collagen
plaque and a penile curvature deformity of thirty degrees or
greater at the start of therapy).
•SUPPRELIN®
LA, which is a soft, flexible 12-month hydrogel implant based on
our hydrogel polymer technology that delivers histrelin acetate, a
gonadotropin-releasing hormone agonist, and is indicated for the
treatment of CPP in children.
•AVEED®,
which is a novel, long-acting testosterone undecanoate for
injection for the treatment of hypogonadism that is dosed only five
times per year after the first month of therapy.
•NASCOBAL®
Nasal Spray, which is a prescription nasal spray used as a
supplement to treat vitamin B12 deficiency.
This portfolio has also included QWO®
(collagenase clostridium histolyticum-aaes), an injectable
treatment for moderate to severe cellulite in the buttocks of adult
women launched in March 2021. However, in December 2022, the
Company announced it would be ceasing the production and sale of
QWO®
in light of market concerns about the extent and variability of
bruising following initial treatment as well as the potential for
prolonged skin discoloration.
Established Products Portfolio
This portfolio’s current treatment offerings primarily relate to
the following areas: (i) pain management, including products in the
opioid analgesics segment and for the treatment of pain associated
with post-herpetic neuralgia, and (ii) urology, focusing mainly on
the treatment of hypogonadism. Key product offerings in this
portfolio include, among others, the following:
•PERCOCET®,
which is an opioid analgesic approved for the treatment of moderate
to moderately-severe pain.
•TESTOPEL®,
which is a unique, long-acting implantable pellet indicated for TRT
in conditions associated with a deficiency or absence of endogenous
testosterone.
•EDEX®,
which is a penile injection used to treat erectile dysfunction
caused by conditions affecting nerves, blood vessels, emotions
and/or a combination of factors.
The Company’s pain products, including opioid products, are managed
as mature brands and are not and have not been actively promoted
for years. In December 2016, the Company announced the elimination
of its entire U.S. pain product field sales force.
Sterile Injectables
The following table displays the revenues from external customers
of our Sterile Injectables segment for the years ended December 31,
2022, 2021 and 2020 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
2021 |
|
2020 |
VASOSTRICT®
|
$ |
253,696 |
|
|
$ |
901,735 |
|
|
$ |
785,646 |
|
ADRENALIN®
|
114,304 |
|
|
124,630 |
|
|
152,074 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Sterile Injectables (1)
|
221,633 |
|
|
239,732 |
|
|
301,127 |
|
Total Sterile Injectables (2) |
$ |
589,633 |
|
|
$ |
1,266,097 |
|
|
$ |
1,238,847 |
|
__________
(1)Products
included within Other Sterile Injectables include
APLISOL®,
ertapenem for injection and others.
(2)Individual
products presented above represent the top two performing products
within the Sterile Injectables segment for the year ended December
31, 2022 and/or any product having revenues in excess of $25
million during any completed quarterly period in 2022 or
2021.
The Sterile Injectables segment includes a product portfolio of
approximately 40 product families, including branded sterile
injectable products that are currently protected by certain patent
rights and have inherent scientific, regulatory, legal and
technical complexities and generic injectable products that are
difficult to formulate or manufacture or face complex legal and
regulatory challenges. Our sterile injectables products are
manufactured in sterile facilities in various dosage forms and are
administered at hospitals, clinics and long-term care facilities.
Key product offerings in this segment include, among others, the
following:
•VASOSTRICT®,
which is indicated to increase blood pressure in adults with
vasodilatory shock who remain hypotensive despite fluids and
catecholamines. We offer VASOSTRICT®
in multiple formulations, including the RTU pre-mix bottle we
launched in February 2022.
•ADRENALIN®,
which is a non-selective alpha and beta adrenergic agonist
indicated for emergency treatment of certain allergic reactions,
including anaphylaxis.
•APLISOL®,
which is a sterile aqueous solution of a purified protein
derivative for intradermal administration as an aid in the
diagnosis of tuberculosis.
•Ertapenem
for injection (the authorized generic of Merck Sharp & Dohme
Corp.’s (Merck) Invanz®),
which is indicated for the treatment of certain moderate to severe
infections.
•Ephedrine
sulfate injection, which is an alpha and beta adrenergic agonist
and a norepinephrine-releasing agent indicated for the treatment of
clinically important hypotension occurring in the setting of
anesthesia.
Generic Pharmaceuticals
The Generic Pharmaceuticals segment includes a product portfolio of
approximately 110 generic product families including solid oral
extended-release products, solid oral immediate-release products,
liquids, semi-solids, patches (which are medicated adhesive patches
designed to deliver the pharmaceutical through the skin), powders,
ophthalmics (which are sterile pharmaceutical preparations
administered for ocular conditions) and sprays and includes
products that treat and manage a wide variety of medical
conditions.
Generic products are the pharmaceutical and therapeutic equivalents
of branded products and are generally sold under their generic
(chemical) names rather than their brand names. Generic products
are substantially the same as branded products in dosage form,
safety, efficacy, route of administration, quality, performance
characteristics and intended use, but are generally sold at prices
below those of the corresponding branded products and thus
represent cost-effective alternatives for consumers.
Typically, a generic product may not be marketed until the
expiration of applicable patent(s) on the corresponding branded
product unless a resolution of patent litigation results in an
earlier opportunity to enter the market. For additional detail, see
“Governmental Regulation.” However, our generics portfolio also
contains certain authorized generics, which are generic versions of
branded products licensed by brand drug companies under an NDA and
marketed as generics. Authorized generics do not face the same
regulatory barriers to introduction and are not prohibited from
sale during the 180-day marketing exclusivity period granted to the
first-to-file ANDA applicant. From time to time, our authorized
generics have included generic versions of our branded products. We
also aim to be a partner of choice to large companies seeking
authorized generic distributors for their branded products. For
example, in January 2021, we launched lubiprostone capsules (the
authorized generic of Mallinckrodt plc’s Amitiza®).
International Pharmaceuticals
Our International Pharmaceuticals segment includes a variety of
specialty pharmaceutical products, including over-the-counter (OTC)
products, sold outside the U.S., primarily in Canada through our
operating company Paladin Labs Inc. (Paladin).
Select Development Projects
XIAFLEX®
XIAFLEX®
is currently approved by the FDA and marketed in the U.S. for the
treatment of both DC and PD (two separate indications). In early
2020, we announced that we had initiated our
XIAFLEX®
development program for the treatment of plantar fibromatosis, for
which we anticipate Phase 2 top-line data by the end of the first
quarter of 2023. We also initiated a proof-of-concept study in
plantar fasciitis during the fourth quarter of 2022. We may in the
future develop our XIAFLEX®
product for potential additional indications, advancing our
strategy of developing non-surgical orthopedic care
interventions.
As further described in Note 12. License, Collaboration and Asset
Acquisition Agreements in the Consolidated Financial Statements
included in Part IV, Item 15 of this report, we completed our
acquisition of BioSpecifics Technologies Corp., a Delaware
corporation and a commercial-stage biopharmaceutical company
(BioSpecifics) in December 2020. Prior to this acquisition, we had
a strategic relationship with BioSpecifics since 2004 pursuant to
which BioSpecifics was, among other things, entitled to a royalty
stream from us related to our collagenase-based therapies,
including XIAFLEX®.
Subsequent to the acquisition, BioSpecifics became our wholly-owned
consolidated subsidiary.
TLC599
In June 2022, we announced that our subsidiary had entered into an
agreement with Taiwan Liposome Company, Ltd. (TLC) to commercialize
TLC599. TLC599 is an injectable compound in Phase 3 development for
the treatment of osteoarthritis knee pain.
In September 2022, we were informed by TLC of the top-line results
from TLC’s Phase 3 clinical study to evaluate the efficacy and
safety of TLC599 in patients with pain from osteoarthritis of the
knee. While study participants treated with TLC599 showed
improvement on the primary endpoint (change from baseline to week
12 on the WOMAC pain scale) consistent with the level of
improvement reported in the previously conducted TLC599 Phase 2
clinical study, the difference compared to those receiving placebo
was not statistically significant. Based on these data, we are
evaluating options for TLC599 with TLC.
Other
Our remaining pipeline consists mainly of a variety of product
candidates in our Sterile Injectables and Generic Pharmaceuticals
segments. As of December 31, 2022, within these two segments,
we were actively pursuing approximately 70 product candidates,
including: (i) approximately 30 ANDAs pending with the FDA, of
which approximately 40% are associated with our Sterile Injectables
segment, as well as (ii) approximately 40 additional projects in
development, of which approximately 90% are associated with our
Sterile Injectables segment, including RTU and other more
differentiated product candidates.
We expect to continue to focus investments in RTU and other product
candidates in our Sterile Injectables segment, potentially
including acquisitions and/or license and commercialization
agreements such as the 2022 Nevakar Agreement that is further
described in Note 12. License, Collaboration and Asset Acquisition
Agreements in the Consolidated Financial Statements included in
Part IV, Item 15 of this report.
Our primary approach to developing generic products for these two
segments is to target high-barrier-to-entry product opportunities,
including first-to-file or first-to-market opportunities that are
difficult to formulate or manufacture or face complex legal and
regulatory challenges as well as products that meet the evolving
needs of hospitals and health systems. We expect such product
opportunities to result in products that are either the exclusive
generic or have two or fewer generic competitors when launched,
which we believe tends to lead to more sustainable market share and
profitability for our product portfolio. In our Sterile Injectables
business, we also focus on developing injectable products with
inherent scientific, regulatory, legal and technical complexities,
as well as developing other dosage forms and
technologies.
We periodically review our development projects in order to better
direct investment toward those opportunities that we expect will
deliver the greatest returns. This process can lead to decisions to
discontinue certain R&D projects that may reduce the number of
products in our previously reported pipeline.
Major Customers
We primarily sell our products to wholesalers, retail drug store
chains, supermarket chains, mass merchandisers, distributors, mail
order accounts, hospitals and/or government agencies. Our
wholesalers and/or distributors purchase products from us and, in
turn, supply products to retail drug store chains, independent
pharmacies, hospitals, long-term care facilities, clinics, home
infusion pharmacies, government facilities and managed care
organizations (MCOs). Our current customer group reflects
significant consolidation in recent years, marked by mergers and
acquisitions and other alliances. Net revenues from direct
customers that accounted for 10% or more of our total consolidated
net revenues during the years ended December 31, 2022, 2021 and
2020 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
2021 |
|
2020 |
AmerisourceBergen Corporation |
35 |
% |
|
36 |
% |
|
33 |
% |
McKesson Corporation |
26 |
% |
|
32 |
% |
|
27 |
% |
Cardinal Health, Inc. |
20 |
% |
|
22 |
% |
|
24 |
% |
Revenues from these customers are included within each of our
segments.
Some wholesalers and distributors have required pharmaceutical
manufacturers, including us, to enter into distribution service
agreements (DSAs) pursuant to which the wholesalers and
distributors provide pharmaceutical manufacturers with certain
services as well as certain information including, without
limitation, periodic retail demand information, current inventory
levels and other information. We have entered into certain of these
agreements.
Competition
Branded Products
Our branded products compete with products manufactured by many
other companies in highly competitive markets.
We compete principally through targeted product development and
through our acquisition and in-licensing strategies, where we face
intense competition as a result of the limited number of assets
available and the number of competitors bidding on such assets. In
addition to product development and acquisitions, other competitive
factors with respect to branded products include product efficacy,
safety, ease of use, price, demonstrated cost-effectiveness,
marketing effectiveness, service, reputation and access to
technical information.
Branded products often must compete with therapeutically similar
branded or generic products or with generic equivalents. Such
competition frequently increases over time. For example, if
competitors introduce new products, delivery systems or processes
with therapeutic or cost advantages, our products could be subject
to progressive price reductions and/or decreased volume of sales.
To successfully compete for business, we must often demonstrate
that our products offer not only medical benefits, but also cost
advantages as compared with other forms of care. Accordingly, we
face pressure to continually seek out technological innovations and
to market our products effectively.
Manufacturers of generic products typically invest far less in
R&D than research-based companies and can therefore price their
products significantly lower than branded products. Accordingly,
when a branded product loses its market exclusivity, it normally
faces intense price competition from generic forms of the product.
Due to lower prices, generic versions, where available, may be
substituted by pharmacies or required in preference to branded
versions under third-party reimbursement programs.
Branded Pharmaceuticals
This segment’s major competitors, including Viatris Inc. (Viatris),
Jazz Pharmaceuticals plc, Takeda Pharmaceutical Company Limited and
Horizon Therapeutics Public Limited Company, among others, vary
depending on therapeutic and product category, dosage strength and
drug-delivery systems, among other factors.
Several of this segment’s products, such as
PERCOCET®,
TESTOPEL®
and SUPPRELIN®
LA, face generic and/or other forms of competition. The degree of
generic and/or other competition facing this segment could increase
in the future.
Sterile Injectables
This segment’s major competitors, including Hospira, Inc. (a
subsidiary of Pfizer Inc.), Fresenius Kabi USA, LLC, Viatris,
Amphastar Pharmaceuticals, Inc., Amneal Pharmaceuticals, Inc.
(Amneal), Hikma Pharmaceuticals PLC, Sandoz and Eagle
Pharmaceuticals, Inc. (Eagle), among others, vary by product. A
significant portion of our sales, including sales to hospitals,
clinics and long-term care facilities in the U.S., are controlled
by a relatively small number of GPOs, including HealthTrust
Purchasing Group, L.P., Premier Inc. and Vizient, Inc. Accordingly,
it is important for us to have strong relationships with these GPOs
and achieve on-time product launches in order to secure new bid
opportunities.
This segment’s products, including VASOSTRICT®
and ADRENALIN®,
face generic and/or other forms of competition. During the first
quarter of 2022, multiple competitive generic alternatives to
VASOSTRICT®
were launched, beginning with a generic that was launched at risk
and began shipping toward the end of January 2022. Since then,
additional competitive alternatives entered the market, including
authorized generics. The degree of generic and/or other competition
facing this segment is expected to increase in the
future.
Generic Products
Generic products generally face intense competition from branded
equivalents, other generic equivalents (including authorized
generics) and therapeutically similar branded or generic products.
Our major competitors, including Teva Pharmaceutical Industries
Limited, Viatris, Sandoz, Aurobindo Pharma Limited and Amneal,
among others, vary by product.
Consolidations of our customer base described above under the
heading “Major Customers” have resulted in increased pricing and
other competitive pressures on pharmaceutical companies, including
us. Additionally, the emergence of large buying groups representing
independent retail pharmacies and other distributors and the
prevalence and influence of MCOs and similar institutions have
increased the negotiating power of these groups, enabling them to
attempt to extract various demands, including without limitation
price discounts, rebates and other restrictive pricing terms. These
competitive trends could continue in the future and could have a
material adverse effect on our business, financial condition,
results of operations and cash flows.
Newly introduced generic products with limited or no other generic
competition typically garner higher prices relative to commoditized
generic products. As such, our primary strategy is to compete with
a focus on high-value, first-to-file or first-to-market
opportunities, regardless of therapeutic category, and products
that present significant barriers to entry for reasons such as
complex formulation or regulatory or legal challenges. For
additional detail, see “Our Competitive Strengths - Optimizing our
portfolios to focus on differentiated products.”
Even if we are successful in launching generic products with
statutory generic exclusivity, competitors may enter the market
when such exclusivity periods expire, resulting in significant
price declines. Consequently, the success of our generics efforts
depends on our continuing ability to select, develop, procure
regulatory approvals of, overcome legal challenges to, launch and
commercialize new generic products in a timely and cost efficient
manner and to maintain efficient, high quality manufacturing
capabilities. For additional detail, see “Our Competitive Strengths
- Operational excellence.”
Seasonality
Although our business is affected by the purchasing patterns and
concentration of our customers, our business is not materially
impacted by seasonality.
Patents, Trademarks, Licenses and Proprietary Property
We regard the protection of patents and other enforceable
intellectual property rights that we own or license as critical to
our business and competitive position. Accordingly, we rely on
patent, trade secret and copyright law, as well as nondisclosure
and other contractual arrangements, to protect our intellectual
property. We have a portfolio of patents and patent applications
owned or licensed by us that cover aspects of our products. These
patents and applications generally include claims directed to the
compounds and/or methods of using the compounds, formulations of
the compounds, pharmaceutical salt forms of the compounds or
methods of manufacturing the compounds. Our policy is to pursue
patent applications on inventions that we believe are commercially
important to the development and growth of our
business.
Certain patents relating to products that are the subject of
approved NDAs are listed in the FDA publication, “Approved Drug
Products with Therapeutic Equivalence Evaluations” (Orange Book).
The Orange Book does not include a listing of patents related to
biological products approved pursuant to a BLA. Included below is
information about certain products for which we own or license a
BLA along with the date of expiration of certain relevant patents
or regulatory exclusivity. In addition, we may have other relevant
regulatory protection or patents that may extend beyond the
expiration dates provided below.
As of February 27, 2023, we held approximately: 152 U.S.
issued patents, 45 U.S. patent applications pending, 427 foreign
issued patents and 119 foreign patent applications pending. In
addition, as of February 27, 2023, we had licenses for
approximately 73 U.S. issued patents, 14 U.S. patent applications
pending, 167 foreign issued patents and 83 foreign patent
applications pending. We are seeking additional patent protection
for several products, including XIAFLEX®.
We may also obtain further patents or additional regulatory or
patent exclusivity for one or more indications for any of our
products in the future.
Our products are subject to different patent expiration dates. For
example, our patents related to NASCOBAL®
Nasal Spray expire in 2024, our patents related to
AVEED®
expire in 2027 and our patents related to
ADRENALIN®
expire in 2035.
XIAFLEX®
is a biological product. We own or have licensed rights to patents
and patent applications related to XIAFLEX®,
including drug product and methods of manufacture patents and
patent applications that will expire into the late 2030s and
methods of use patents and patent applications for uses such as
plantar fibromatosis that will expire into the late 2030s/early
2040s.
Our patents provide protection by allowing us to exclude others
from making, using, selling, offering for sale or importing that
which is covered by the patent claims. When patent protection is
not feasible, we may rely on trade secrets, non-patented
proprietary know-how or continuing technological innovation. Many
of our products are sold under trademarks. We also rely on
confidentiality agreements with our employees, consultants and
other parties to protect, among other things, trade secrets and
other proprietary information.
There can be no assurance that our patents, licenses or other
intellectual property rights will afford us protection from
competition. For example, in August 2021, the U.S. District Court
for the District of Delaware held that Eagle’s proposed vasopressin
product did not infringe our asserted patent claims related to
VASOSTRICT®.
The expiration of a basic product patent or loss of patent
protection resulting from a legal challenge typically results in
significant competition from generic products or biosimilars
against the originally patented product and can result in a
significant reduction in revenues for that product in a very short
period of time that may never be reversed. In some cases, however,
it is possible to obtain commercial benefits from product
manufacturing trade secrets, patents on uses for products, patents
on processes and intermediates for the economical manufacture of
the active ingredients or patents for special formulations of the
product or delivery mechanisms. There can also be no assurance that
our confidentiality agreements will not be breached, that we will
have adequate remedies for any breach, that others will not
independently develop equivalent proprietary information or that
other third parties will not otherwise gain access to our trade
secrets and other intellectual property.
Additionally, any pending or future patent applications made by us
or our subsidiaries, our license partners or entities we may
acquire in the future are subject to risks and uncertainties. The
coverage claimed in any such patent applications could be
significantly reduced before the patent is issued and there can be
no assurance that any such applications will result in the issuance
of patents or, if any patents are issued, whether they will provide
significant proprietary protection or will be challenged,
circumvented or invalidated. Because unissued U.S. patent
applications are maintained in secrecy for a period of eighteen
months and certain U.S. patent applications are not disclosed until
the patents are issued, and since publication of discoveries in the
scientific or patent literature often lags behind actual
discoveries, we cannot be certain of the priority of inventions
covered by pending patent applications. Moreover, we may have to
participate in interference and other inter-parties proceedings
declared by the U.S. Patent and Trademark Office (PTO) to determine
priority of invention, or in opposition proceedings in a foreign
patent office, either of which could result in substantial cost to
us, even if the eventual outcome is favorable to us. There can be
no assurance that any patents, if issued, will be held valid by a
court of competent jurisdiction. An adverse outcome could subject
us to significant liabilities to third parties, require disputed
rights to be licensed from third parties or require us to cease
using such technology. See Item 1A. Risk Factors - “Our ability to
protect and maintain our proprietary and licensed third-party
technology, which is vital to our business, is
uncertain.”
We may find it necessary to initiate litigation to enforce our
patent rights, to protect our intellectual property or trade
secrets or to determine the scope and validity of the proprietary
rights of others. However, litigation is costly and time-consuming
and there can be no assurance that we will prevail. Any successful
challenges to our intellectual property rights may result in a
significant loss of revenue. See Note 16. Commitments and
Contingencies in the Consolidated Financial Statements included in
Part IV, Item 15 of this report.
Governmental Regulation
FDA and U.S. Drug Enforcement Administration (DEA)
The pharmaceutical industry in the U.S. is subject to extensive and
rigorous government regulation. The U.S. Federal Food, Drug, and
Cosmetic Act (FFDCA), the U.S. Controlled Substances Act (CSA) and
other federal and state statutes and regulations govern or
influence the testing, manufacturing, packaging, labeling, storage,
recordkeeping, approval, advertising, promotion, sale and
distribution of pharmaceutical products. Noncompliance with
applicable requirements can result in criminal prosecution, fines,
civil penalties, recall or seizure of products, total or partial
suspension of production and/or distribution, injunctions and
refusal of the government to enter into supply contracts or to
approve NDAs, ANDAs, BLAs and/or other similar
applications.
FDA approval is typically required before any new pharmaceutical or
biologic product can be marketed. An NDA or BLA is a filing
submitted to the FDA to obtain approval of new chemical entities
and other innovations for which thorough applied research is
required to demonstrate safety and effectiveness in use. The
process generally involves, among other things:
•completion
of preclinical laboratory and animal testing and formulation
studies in compliance with the FDA’s Good Laboratory Practice
regulations;
•submission
to the FDA of an Investigational New Drug application (IND) for
human clinical testing, which must become effective before human
clinical trials may begin in the U.S.;
•approval
by an independent institutional review board before each trial may
be initiated and continuing review during the trial;
•performance
of human clinical trials, including adequate and well-controlled
clinical trials in accordance with good clinical practice, the
protocol and the IND to establish the safety and efficacy of the
proposed product for each intended use;
•submission
to the FDA of an NDA or BLA for marketing approval, which must
include data from preclinical testing and clinical
trials;
•satisfactory
completion of an FDA pre-approval inspection of the product’s
manufacturing processes and facility or facilities to assess
compliance with the FDA’s current Good Manufacturing Practice
(cGMP) regulations and/or review of the Chemistry, Manufacturing
and Controls section of the NDA or BLA to assess whether the
facilities, methods and controls are adequate to preserve the
proposed product’s identity, strength, quality, purity and
potency;
•payment
of user fees for FDA review of an NDA or BLA unless a fee waiver
applies;
•agreement
with the FDA on the final labeling for the product and the design
and implementation of any required Risk Evaluation and Mitigation
Strategy (REMS);
•satisfactory
completion of an FDA advisory committee review, if applicable;
and
•approval
by the FDA of the NDA or BLA.
Clinical trials are typically conducted in three sequential phases,
although the phases may overlap or be combined. Those phases
include:
•Phase
1 trials generally involve testing the product for safety, adverse
effects, dosage, tolerance, absorption, distribution, metabolism,
excretion and other elements of clinical pharmacology.
•Phase
2 trials typically involve a small sample of the intended patient
population to assess the efficacy of the compound for a specific
indication, to determine dose tolerance and the optimal dose range
and to gather additional information relating to safety and
potential adverse effects.
•Phase
3 trials are undertaken in an expanded patient population,
typically at dispersed study sites, in order to determine the
overall risk-benefit ratio of the compound and to provide an
adequate basis for product labeling.
Each trial is conducted in accordance with certain standards under
protocols that detail the objectives of the study, the parameters
to be used to monitor safety and the efficacy criteria to be
evaluated. Each protocol must be submitted to the FDA as part of
the IND. Clinical trials, clinical investigators and the trial
sponsor are also subject to regulatory inspections by the FDA and
other regulatory authorities to confirm compliance with applicable
regulatory standards. The process of completing clinical trials for
a new product may take many years and require the expenditures of
substantial resources. See Item 1A. Risk Factors - “The
pharmaceutical industry is heavily regulated, which creates
uncertainty about our ability to bring new products to market and
imposes substantial compliance costs on our business, including
withdrawal or suspension of existing products.”
As a condition of approval of an NDA or BLA, the FDA may require
further studies, including Phase 4 post-marketing studies or
post-marketing data reporting, such as evaluating known or signaled
safety risks. Results of post-marketing programs may limit or
expand the future marketing of the products and result in the FDA
requiring labeling changes, including the addition of risk
information.
For some products, the FDA may require a REMS to confirm that a
drug’s benefits outweigh its risks. REMS could include medication
guides, physician communication plans or other elements. See Item
1A. Risk Factors - “The pharmaceutical industry is heavily
regulated, which creates uncertainty about our ability to bring new
products to market and imposes substantial compliance costs on our
business, including withdrawal or suspension of existing
products.”
In most instances, FDA approval of an ANDA is required before a
generic equivalent of an existing or reference-listed drug can be
marketed. The ANDA process is abbreviated in that the FDA waives
the requirement of conducting complete preclinical and clinical
studies and generally instead relies principally on bioequivalence
studies. Bioequivalence generally involves a comparison of the rate
of absorption and levels of concentration of a generic product in
the body with those of the previously approved product. When the
rate and extent of absorption of systemically acting test and
reference drugs are considered the same under the bioequivalence
requirement, the two products are considered bioequivalent and are
generally regarded as therapeutically equivalent (so long as the
products also have the same active ingredient(s),
strength/concentration, dosage form and route of administration),
meaning that a pharmacist can substitute the generic product for
the reference-listed drug. Under certain circumstances, an ANDA may
also be submitted for a product authorized by approval of an ANDA
suitability petition. Such petitions may be submitted to secure
authorization to file an ANDA for a product that differs from a
previously approved product in active ingredient, route of
administration, dosage form or strength. In September 2007 and July
2012, the U.S. Congress re-authorized pediatric testing
legislation, which now requires ANDAs approved via the suitability
petition route to conduct pediatric testing. The timing of final
FDA approval of an ANDA application depends on a variety of
factors, including whether the applicant challenges any listed
patents for the reference-listed drug and whether the manufacturer
of the reference-listed drug is entitled to one or more statutory
exclusivity periods during which the FDA is prohibited from finally
approving generic products. In certain circumstances, a regulatory
exclusivity period can extend beyond the life of a patent, thus
blocking ANDAs from being approved even after the patent expiration
date.
Certain of our products are or could become regulated and marketed
as biologic products pursuant to BLAs. Our BLA-licensed products
were licensed based on a determination by the FDA of safety, purity
and potency as required under the U.S. Public Health Service Act
(PHSA). Although the ANDA framework referenced above does not apply
to generics of BLA-licensed biologics, there is an abbreviated
licensure pathway for products deemed to be biosimilar to, or
interchangeable with, FDA-licensed reference biological products
pursuant to the U.S. Biologics Price Competition and Innovation Act
of 2009 (BPCIA). The BPCIA framework was enacted as part of the
U.S. Patient Protection and Affordable Care Act (PPACA). Under the
BPCIA, following the expiration of a 12-year reference exclusivity
period, the FDA may license, under section 351(k) of the PHSA, a
biological product that it determines is biosimilar to, or
interchangeable with, a reference product licensed under section
351(a) of the PHSA. Although licensure of biosimilar or
interchangeable products is generally expected to require less than
the full complement of product-specific preclinical and clinical
data required for innovator products, the FDA has considerable
discretion over the kind and amount of scientific evidence required
to demonstrate biosimilarity and interchangeability.
Some pharmaceutical products are available in the U.S. that are not
the subject of an FDA-approved NDA. In 2011, the FDA’s Center for
Drug Evaluation and Research (CDER) Office of Compliance modified
its enforcement policy with regard to the marketing of such
“unapproved” marketed products (the Unapproved Drug Initiative).
Under CDER’s revised guidance, the FDA encourages manufacturers to
obtain NDA approvals for such products by requiring unapproved
versions to be removed from the market after an approved version
has been introduced, subject to a grace period at the FDA’s
discretion. This grace period is intended to allow an orderly
transition of supply to the market and to mitigate any potential
related product shortage. Depending on the length of the grace
period and the time it takes for subsequent applications to be
approved, this may result in a period of de facto market
exclusivity to the first manufacturer that has obtained an approved
NDA for the previously unapproved marketed product. In November
2020, the U.S. Department of Health and Human Services (HHS)
announced that it was withdrawing its Unapproved Drugs Compliance
Policy Guidance and terminating the Unapproved Drug Initiative
described above. However, in May 2021, HHS withdrew the November
2020 termination notice and stated that the FDA would issue new
guidance on its enforcement priorities for unapproved marketed
products.
OTC products may, depending on ingredients and proposed label
claims, be marketed pursuant to the OTC monograph process or could
require NDA or ANDA approval. The OTC monograph process allows for
OTC products to be marketed without pre-market approval and
generally does not require clinical studies. The U.S.
Over-the-Counter Monograph Safety, Innovation, and Reform Act,
enacted on March 27, 2020, modified this process by introducing
administrative orders as a replacement to rulemaking for the
development of OTC monographs.
Laws and regulations impacting the pharmaceutical industry are
constantly evolving. For example, the U.S. 21st Century Cures Act
(Cures Act), which was signed into law on December 13, 2016,
includes various provisions to accelerate the development and
delivery of new treatments, such as those intended to expand the
types of evidence manufacturers may submit to support FDA approval,
to encourage patient-centered product development, to liberalize
the communication of healthcare economic information to payers and
to create greater transparency with regard to manufacturer expanded
access programs. Central to the Cures Act are provisions that
enhance and accelerate the FDA’s processes for reviewing and
approving new products and supplements to approved NDAs. The Cures
Act also included $1 billion in new funding to states to supplement
opioid abuse prevention and treatment activities.
More recently, in December 2019, the Further Consolidated
Appropriations Act, 2020 became law. Section 610 of Division N
Title I, titled “Actions
for Delays of Generic Drugs and Biological
Products,”
provides generic (ANDA and 505(b)(2)) and biosimilar developers
with a private right of action to obtain sufficient quantities of
reference product from the brand manufacturer, or a generic or
biosimilar manufacturer, necessary for approval of the developers’
generic or biosimilar product. If a generic or biosimilar developer
is successful in its suit, the defendant manufacturer would be
required to provide sufficient quantities of product on
commercially-reasonable, market-based terms and may be required to
pay the developer’s reasonable attorney’s fees and costs as well as
financial compensation under certain circumstances. The purpose of
section 610 is to promote competition by facilitating the timely
entry of lower-cost generic and biosimilar products. In addition,
on March 27, 2020, Congress enacted the Coronavirus Aid, Relief,
and Economic Security Act (CARES Act) in response to the COVID-19
pandemic. Among other provisions, the CARES Act made a number of
changes to the FFDCA aimed at preventing drug shortages. Similarly,
the FDA has issued a number of guidance documents describing the
agency’s expectations for how drug manufacturers should comply with
various FDA requirements during the pandemic, including with
respect to conducting clinical trials, distributing drug samples
and reporting post-marketing adverse events. Moreover, as a result
of the COVID-19 pandemic, there has been increasing political and
regulatory scrutiny of foreign-sourced drugs and foreign drug
supply chains, resulting in proposed legislative and executive
actions, including executive orders, to incentivize or compel drug
manufacturing operations to relocate to the U.S.
A sponsor of an NDA is required to identify, in its application,
any patent that claims the drug or a use of the drug subject to the
application. Upon NDA approval, the FDA lists these patents in a
publication referred to as the Orange Book. Any person that files
an ANDA or NDA under Section 505(b)(2) of the FFDCA referencing the
approved drug must make a certification in respect to any listed
patents for the reference drug. The FDA may not approve such an
ANDA or 505(b)(2) application until expiration of the reference
drug’s listed patents unless: (i) the applicant certifies that the
listed patents are invalid, unenforceable and/or not infringed by
the proposed generic drug and gives notice to the holder of the NDA
for the listed drug of the basis upon which the patents are
challenged and (ii) the holder of the listed drug does not sue the
later applicant for patent infringement within 45 days of receipt
of notice. Under the current law, if an infringement suit is filed,
the FDA may not approve the later application until the earliest
of: (i) 30 months after submission; (ii) entry of an appellate
court judgment holding the patent invalid, unenforceable or not
infringed; (iii) such time as a court may order; or (iv) expiration
of the patent.
One of the key motivators for challenging patents is the 180-day
marketing exclusivity period granted to the developer of a generic
version of a product that is the first to have a substantially
complete ANDA received for review by the FDA and whose filing
includes a certification that a reference product’s listed
patent(s) are invalid, unenforceable and/or not infringed (a
Paragraph IV certification) and that otherwise does not forfeit
eligibility for the exclusivity. Under the U.S. Medicare
Prescription Drug, Improvement, and Modernization Act of 2003, with
accompanying amendments to the U.S. Drug Price Competition and
Patent Term Restoration Act (the Hatch-Waxman Act), this marketing
exclusivity would begin to run upon the earlier of the commercial
launch of the generic product or upon an appellate court decision
in the generic company’s favor or in favor of another ANDA
applicant who had filed with a Paragraph IV certification and has
tentative approval. In addition, the holder of the NDA for the
listed drug may be entitled to certain non-patent exclusivity
during which, depending on the type of exclusivity, the FDA either
cannot accept or approve an application for a competing ANDA
generic product or 505(b)(2) NDA product with the same active
moiety. Depending on the exclusivity, the protection may apply to
all of the reference drug’s approved conditions of use, or may be
limited to a certain condition of use or other protected label
information.
The FDA also regulates pharmacies and outsourcing facilities that
prepare “compounded” drugs pursuant to section 503A and 503B of the
FFDCA, respectively. For instance, under section 503A of the FFDCA,
pharmacies may compound drugs for an identified individual based on
the receipt of a valid prescription order, or notation approved by
the prescribing practitioner, that a compounded product is
necessary for the identified patient. Similarly, under section 503B
of the FFDCA, outsourcing facilities may compound drugs and sell
them to healthcare providers, but not wholesalers or distributors.
Although section 503A pharmacies and section 503B outsourcing
facilities are subject to many regulatory requirements, compounded
drugs are not subject to premarket review by the FDA and,
therefore, may not have the same level of safety and efficacy as
products subject to premarket review and approval by the FDA.
Because they are not subject to premarket review, compounded drugs
are frequently lower cost than either branded or generic
products.
The FDA enforces regulations to require that the methods used in,
and the facilities and controls used for, the manufacture,
processing, packing and holding of drugs conform to cGMPs. The cGMP
regulations the FDA enforces are comprehensive and cover all
aspects of manufacturing operations. Compliance with the
regulations requires a continuous commitment of time, money and
effort in all operational areas.
The FDA conducts pre-approval inspections of facilities engaged in
the development, manufacture, processing, packing, testing and
holding of the products subject to NDAs and ANDAs and pre-license
inspections of facilities engaged in similar activities for
biologic products subject to BLAs. In addition, manufacturers of
both pharmaceutical products and active pharmaceutical ingredients
(APIs) used to formulate such products also ordinarily undergo
pre-approval inspections. Failure of any facility to pass a
pre-approval inspection will result in delayed
approval.
Facilities that manufacture pharmaceutical or biological products
must be registered with the FDA and all such products made in such
facilities must be manufactured in accordance with the latest cGMP
regulations. The FDA conducts periodic inspections of facilities to
assess the cGMP status of marketed products. Following such
inspections, the FDA could issue a Form 483 Notice of Inspectional
Observations, which could require modification to certain
activities identified during the inspection. If the FDA were to
find serious cGMP non-compliance during such an inspection, it
could take regulatory actions. The FDA also may issue an untitled
letter as an initial correspondence that cites violations that do
not meet the threshold of regulatory significance for a Warning
Letter. FDA guidelines also provide for the issuance of Warning
Letters for violations of “regulatory significance” for which the
failure to adequately and promptly achieve correction may be
expected to result in an enforcement action.
Imported API and other components needed to manufacture our
products could be rejected by U.S. Customs. In respect to domestic
establishments, the FDA could initiate product seizures or request,
or in some instances require, product recalls and seek to enjoin or
otherwise limit a product’s manufacture and distribution. In
certain circumstances, violations could support civil penalties and
criminal prosecutions. In addition, if the FDA concludes that a
company is not in compliance with cGMP requirements, sanctions may
be imposed that include preventing that company from receiving the
necessary licenses to export its products and classifying that
company as an unacceptable supplier, thereby disqualifying that
company from selling products to federal agencies.
Certain of our subsidiaries sell products that are “controlled
substances” as defined in the CSA and implementing regulations,
which establish certain security and recordkeeping requirements
administered by the DEA. The DEA regulates chemical compounds as
Schedule I, II, III, IV or V substances, with Schedule I substances
considered to present the highest risk of substance abuse and
Schedule V substances the lowest risk. The active ingredients in
some of our products are listed by the DEA as Schedule II or III
substances under the CSA. Consequently, their manufacture,
shipment, storage, sale and use are subject to a high degree of
regulation.
The DEA limits the availability of the active ingredients that are
subject to the CSA used in several of our products as well as the
production of these products. We or our contract manufacturing
organizations must annually apply to the DEA for procurement and
production quotas in order to obtain and produce these substances.
As a result, our quotas may not be sufficient to meet commercial
demand or complete clinical trials. Moreover, the DEA may adjust
these quotas from time to time during the year, although the DEA
has substantial discretion in whether or not to make such
adjustments. See Item 1A. Risk Factors - “The DEA limits the
availability of the active ingredients used in many of our products
as well as the production of these products, and, as a result, our
procurement and production quotas may not be sufficient to meet
commercial demand or complete clinical trials.”
To meet its responsibilities, the DEA conducts periodic inspections
of registered establishments that handle controlled substances.
Annual registration is required for any facility that manufactures,
tests, distributes, dispenses, imports or exports any controlled
substance. The facilities must have the security, control,
accounting mechanisms and monitoring systems required by the DEA to
prevent loss and diversion of controlled substances and to comply
with reporting obligations. Failure to maintain compliance can
result in enforcement action. The DEA may seek civil penalties,
refuse to renew necessary registrations or initiate proceedings to
revoke or restrict those registrations or, with the U.S. Department
of Justice (DOJ), seek to impose civil penalties. In certain
circumstances, violations could result in criminal
proceedings.
In October 2018, the U.S. Congress enacted the Substance
Use-Disorder Prevention that Promotes Opioid Recovery and Treatment
for Patients and Communities Act (H.R. 6). Intended to achieve
sweeping reform to combat opioid abuse, H.R. 6, among other
provisions, amends related laws administered by the FDA, DEA and
the U.S. Centers for Medicare and Medicaid Services (CMS). Among
other things, the law: (i) amends requirements related to the FDA’s
authority to include packaging requirements in REMS requirements;
(ii) increases civil and criminal penalties for manufacturers and
distributors for failing to maintain effective controls against
diversion of opioids or for failing to report suspicious opioid
orders; (iii) requires the DEA to estimate the amount of opioid
diversion when establishing manufacturing and procurement quotas;
(iv) implements expanded anti-kickback and financial disclosure
provisions; and (v) authorizes HHS to implement a demonstration
program which would award grants to hospitals and emergency
departments to develop, implement, enhance or study alternative
pain management protocols and treatments that limit the use and
prescription of opioids in emergency departments.
Individual states also regulate controlled substances and we, as
well as our third-party API suppliers and manufacturers, are
subject to such regulation by several states with respect to the
manufacture and distribution of these products.
Government Benefit Programs
As described further in Item 1A. Risk Factors, statutory and
regulatory requirements for government healthcare programs such as
Medicaid, Medicare and TRICARE govern access and provider
reimbursement levels, and provide for other cost-containment
measures such as requiring pharmaceutical companies to pay rebates
or refunds for certain sales of products reimbursed by such
programs, or subjecting products to certain price ceilings. In
addition to the cost-containment measures described in Item 1A.
Risk Factors, sales to retail pharmacies under the TRICARE Retail
Pharmacy Program are subject to certain price ceilings which
require manufacturers to, among other things, pay refunds for
prescriptions filled based on the applicable ceiling price limits.
Beginning in the first quarter of 2017, pursuant to the Bipartisan
Budget Act of 2015, manufacturers are required to pay additional
rebates to state Medicaid programs if the prices of their
non-innovator products rise at a rate faster than inflation (as
continues to be the case for innovator products); this requirement
previously existed only as to branded or innovator products and the
change in law may impact our business.
The federal government may continue to pursue legislation aimed at
containing or reducing payment levels for prescription
pharmaceuticals paid for in whole or in part with government funds.
State governments also may continue to enact similar cost
containment or transparency legislation. These efforts could have
material consequences for the pharmaceutical industry and the
Company. From time to time, legislative changes are made to
government healthcare programs that impact our business. The U.S.
Congress continues to examine various Medicare and Medicaid policy
proposals that may result in a downward pressure on the prices of
prescription products in these programs, including, for example, as
part of the Inflation Reduction Act of 2022 that was enacted in
August 2022. See Item 1A. Risk Factors - “The availability of
third-party reimbursement for our products is uncertain, and we may
find it difficult to maintain current price levels. Additionally,
the market may not accept those products for which third-party
reimbursement is not adequately provided.”
Under the PPACA, pharmaceutical manufacturers of branded
prescription products must pay an annual fee to the federal
government. Each individual pharmaceutical manufacturer must pay a
prorated share of the total industry fee based on the dollar value
of its branded prescription product sales to specified federal
programs.
The PPACA has been subject to court challenges and repeal efforts.
For example, the U.S. Tax Cuts and Jobs Act of 2017 (TCJA) repealed
the requirement that individuals maintain health insurance coverage
or face a penalty (known as the individual mandate). In June 2021,
the U.S. Supreme Court held that state and individual plaintiffs
did not have standing to challenge the minimum essential coverage
provision of the PPACA; in so holding, the U.S. Supreme Court did
not consider larger constitutional questions about the validity of
this provision or the validity of the PPACA in its entirety.
Ongoing efforts to repeal, substantially amend, eliminate or reduce
funding for the PPACA may threaten the stability of the insurance
marketplace and may have consequences for the coverage and
accessibility of prescription drugs. The current administration has
taken actions intended to strengthen and build upon the
PPACA.
Healthcare Fraud and Abuse Laws
We are subject to various federal, state and local laws targeting
fraud and abuse in the healthcare industry, violations of which can
lead to civil and criminal penalties, including fines, imprisonment
and exclusion from participation in federal healthcare programs.
These laws are potentially applicable to us as both a manufacturer
and a supplier of products reimbursed by federal healthcare
programs, and they also apply to hospitals, physicians and other
potential purchasers of our products.
The U.S. federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b)
prohibits persons from knowingly and willfully soliciting,
receiving, offering or providing remuneration, directly or
indirectly, to induce either the referral of an individual, or the
furnishing, recommending or arranging for a good or service, for
which payment may be made under a federal healthcare program such
as the Medicare and Medicaid programs. Remuneration is not defined
in the federal Anti-Kickback Statute and has been broadly
interpreted to include anything of value, including for example,
gifts, discounts, coupons, the furnishing of supplies or equipment,
credit arrangements, payments of cash, waivers of payments,
ownership interests and providing anything at less than its fair
market value. Under the federal Anti-Kickback Statute and the
applicable criminal healthcare fraud statutes contained within 42
U.S.C. § 1320a-7b, a person or entity need not have actual
knowledge of this statute or specific intent to violate it in order
to have committed a violation. In addition, the government may
assert that a claim, including items or services resulting from a
violation of 42 U.S.C. § 1320a-7b, constitutes a false or
fraudulent claim for purposes of the civil U.S. False Claims Act
(FCA), which is discussed below, or the civil monetary penalties
statute, which imposes fines against any person who is determined
to have presented or caused to be presented claims to a federal
healthcare program that the person knows or should know is for an
item or service that was not provided as claimed or is false or
fraudulent. The federal Anti-Kickback Statute and implementing
regulations provide for certain exceptions for “safe harbors” for
certain discounting, rebating or personal services arrangements,
among other things, which were amended in 2020. However, the lack
of uniform court interpretation of the Anti-Kickback Statute,
coupled with novel enforcement theories by government authorities
and stayed implementation of certain regulatory changes, make
compliance with the law difficult. Violations of the federal
Anti-Kickback Statute can result in significant criminal fines,
exclusion from participation in Medicare and Medicaid and follow-on
civil litigation, among other things, for both entities and
individuals.
The civil FCA and similar state laws impose liability on any person
or entity who, among other things, knowingly presents, or causes to
be presented, a false or fraudulent claim for payment by a federal
healthcare program. The
qui tam
provisions of the FCA and similar state laws allow a private
individual to bring civil actions on behalf of the federal or state
government and to share in any monetary recovery. The U.S. Federal
Physician Payments Sunshine Act and similar state laws impose
reporting requirements for various types of payments to physicians
and teaching hospitals. Failure to comply with reporting
requirements under these laws could subject manufacturers and
others to substantial civil money penalties. In addition,
government entities and private litigants have asserted claims
under state consumer protection statutes against pharmaceutical and
medical device companies for alleged false or misleading statements
in connection with the marketing, promotion and/or sale of
pharmaceutical and medical device products, including state
investigations of the Company regarding vaginal mesh devices
previously sold by certain of our operating subsidiaries and
investigations and litigation by certain government entities
regarding the prior promotional practices of certain of our
operating subsidiaries with respect to opioid
products.
International Regulations
Through our international operations, the Company is subject to
laws and regulations that differ from those under which the Company
operates in the U.S. In most cases, non-U.S. regulatory agencies
evaluate and monitor the safety, efficacy and quality of
pharmaceutical products, govern the approval of clinical trials and
product registrations and regulate pricing and reimbursement.
Certain international markets have differing product preferences
and requirements and operate in an environment of
government-mandated, cost-containment programs, including price
controls, such as the Patented Medicine Prices Review Board (PMPRB)
in Canada.
In Canada, the
Regulations Amending the Patented Medicines Regulations (Additional
Factors and Information Reporting Requirements)
(the Amendments) came into force on July 1, 2022. The Amendments
made a number of changes to the regulation of Canadian drug prices
by the PMPRB. The PMPRB is an administrative board with a mandate
to protect Canadians from excessive pricing of patented medicines.
Pharmaceutical manufacturers that are patentees are required to
report applicable patents and file sales information so the PMPRB
can monitor for excessive pricing as long as the product is
considered to be a patented medicine. If it is determined the
average price for a patented medicine is too high based on pricing
tests developed by the PMPRB, a payment must be made to the PMPRB
to offset the excessive revenues that were generated and/or the
price of the medicine must be reduced. The PMPRB’s authority to
regulate the price of a drug product is linked to patent
protection, specifically when there is a patent to an invention
that is intended or capable of being used for medicine or for the
preparation or production of medicine.
Certain governments have placed restrictions on physician
prescription levels and patient reimbursements, emphasized greater
use of generic products and enacted across-the-board price cuts as
methods of cost control.
Whether or not FDA approval has been obtained for a product,
approval of the product by comparable regulatory authorities of
other governments must be obtained prior to marketing the product
in those jurisdictions. The approval process may be more or less
rigorous than the U.S. process and the time required for approval
may be longer or shorter than in the U.S.
Environmental Matters
Our operations are subject to substantial federal, state and local
environmental laws and regulations concerning, among other matters,
the generation, handling, storage, transportation, treatment and
disposal of, and exposure to, hazardous substances. Violation of
these laws and regulations, which may change, can lead to
substantial fines and penalties. Many of our operations require
environmental permits and controls to prevent and limit pollution
of the environment. We believe that our facilities and the
facilities of our third-party service providers are in substantial
compliance with applicable environmental laws and regulations. As
part of our ESG strategy, we are committed to operating our
business in a responsible manner that seeks to minimize
environmental impact, while promoting the safe, efficient and
responsible use of global resources.
Service Agreements
We contract with various third parties to provide certain critical
services including manufacturing, packaging, supply, warehousing,
distribution, customer service, certain financial functions,
certain R&D activities and medical affairs, among
others.
Refer to Note 12. License, Collaboration and Asset Acquisition
Agreements and Note 16. Commitments and Contingencies in the
Consolidated Financial Statements included in Part IV, Item 15 of
this report for additional information.
We primarily purchase our raw materials for the production and
development of our products in the open market from third-party
suppliers. We attempt, when possible, to mitigate our raw material
supply risks through inventory management and alternative sourcing
strategies. However, some raw materials are only available from one
source. We are required to identify the suppliers of all raw
materials for our products in the drug applications that we file
with the FDA. If the raw materials from an approved supplier for a
particular product become unavailable, we would be required to
qualify a substitute supplier with the FDA, which would likely
interrupt manufacturing of the affected product. See Item 1A. Risk
Factors for further discussion on the risks associated with the
sourcing of our raw materials.
License & Collaboration Agreements and
Acquisitions
We continue to seek to enhance our product line and develop a
diversified portfolio of products through product acquisitions and
in-licensing or acquiring licenses to products, compounds and
technologies from third parties. The Company enters into strategic
alliances and collaborative arrangements with third parties, which
give the Company rights to develop, manufacture, market and/or sell
pharmaceutical products, the rights to which are primarily owned by
these third parties. These alliances and arrangements can take many
forms, including licensing arrangements, co-development and
co-marketing agreements, co-promotion arrangements, research
collaborations and joint ventures. Such alliances and arrangements
enable us to share the risk of incurring all R&D expenses that
do not lead to revenue-generating products; however, because
profits from alliance products are shared with the counter-parties
to the collaborative arrangement, the gross margins on alliance
products are generally lower, sometimes substantially so, than the
gross margins that could be achieved had the Company not opted for
a development partner. Refer to Note 12. License, Collaboration and
Asset Acquisition Agreements in the Consolidated Financial
Statements included in Part IV, Item 15 of this report for
additional information.
Human Capital Resources
As of February 27, 2023, we have 2,861 employees, of which 423
are engaged in R&D and regulatory work, 356 in sales and
marketing, 1,106 in manufacturing, 580 in quality assurance and 396
in general and administrative capacities. With the exception of
certain production personnel in our Rochester, Michigan
manufacturing facility, our employees are generally not represented
by unions. We believe that our relations with our employees are
good.
Information about our Executive Officers
The following table sets forth, as of March 6, 2023,
information about our executive officers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Age |
|
Position and Offices |
Blaise Coleman |
|
49 |
|
President and Chief Executive Officer |
Patrick Barry |
|
55 |
|
Executive Vice President and President, Global Commercial
Operations |
Mark T. Bradley |
|
54 |
|
Executive Vice President and Chief Financial Officer |
Matthew J. Maletta |
|
51 |
|
Executive Vice President and Chief Legal Officer and Company
Secretary |
James P. Tursi, M.D. |
|
58 |
|
Executive Vice President, Global Research &
Development |
Blaise Coleman was appointed President, Chief Executive Officer and
a member of the Board of Directors, effective March 2020. He
previously served as Executive Vice President and Chief Financial
Officer since December 2016. He joined Endo in January 2015 as Vice
President of Corporate Financial Planning & Analysis, and was
then promoted to Senior Vice President, Global Finance Operations
in November 2015. Prior to joining Endo, Mr. Coleman held a number
of finance leadership roles with AstraZeneca, most recently as the
Chief Financial Officer of the AstraZeneca/Bristol-Myers Squibb US
Diabetes Alliance. Prior to that, he was the Head of Finance for
the AstraZeneca Global Medicines Development organization based in
Mölndal, Sweden. Mr. Coleman joined AstraZeneca in 2007 as Senior
Director Commercial Finance for the US Cardiovascular Business. He
joined AstraZeneca from Centocor, a wholly-owned subsidiary of
Johnson & Johnson, where he held positions in both the Licenses
& Acquisitions and Commercial Finance organizations. Mr.
Coleman’s move to Centocor in early 2003 followed 7 years’
experience with the global public accounting firm,
PricewaterhouseCoopers LLP. Mr. Coleman is a Certified Public
Accountant; he holds a Bachelor of Science degree in accounting
from Widener University and an M.B.A. from the Fuqua School of
Business at Duke University.
Patrick Barry was appointed Executive Vice President and President,
Global Commercial Operations, effective April 2020. In this role,
he has responsibility for the Company’s global commercial
organization across each of Endo’s four reportable business
segments, including Branded Pharmaceuticals, Sterile Injectables,
Generic Pharmaceuticals and International Pharmaceuticals. He
formerly served as Executive Vice President and Chief Commercial
Officer, U.S. Branded Business since February 2018, after joining
Endo in December 2016 as Senior Vice President, U.S. Branded
Pharmaceuticals. Prior to joining Endo, Mr. Barry worked at Sanofi
S.A. from 1992 until December 2016, holding roles of increasing
responsibility in areas such as Sales Leadership, Commercial
Operations, Marketing, Launch Planning and Training and Leadership
Development. Most recently, he served at Sanofi S.A. as its General
Manager and Head of North America General Medicines starting in
September 2015 and as Vice President and Head of U.S. Specialty
from April 2014 until August 2015. During this time, Mr. Barry
oversaw three complex and diverse businesses with responsibility
for leading sales and marketing activities for branded and generic
products across the U.S. and Canada. He has a diverse therapeutic
experience including aesthetics and dermatology, oncology, urology,
orthopedics and medical device and surgical experience. He has an
M.B.A. from Cornell University, Johnson School of Management and a
B.A. in Public Relations and Marketing from McKendree
University.
Mark T. Bradley was appointed Executive Vice President and Chief
Financial Officer, effective March 2020. He previously served as
Senior Vice President, Corporate Development & Treasurer since
June 2017. Mr. Bradley joined Endo in January 2007 as a Finance
Director and has held various positions of increasing
responsibility since joining the Company. Prior to joining Endo, he
spent nearly 7 years as a management consultant, most recently with
Deloitte Consulting, providing a broad range of strategic and
operational advice and services to senior executives across a
number of industries. In addition, Mr. Bradley served as a Finance
Director for an industrial products company for approximately 2
years. He spent the first 5 years of his career in public
accounting at Ernst & Young LLP. Mr. Bradley is a licensed
Certified Public Accountant and holds a Bachelor of Science degree
in Accounting from Saint Joseph’s University and a Master of
Business Administration from The University of Texas at
Austin.
Matthew J. Maletta was appointed Executive Vice President and Chief
Legal Officer, effective May 2015, where he has global
responsibility for all legal matters affecting the Company. He was
also appointed Company Secretary, effective June 2020. Prior to
joining Endo in 2015, Mr. Maletta served as Vice President,
Associate General Counsel and Corporate Secretary of Allergan. In
this position, he served as an advisor to the Chief Executive
Officer and Board of Directors and supervised several large
transactions, including the $70 billion acquisition of Allergan by
Actavis in 2015. Mr. Maletta also played a key role defending
Allergan from an unsolicited takeover bid by Valeant
Pharmaceuticals and Pershing Square Capital Management in 2014. Mr.
Maletta joined Allergan in 2002 and during his tenure, held roles
of increased responsibility, including serving as the lead
commercial attorney for Allergan’s aesthetics businesses for
several years and as Head of Human Resources in 2010. Prior to
joining Allergan, Mr. Maletta was in private practice, focusing on
general corporate matters, finance, governance, securities and
transactions. He holds a B.A. degree in political science from the
University of Minnesota, summa cum laude and Phi Beta Kappa, and a
J.D. degree, cum laude, from the University of Minnesota Law
School.
James P. Tursi, M.D. was appointed Executive Vice President, Global
Research & Development, effective January 2022. In this role,
Dr. Tursi is responsible for leading global research &
development, medical affairs and regulatory operations. Prior to
joining Endo, he held senior leadership roles at Ferring
Pharmaceuticals U.S., Antares Pharmaceuticals and Aralez
Pharmaceuticals. Prior to Aralez, Dr. Tursi was Chief Medical
Officer and Vice President of Clinical R&D at Auxilium
Pharmaceuticals until its acquisition by Endo in 2015. Dr. Tursi
practiced medicine and surgery for over 10 years and created a
medical education company, I Will Pass®,
which assisted physicians in the process of board certification. He
performed his residency in Gynecology and Obstetrics at the Johns
Hopkins Hospital, holds a Bachelor of Science degree in Chemistry
and Biology from Ursinus College and a Doctor of Medicine degree
from the Medical College of Pennsylvania. Dr. Tursi is a member of
the Ideal Image Board of Directors. Previously, Dr. Tursi served as
a member of the Agile Therapeutics, Inc. Board of Directors from
October 2014 to October 2022.
We have employment agreements with each of our executive
officers.
Available Information
Our internet address is www.endo.com. The contents of our website
are not part of this Annual Report on Form 10-K and our internet
address is included in this document as an inactive textual
reference only. We currently make our Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy
reports and all amendments to those reports available free of
charge on our website as soon as reasonably practicable after we
file such reports with, or furnish such reports to, the
SEC.
You can access our filings through the SEC’s internet site:
www.sec.gov
(intended to be an inactive textual reference only).
You may also access copies of the Company’s filings with the
Canadian Securities Administrators on SEDAR through their internet
site: www.sedar.com
(intended to be an inactive textual reference only).
Item 1A. Risk
Factors
Risk Factor Summary
The following is a summary of the risk factors contained in this
Annual Report on Form 10-K that could adversely affect our
business, financial condition, results of operations and cash
flows. In addition to this summary, we encourage you to carefully
review the full risk factors in their entirety.
Business Related Risks
•We
operate in a highly competitive industry.
•Other
pharmaceutical companies may obtain approval for competing versions
of our products.
•Pharmacies
or outsourcing facilities may produce compounded versions of our
products.
•We
may fail to successfully identify, develop, maintain or introduce
products.
•Uncertainties
exist regarding our acquisition and licensing
strategy.
•Asset
sales could adversely affect our prospects and opportunities for
growth.
•Third-party
reimbursement for our products is uncertain.
•Price
levels may be reduced because of social or political
pressures.
•Our
business is highly dependent upon market perceptions of us, our
brands and the safety and quality of our products.
•Our
business and financial condition may be adversely affected by
existing or future legislation and regulations.
•Our
customer concentration may adversely affect us.
•We
are currently dependent on outside manufacturers for the
manufacture of a significant amount of our products.
•We
are dependent on third parties to supply raw materials used in our
products and to provide services.
•We
have limited experience in manufacturing biologic products and may
encounter difficulties in our manufacturing processes.
•The
DEA could limit the availability of active ingredients and the
production of products.
•We
rely on our ability to retain our key personnel and to continue to
attract additional professional staff.
•Our
operations could be disrupted if our information systems fail, if
we are unsuccessful in implementing necessary upgrades or if we are
subject to cyber-attacks.
•We
are subject to risks related to our global operations.
•We
are subject to risks regarding widespread health problems,
including the recent global coronavirus.
•Supply
chain and other manufacturing disruptions could negatively impact
our businesses.
•We
may be impacted by the effects of climate change and encounter
challenges implementing sustainability-related
measures.
Risks Related to Bankruptcy and Our Ordinary Shares
•We
are subject to risks and uncertainties associated with the Chapter
11 Cases (as defined below).
•Delays
in the Chapter 11 Cases may occur.
•The
RSA (as defined below) is subject to significant conditions and
milestones that may be difficult for us to satisfy.
•If
the RSA is terminated, our ability to confirm and consummate the
Sale (as defined below) could be materially and adversely
affected.
•Even
if the Sale or an alternative restructuring transaction is
consummated, we may not be able to achieve our stated goals or
continue as a going concern.
•Our
ability to prosecute the Chapter 11 Cases and consummate the Sale
may be contested by third parties with litigation.
•In
certain instances, a chapter 11 case may be converted to a case
under chapter 7 of the Bankruptcy Code.
•Alternative
plans of reorganization may be introduced, which could have less
favorable terms than currently anticipated or result in significant
litigation and expenses.
•As
a result of the Chapter 11 Cases, our historical financial
information may not be indicative of our future performance, which
may be volatile.
•We
may be subject to claims that will not be discharged in the Chapter
11 Cases.
•If
we consummate the Sale with the Stalking Horse Bidder (as defined
below), we may not have sufficient liquidity to implement an
orderly wind-down process.
•The
pursuit of the Chapter 11 Cases has consumed, and will continue to
consume, a substantial portion of the time and attention of our
management and could cause us to experience increased levels of
employee attrition.
•Our
current sources of financing may be insufficient to fund our cash
requirements through emergence from bankruptcy.
•We
may be unable to comply with restrictions imposed by the Cash
Collateral Order (as defined below).
•Aspects
of the Chapter 11 Cases limit the flexibility of our management
team in running our business.
•The
trading prices of our securities have been volatile, and
investments in our securities could decline in value.
•We
have no plans to pay regular dividends on our ordinary shares or to
conduct ordinary share repurchases.
•Shareholder
activism could cause us to incur significant expenses, hinder
execution of our business strategy and impact our share
price.
•Our
ordinary shares are quoted on the over-the-counter market, and thus
may have a limited market and lack of liquidity.
•We
believe it is likely that our ordinary shares will continue to
decrease in value as a result of the Chapter 11 Cases.
Litigation and Liability Related Risks
•We
are regularly the subject of material legal proceedings, including
significant lawsuits, product liability claims, governmental
investigations and product recalls.
•We
may not have and may be unable to obtain or maintain insurance
adequate to cover potential liabilities.
•Public
concern around the abuse of opioids or other products, including
law enforcement concerns over diversion or marketing practices,
regulatory efforts to combat abuse and litigation could result in
costs to our business and damage our reputation.
Financial and Liquidity Related Risks
•Our
ability to fund our operations, maintain adequate liquidity and
meet our financing obligations is reliant on our operations, which
are subject to significant risks and uncertainties.
•Potential
impairments of goodwill and other intangibles may significantly
impact our profitability.
•Our
substantial indebtedness could adversely affect our financial
position.
•We
may not realize the anticipated benefits from our strategic
actions.
Legal and Regulatory Related Risks
•Agreements
between branded pharmaceutical companies and generic pharmaceutical
companies are facing increased government scrutiny and we may be
subject to additional investigations or litigation.
•We
are subject to various laws and regulations pertaining to the
marketing of our products and services.
•The
pharmaceutical industry is heavily regulated, which creates
uncertainty about our ability to bring new products to market and
imposes substantial compliance costs on our business, including
withdrawal or suspension of existing products.
•We
are subject to complex reporting and payment obligations under
Medicaid and other governmental drug pricing programs.
•Decreases
in the degree to which individuals are covered by healthcare
insurance could result in decreased use of our
products.
•Regulatory
or other factors may cause us to be unable to manufacture our
products or face interruptions in the manufacturing
process.
•We
may fail to obtain regulatory approval or maintain compliance with
requirements in non-U.S. jurisdictions.
•The
use of generic products may be limited through legislative,
regulatory and other efforts.
•New
tariffs and evolving trade policy between the U.S. and other
countries, including China, could adversely affect us.
•We
are subject to information privacy and data protection laws that
include penalties for noncompliance.
Intellectual Property Related Risks
•Our
ability to protect and maintain our proprietary and licensed
third-party technology, which is vital to our business, is
uncertain.
•Third-party
allegations of intellectual property infringement, unfavorable
outcomes in litigation and “at-risk” product launches could
adversely affect us.
Tax Related Risks
•Future
changes to tax laws could materially adversely affect
us.
•The
IRS may not agree with the conclusion that we should be treated as
a non-U.S. corporation.
•The
effective rate of taxation upon our results of operations is
dependent on multi-national tax considerations.
•The
IRS and other taxing authorities may continue to challenge our tax
positions and we may not be able to successfully maintain such
positions.
•Our
ability to use tax attributes to offset U.S. taxable income may be
limited.
Structural and Organizational Risks
•Irish
law differs from the laws in effect in the U.S. and may afford less
protection to our shareholders.
•Takeover
attempts will be subject to Irish Takeover Rules and subject to
review by the Irish Takeover Panel.
•We
are an Irish company and it may be difficult to enforce judgments
against us or certain of our officers and directors.
Risk Factors
The following risk factors could adversely affect our business,
financial condition, results of operations and cash flows. These
are not the only risks facing the Company. Other risks and
uncertainties, including those not currently known to us or that we
currently deem to be immaterial, could also adversely affect our
business, financial condition, results of operations and cash
flows.
Business Related Risks
We operate in a highly competitive industry.
The pharmaceutical industry is intensely competitive and we face
competition in both our U.S. and international branded and generic
pharmaceutical businesses. Competitive factors include, without
limitation, product development, technological innovation, safety,
efficacy, commercialization, marketing, promotion, product quality,
price, cost-effectiveness, reputation, service, patient convenience
and access to scientific and technical information. Many of our
competitors have, and future competitors may have, greater
resources than we do, and we cannot predict with certainty the
timing or impact of competitors’ products and commercialization
strategies. Furthermore, recent market consolidation in this
industry may further concentrate financial, technical and market
strength and increase competitive pressure in the industry. In
addition, our competitors may make greater R&D investments and
have more efficient or superior processes and systems and more
experience in the development of new products that permit them to
respond more quickly to new or emerging technologies and changes in
customer demand which may make our products or technologies
uncompetitive or obsolete. Furthermore, academic institutions,
government agencies and other public and private organizations
conducting research may seek patent protection and may establish
collaborative arrangements for competitive products or programs. If
we fail to compete successfully, it could have a material adverse
effect on our business, financial condition, results of operations
and cash flows.
Certain of our branded products do not currently compete with
on-market generic products but are likely to face generic
competition in the future. The entrance of generic competitors can
occur at any time and cannot be predicted with certainty. For
additional information on our patent protection, refer to Part I,
Item 1 of this report “Business” under the caption “Patents,
Trademarks, Licenses and Proprietary Property.” Generic products we
currently sell with generic exclusivity could in the future be
subject to competition from other generic competitors. Some of our
other branded and generic products, such as
VASOSTRICT®,
already face generic competition and are at risk of additional
generic competitors entering the market. During the first quarter
of 2022, multiple competitive generic alternatives to
VASOSTRICT®
were launched, beginning with a generic that was launched at risk
and began shipping toward the end of January 2022. Since then,
additional competitive alternatives entered the market, including
authorized generics.
Manufacturers of generic products typically invest far less in
R&D than research-based companies. Additionally, generic
competitors, including Asian or other overseas generic competitors,
may be able to manufacture products at costs lower than us. For
these reasons, competitors may price their products lower than
ours, and such differences could be significant. Due to lower
prices, generic versions, where available, may be substituted by
pharmacies or required in preference to branded versions under
third-party reimbursement programs. As a result, generic
competition could have a material adverse effect on our business,
financial condition, results of operations and cash flows.
Legislation encouraging early and rapid approval of generic drugs
could also increase the degree of generic competition we face. See
the risk factor “If other pharmaceutical companies use litigation
and regulatory means to obtain approval for generic, biosimilar,
OTC or other competing versions of our products, our sales may
suffer” for more information.
In addition, our generics business faces competition from
brand-name pharmaceutical companies, which have taken and may
continue to take aggressive steps to thwart or delay competition
from generic equivalents of their brand-name products, including
bringing litigation alleging patent infringement or other
violations of intellectual property rights. The actions taken by
competing brand-name pharmaceutical companies may increase the
costs and risks associated with our efforts to introduce generic
products and may delay or prevent such introduction altogether. For
example, if a brand-name pharmaceutical company’s patent were held
to be valid and infringed by our generic products in a particular
jurisdiction, we would be required to either obtain a license from
the patent holder or delay or cease the manufacture and sale of
such generic product. Any of these factors could have a material
adverse effect on our business, financial condition, results of
operations and cash flows.
Our sales may also suffer as a result of changes in consumer demand
for our products, including as a result of fluctuations in consumer
buying patterns, changes in market conditions or actions taken by
our competitors, including the introduction of new products or
price reductions for existing products. Any of these factors could
have a material adverse effect on our business, financial
condition, results of operations and cash flows.
If other pharmaceutical companies use litigation and regulatory
means to obtain approval for generic, biosimilar, OTC or other
competing versions of our products, our sales may
suffer.
Various manufacturers have filed ANDAs seeking FDA approval for
generic versions of certain of our key pharmaceutical products
including, but not limited to, VASOSTRICT®,
ADRENALIN®
and AVEED®.
In connection with such filings, these manufacturers have
challenged the validity and/or enforceability of one or more of the
underlying patents protecting our products.
Any launch of competing versions of any of our products could
decrease the revenue of such products, which could have a material
adverse effect on our business, financial condition, results of
operations and cash flows.
Our practice is to vigorously defend and pursue all available legal
and regulatory avenues in defense of the intellectual property
rights protecting our products. Despite our efforts, litigation is
inherently uncertain, and we cannot predict the timing or outcome
of our efforts. If we are not successful in defending our
intellectual property rights or opt to settle, or if a product’s
marketing or data exclusivity rights expire or become otherwise
unenforceable, our competitors could ultimately launch generic,
biosimilar, OTC or other competing versions of our products. Upon
the loss or expiration of patent protection for one of our
products, or upon the “at-risk” launch (despite pending patent
infringement litigation against the generic product) by a generic
manufacturer of a generic version of one of our patented products,
our sales and revenues of the affected products would likely
decline rapidly and materially, which could require us to write off
a portion or all of the intangible assets associated with the
affected product and could have a material adverse effect on our
business, financial condition, results of operations and cash
flows.
For example, in
the case of VASOSTRICT®,
beginning in April 2018, Par Sterile Products, LLC (PSP LLC) and
Par Pharmaceutical, Inc. (PPI) received notice letters from Eagle
and other companies advising of the filing by such companies of
ANDAs/NDAs for generic versions of VASOSTRICT®
(vasopressin IV solution (infusion)) 20 units/ml and/or 200
units/10 ml. Beginning in May 2018, PSP LLC, PPI and Endo Par
Innovation Company, LLC (EPIC) filed lawsuits against Eagle and
other generic filers in the U.S. District Court for the District of
Delaware or New Jersey. We reached settlements and voluntarily
dismissed the suits against many of these filers. The remaining
Delaware cases against Eagle and Amneal Pharmaceuticals LLC were
consolidated and a trial was held in July 2021. In August 2021, the
court issued an opinion holding that Eagle’s proposed generic
product would not infringe PPI’s asserted patent claims. The court
made no finding regarding the validity of the patents. We appealed
the ruling. In August 2022, the Federal Circuit affirmed the
District of Delaware’s decision: (i) that Eagle’s proposed generic
product would not infringe PPI’s asserted patent claims and (ii)
denying the issuance of a declaratory judgment that Eagle’s planned
sale of generic product would infringe under 35 U.S.C. § 271(a) and
(b). During the first quarter of 2022, multiple competitive generic
alternatives to VASOSTRICT®
20 units/ml were launched, beginning with Eagle’s generic that was
launched at risk and began shipping toward the end of January 2022.
Since then, additional competitive alternatives entered the market,
including authorized generics. These launches began to
significantly impact both Endo’s market share and product price
toward the middle of the first quarter of 2022, and the effects of
competition have since increased. This competition could have a
material adverse effect on our business, financial condition,
results of operations and cash flows.
There are currently pending legal proceedings brought by us and/or
our subsidiaries and, in certain cases, our third-party partners,
against manufacturers seeking FDA approval for generic versions of
our products. For a description of the material related legal
proceedings, see Note 16. Commitments and Contingencies in the
Consolidated Financial Statements included in Part IV, Item 15 of
this report.
We also believe it is likely that manufacturers may seek FDA
approvals for generic, OTC or other competing versions of other of
our key pharmaceutical products, either through the filing of
ANDAs, through the OTC monograph process or through the use of
other means.
If pharmacies or outsourcing facilities produce compounded versions
of our products, our sales may suffer.
Compounded drugs do not typically require the same R&D
investments as either branded or generic drugs and, therefore, can
compete favorably on price with both branded and generic versions
of a drug. See “Governmental Regulation” in Part I, Item 1. The
introduction of compounded versions of our products by pharmacies
or outsourcing facilities could have a material adverse effect on
our business, financial condition, results of operations and cash
flows.
If we fail to successfully identify and develop additional branded
and generic pharmaceutical products, obtain and maintain exclusive
marketing rights for our branded and generic products or fail to
introduce branded and generic products on a timely basis, our
revenues, gross margin and operating results may
decline.
Our financial results depend, to a significant extent, upon our
ability, and the ability of our partners, to identify, develop,
obtain regulatory approval for, launch and commercialize a pipeline
of commercially successful branded and generic products, including
first-to-file or first-to-market opportunities. Due to the
significant competition we face and the importance of being the
first (or one of the first) to market, no assurances can be given
that we will be able to develop, introduce and maintain
commercially successful products in the future. Competition could
cause our revenues to decrease significantly, which could have a
material adverse effect on our business, financial condition,
results of operations and cash flows.
Identifying and developing additional product candidates are prone
to risks of failure inherent in product development. We conduct
R&D to enable us to manufacture and market pharmaceutical
products in accordance with specific government regulations. Much
of our product development effort is focused on technically
difficult-to-formulate products and/or products that require
advanced manufacturing technology. Typically, expenses related to
research, development and regulatory approval of compounds for our
branded products are significantly greater than those expenses
associated with generic products. Should we expand our R&D
efforts, our research expenses are likely to increase. Because of
the inherent risk associated with R&D efforts in the healthcare
industry, particularly with respect to new products, our R&D
expenditures may not result in the successful regulatory approval
and introduction of new products and failure in the development of
any new product can occur at any point in the process, including
late in the process after substantial investment. Also, after we
submit a regulatory application, the relevant governmental health
authority may require that we conduct additional studies,
including, for example, studies to assess the product’s interaction
with alcohol. As a result, we may be unable to reasonably predict
the total R&D costs to develop a particular product and there
is a significant risk that the funds we invest in R&D will not
generate financial returns. In addition, our operating results and
financial condition may fluctuate as the amount we spend to
research and develop, commercialize, acquire or license new
products, technologies and businesses changes.
The process of developing and obtaining regulatory approvals for
new products is time-consuming, costly and inherently
unpredictable. Even if we are able to identify and develop
additional product candidates, we may fail to obtain exclusive
marketing rights, such as the 180-day ANDA first-filer marketing
exclusivity period provided for in the Hatch-Waxman amendments to
the FFDCA or the 180-day exclusivity for competitive generic
therapies established by the FDA Reauthorization Act of 2017, for
such product candidates. Even if we were to secure such
exclusivities, risks associated with securing timely approval, as
well as risks of unfavorable litigation dispositions, put such
exclusivities at risk of being forfeited. The approval of our ANDAs
may also be stayed by the FDA for up to 30 months if such ANDAs
become the subject of patent litigation. Even where we are awarded
marketing exclusivity, we may be required to share our exclusivity
period with other ANDA applicants or with authorized generics that
are not prohibited from sale during the 180-day marketing
exclusivity period. Our revenues have historically included sales
of generic products with limited competition resulting from
marketing exclusivity or other factors, and the failure to timely
and effectively file any NDA, ANDA, BLA or Supplemental Biologics
License Application (sBLA) with the FDA or similar filings with
other regulatory agencies, or to partner with parties that have
obtained marketing exclusivity, could have a material adverse
effect on our business, financial condition, results of operations
and cash flows.
Furthermore, the successful commercialization of a product is
subject to a number of factors, including:
•the
effectiveness, ease of use and safety of our products as compared
to existing products;
•customer
demand and the willingness of physicians and customers to adopt our
products over products with which they may have more loyalty or
familiarity and overcoming any biases toward competitors’ products
or against our products;
•the
cost of our products compared to alternative products and the
pricing and commercialization strategies of our
competitors;
•the
success of our launch and marketing efforts;
•adverse
publicity about us, our products, our competitors and their
products or the industry as a whole or favorable publicity about
competitors or their products;
•the
advent of new and innovative alternative products;
•any
unforeseen issues or adverse developments in connection with our
products and any resulting litigation, regulatory scrutiny and/or
harm to our reputation; and
•other
risks that may be out of our control, including the decision by a
collaboration partner to make substantial changes to a product’s
formulation or design, or a collaboration partner refusing to
perform its obligations under our collaboration agreement, which
may cause delays and additional costs in developing and marketing a
product.
The success of our acquisition and licensing strategy is subject to
uncertainty and acquisitions or licenses may reduce our earnings,
be difficult to integrate, not perform as expected or require us to
obtain additional financing.
We regularly evaluate selective acquisitions and look to continue
to enhance our product line by acquiring rights to additional
products and compounds. Such acquisitions may be carried out
through corporate acquisitions, asset acquisitions, licensing or
joint venture arrangements. However, we may not be able to complete
acquisitions, obtain licenses or enter into arrangements that meet
our target criteria on satisfactory terms, if at all. For example,
we may not be able to identify suitable acquisition candidates. In
addition, any acquisition of assets and rights to products and
compounds may fail to accomplish our strategic objective and may
not perform as expected. Further, if we are unable to maintain, on
commercially reasonable terms, product, compound or other licenses
that we have acquired, our ability to develop or commercialize our
products may be inhibited. In order to continue to develop and
broaden our product range, we must compete to acquire assets. Our
competitors may have greater resources than us and therefore be
better able to complete acquisitions or licenses, which could cause
us to be unable to consummate acquisitions, licensing agreements or
cause the ultimate price we pay to increase. If we fail to achieve
our acquisition or licensing goals, our growth may be
limited.
Acquisitions of companies may expose us to additional risks, which
may be beyond our control and may have a material adverse effect on
our business, financial condition, results of operations and cash
flows. The combination of two independent businesses is a complex,
costly and time-consuming process. As a result, we may be required
to devote significant management attention and resources to the
integration of an acquired business into our practices and
operations. Any integration process may be disruptive and may not
achieve realization of expected benefits. The difficulties of
combining operations of companies include, among
others:
•diversion
of management’s attention to integration matters;
•difficulties
in achieving anticipated cost or tax savings, synergies, business
opportunities and growth prospects from the combination of the
businesses;
•difficulties
in the integration of operations and systems;
•the
impact of pre-existing legal and/or regulatory issues;
•difficulties
in conforming standards, controls, procedures and accounting and
other policies, business cultures and compensation structures
between the companies;
•difficulties
in the assimilation of employees and retention of key
personnel;
•difficulties
in managing the expanded operations of a larger and more complex
company;
•challenges
in retaining existing customers and obtaining new
customers;
•potential
unknown liabilities or larger liabilities than
projected;
•unforeseen
increases to expenses or other adverse consequences;
and
•difficulties
in coordinating a geographically dispersed
organization.
In addition, any acquisitions may result in material unanticipated
problems, expenses, liabilities, competitive responses and loss or
disruption of relationships with customers, suppliers, partners,
regulators and others with whom we have business or other
dealings.
The benefits of mergers and acquisitions are also subject to a
variety of other factors, many of which are beyond our ability to
control, such as changes in the rate of economic growth in
jurisdictions in which the combined company will do business, the
financial performance of the combined business in various
jurisdictions, currency exchange rate fluctuations and significant
changes in trade, monetary or fiscal policies, including changes in
interest rates and tax law of the jurisdictions in which the
combined company will do business. The impact of these factors,
individually and in the aggregate, is difficult to predict, in part
because the occurrence of the events or circumstances relating to
such factors may be interrelated, and the impact to the combined
company of the occurrence of any one of these events or
circumstances could be compounded or, alternatively, reduced,
offset or more than offset by the occurrence of one or more of the
other events or circumstances relating to such
factors.
In addition, based on current acquisition prices in the
pharmaceutical industry, acquisitions could decrease our net income
per share and add significant intangible assets and related
amortization or impairment charges. Our acquisition strategy may
require us to obtain additional debt or equity financing, resulting
in additional debt obligations, increased interest expense or
dilution of equity ownership. We may not be able to finance
acquisitions on terms satisfactory to us, or at all.
We may decide to sell assets, which could adversely affect our
prospects and opportunities for growth.
In addition to our efforts to consummate the Sale, and subject to
any required approvals of the Bankruptcy Court, we may from time to
time consider selling certain assets if we determine that such
assets are not critical to our strategy or we believe the
opportunity to monetize the asset is attractive or for various
other reasons, including for the reduction of indebtedness. For
example, as further discussed in Note 4. Discontinued Operations
and Asset Sales in the Consolidated Financial Statements included
in Part IV, Item 15 of this report, in both 2021 and 2022, we
divested of certain assets related to our retail generics business.
We have also divested of certain intellectual property rights
throughout each of the past three years. We intend to continue to
explore the sale of certain non-core assets, subject to any
limitations imposed as a result of our bankruptcy proceedings.
Although our preference is to engage in asset sales only if they
advance or otherwise support our overall strategy, we may decide to
sell assets in response to liquidation or other claims described
herein, and any such sale could reduce the size or scope of our
business, our market share in particular markets or our
opportunities with respect to certain markets, products or
therapeutic categories. As a result, any such sale could have a
material adverse effect on our business, financial condition,
results of operations and cash flows.
The availability of third-party reimbursement for our products is
uncertain, and we may find it difficult to maintain current price
levels. Additionally, the market may not accept those products for
which third-party reimbursement is not adequately
provided.
Our ability to commercialize our products depends, in part, on the
extent to which reimbursement for the costs of these products is
available from government healthcare programs, such as Medicaid and
Medicare, private health insurers and others. We cannot be certain
that, over time, third-party reimbursements for our products will
be adequate for us to maintain price levels sufficient for
realization of an appropriate return on our investment. Government
payers, private insurers and other third-party payers are
increasingly attempting to contain healthcare costs by: (i)
limiting both coverage and the level of reimbursement (including
adjusting co-pays) for products; (ii) refusing, in some cases, to
provide any coverage for off-label uses for products; and (iii)
requiring or encouraging, through more favorable reimbursement
levels or otherwise, the substitution of generic alternatives to
branded products. For instance, government agencies or third-party
payers could attempt to reduce reimbursement for physician
administered products through their interpretation of complex
government price reporting obligations and payment and
reimbursement coding rules, and could attempt to reduce
reimbursement for separate physician administered products that
share an active ingredient by requiring the blending of sales and
pricing information in the same payment and reimbursement
code.
There have been several recent U.S. Congressional inquiries,
hearings and proposed and enacted federal and state legislation and
rules, as well as executive orders, designed to, among other
things: (i) reduce or limit the prices of drugs and make them more
affordable for patients, such as by tying the prices that Medicare
reimburses for physician administered drugs to the prices of drugs
in other countries; (ii) reform the structure and financing of
Medicare Part D pharmaceutical benefits, including through
increasing manufacturer contributions to offset Medicare
beneficiary costs; (iii) bring more transparency to how
manufacturers price their medicines; (iv) enable the government to
directly negotiate prices for drugs covered under Medicare; (v)
revise rules associated with the calculation of Medicaid Average
Manufacturer Price and Best Price, including with regard to the
manner in which pharmaceutical manufacturers may provide copayment
assistance to patients and the identification of “line extension”
drugs, which affect the amount of rebates that manufacturers must
pay on prescription drugs under Medicaid; (vi) eliminate
anti-kickback statute discount safe harbor protection for
manufacturer rebate arrangements with Medicare Part D Plan Sponsors
and pharmacy benefit managers on behalf of Part D Plan Sponsors;
(vii) create new anti-kickback statute safe harbors applicable to
certain point-of-sale discounts to patients and fixed-fee
administrative fee payment arrangements with pharmacy benefit
managers; and (viii) and facilitate the importation of certain
lower-cost drugs from other countries. In addition, state
legislatures have enacted legislation and regulations designed to
control pharmaceutical and biological product pricing, including
restrictions on pricing or reimbursement at the state government
level, marketing cost disclosure and transparency measures, and, in
some cases, policies to encourage importation of drugs from other
countries (subject to federal approval) and bulk purchasing,
including the National Medicaid Pooling Initiative. While we cannot
predict the final form of any pending legislative, regulatory
and/or administrative measures, some of the pending and enacted
legislative proposals or executive rulemaking, such as those
incorporating International Pricing Index or Most-Favored-Nation
models, could significantly reduce the coverage and levels of
reimbursement for products.
In addition, in August 2022, the U.S. enacted the Inflation
Reduction Act of 2022. Subject to subsequent rulemaking, this act,
among other changes: (i) gives HHS the ability and authority to
directly negotiate with manufacturers the price that Medicare will
pay for certain drugs; (ii) requires manufacturers of certain Part
B and Part D drugs to issue rebates to HHS based on certain
calculations and triggers, such as when drug price increases
outpace the rate of inflation; (iii) places certain limitations on
out-of-pocket spending for Medicare Part D enrollees; (iv)
implements a 15% corporate alternative minimum tax on book income
on corporations whose average annual adjusted financial statement
income during the most recently-completed three-year period exceeds
$1.0 billion; (v) implements a 1% excise tax on net stock
repurchases; and (vi) implements several tax incentives to promote
clean energy. While the impact of the Inflation Reduction Act of
2022 was not material to us in 2022, we are continuing to evaluate
the act and its requirements, as well as any potential impact on
our business. It is possible that the act will have a material
adverse effect on our business, financial condition, results of
operations and cash flows in the future.
The unavailability of or a reduction in the reimbursement of our
products could have a material adverse effect on our business,
financial condition, results of operations and cash
flows.
We may experience pricing pressure on our products due to social or
political pressures, which would reduce our revenue and future
profitability.
We may experience downward pricing pressure on our products due to
social or political pressures, which would reduce our revenue and
future profitability. Price increases have resulted in increased
public and governmental scrutiny of the cost of pharmaceutical
products. For example, U.S. federal prosecutors have issued
subpoenas to pharmaceutical companies in connection with an
investigation into pricing practices conducted by the DOJ. Several
state attorneys general also have commenced drug pricing
investigations and filed lawsuits against pharmaceutical companies,
including PPI, and the U.S. Senate has investigated a number of
pharmaceutical companies relating to price increases and pricing
practices. Our revenue and future profitability could be negatively
affected if these or other inquiries were to result in legislative
or regulatory proposals limiting our ability to increase or
maintain the prices of our products.
In addition, the federal government and a number of federal
legislators continue to scrutinize pharmaceutical prices and seek
ways to lower prices. For example, recent legislation, including
the Inflation Reduction Act of 2022, seeks to reduce prescription
drug costs in a variety of ways.
Our business is highly dependent upon market perceptions of us, our
brands and the safety and quality of our products and similar
products, and may be adversely impacted by negative publicity or
findings.
We are dependent on market perceptions and consumer preferences.
Negative publicity or findings associated with product quality,
safety, efficacy, patient illness, side effects or other adverse
effects related to, or perceived to be related to, our products, or
similar products, or our or our partners’ and suppliers’
manufacturing facilities, could have a material adverse effect on
our business, financial condition, results of operations and cash
flows.
Market perceptions and consumer preferences are very important to
our business, especially with respect to our brands, company name
and the safety and quality of our products. Our products and
similar products are subject to market withdrawal or recall and may
be claimed or proven to be ineffective or harmful to
consumers.
Our products may cause known or unknown adverse or other side
effects. If we or our partners, suppliers or brands are negatively
impacted by publicity, media coverage, market perception or
consumer preference, it could impact the commercial viability of
our products, which could have a material adverse effect on our
business, financial condition, results of operations and cash
flows. For example, in December 2022, we announced we would be
taking certain actions to cease the production and sale of
QWO®
in light of market concerns about the extent and variability of
bruising following initial treatment as well as the potential for
prolonged skin discoloration.
The pharmaceutical supply chain has been increasingly challenged by
the vulnerability of distribution channels to illegal
counterfeiting and the presence of counterfeit products in a
growing number of markets and over the internet. Third parties may
illegally distribute and sell counterfeit versions of our products
that do not meet the rigorous manufacturing and testing standards
that our products undergo. Counterfeit products are frequently
unsafe or ineffective and can be potentially life-threatening.
Counterfeit medicines may contain harmful substances, the wrong
dose of API or no API at all. However, to distributors and users,
counterfeit products may be visually indistinguishable from the
authentic version.
Negative posts or comments about us on any social networking
website could seriously damage our reputation. The inappropriate
use of certain social media vehicles could cause brand damage or
information leakage or could lead to legal implications from the
improper collection and/or dissemination of personally identifiable
information or the improper dissemination of material non-public
information.
Unfavorable media coverage about opioid abuse could negatively
affect our business, financial condition and results of operations.
In recent years, opioid abuse has received a high degree of media
coverage. Unfavorable publicity regarding, for example, the use or
misuse of oxycodone or other prescription opioid medications, the
limitations of abuse-deterrent forms, public inquiries and
investigations into drug abuse, including the abuse of prescription
products, litigation or regulatory activity could adversely affect
our reputation. Additionally, increased scrutiny of opioids
generally, whether focused on our products or otherwise, could
negatively impact our relationship with healthcare providers and
other members of the healthcare community. Such negative publicity
could have an adverse effect on the potential size of the market
for new or existing products and could decrease revenues and
royalties, any of which could have a material adverse effect on our
business, financial condition, results of operations and cash
flows.
Our business and financial condition may be adversely affected by
existing or future legislation and regulations.
We cannot predict with any certainty how existing laws may be
applied or how laws or legal standards may change in the future.
Current or future legislation and regulations, whether state or
federal, or in any of the non-U.S. jurisdictions with authority
over our operations, may have a material adverse effect on our
business, financial condition, results of operations and cash
flows.
In October 2018, the Substance Use-Disorder Prevention that
Promotes Opioid Recovery and Treatment for Patients and Communities
Act was enacted in response to the opioid abuse epidemic. State
laws have been enacted such as the New York Opioid Stewardship Act
enacted in April 2018 which provides for certain manufacturers and
distributors to make payments to an opioid stewardship fund. In
April 2019, New York enacted an excise tax on the first sale of
every opioid unit in New York. In October 2018, the Canadian
province of British Columbia enacted a statute called the Opioid
Damages and Health Care Costs Recovery Act, which allows the
British Columbia government to file a direct action against opioid
manufacturers and wholesalers to recover the health care costs it
has incurred, and will incur, resulting from an “opioid-related
wrong.” These statutes, and similar statutes enacted by other
jurisdictions, and resultant litigation, could have a material
adverse effect on our business, financial condition, results of
operations and cash flows.
In Canada, the prices of patented pharmaceutical products are
subject to regulation by the PMPRB. Under the Canadian Patent Act
and Patented Medicines Regulations, patentees of inventions that
pertain to pharmaceutical products sold in Canada are required to
file price and sales information about their patented
pharmaceutical products with the PMPRB. The PMPRB reviews this
information on an ongoing basis to ensure that the prices of
patented pharmaceuticals sold in Canada are not excessive, based
upon price tests established by the PMPRB. There is a risk that the
price of our pharmaceutical products could be found to be excessive
because the price as set at launch is non-compliant with the
PMPRB’s guidelines, or because our average sale prices over time
are not compliant with the guidelines. Furthermore, amendments that
came into force on July 1, 2022 made a number of changes to the
regulation of Canadian drug prices by the PMPRB. The application of
new price tests under the PMPRB guidelines could result in the
current prices of our pharmaceutical products being deemed to be
excessive. Failure by us to comply with the current or future
guidelines could ultimately result in us reducing the prices of the
pharmaceutical products we sell in Canada and/or making payments to
the Canadian government to offset revenues deemed by the PMPRB to
be excessive, which could ultimately impact the commercial
viability of products we sell in Canada, reduce the revenues and
cash flows of our International Pharmaceuticals segment and/or
could have a material adverse effect on our business, financial
condition, results of operations and cash flows.
It is possible that these or other changes in law could have a
material adverse effect on our business, financial condition,
results of operations and cash flows. See “Governmental Regulation”
in Part I, Item 1.
Our customer concentration may adversely affect our financial
condition and results of operations.
We primarily sell our products to wholesalers, retail drug store
chains, supermarket chains, mass merchandisers, distributors, mail
order accounts, hospitals and/or government agencies. Our
wholesalers and/or distributors purchase products from us and, in
turn, supply products to retail drug store chains, independent
pharmacies, hospitals, long-term care facilities, clinics, home
infusion pharmacies, government facilities and MCOs. Our current
customer group reflects significant consolidation in recent years,
marked by mergers and acquisitions and other alliances.
Consolidations and joint purchasing arrangements have resulted in
increased pricing and other competitive pressures on pharmaceutical
companies, including us. Additionally, the emergence of large
buying groups representing independent retail pharmacies and other
distributors and the prevalence and influence of MCOs and similar
institutions have increased the negotiating power of these groups,
enabling them to attempt to extract various demands, including
without limitation price discounts, rebates and other restrictive
pricing terms. These competitive trends could continue in the
future and could have a material adverse effect on our business,
financial condition, results of operations and cash
flows.
Net revenues from direct customers that accounted for 10% or more
of our total consolidated net revenues during the years ended
December 31, 2022, 2021 and 2020 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
2021 |
|
2020 |
AmerisourceBergen Corporation |
35 |
% |
|
36 |
% |
|
33 |
% |
McKesson Corporation |
26 |
% |
|
32 |
% |
|
27 |
% |
Cardinal Health, Inc. |
20 |
% |
|
22 |
% |
|
24 |
% |
Revenues from these customers are included within each of our
segments. Accordingly, our revenues, financial condition or results
of operations may also be unduly affected by fluctuations in the
buying or distribution patterns of these customers. These
fluctuations may result from seasonality, pricing, wholesaler
inventory objectives or other factors. In addition, if we were to
lose the business of any of these customers, or if any were to fail
to pay us on a timely basis, it could have a material adverse
effect on our business, financial condition, results of operations
and cash flows.
We are currently dependent on outside manufacturers for the
manufacture of a significant amount of our products; therefore, we
have and expect to continue to have limited control of the
manufacturing process and related costs. Certain of our
manufacturers currently constitute the sole source of one or more
of our products.
Third-party manufacturers currently manufacture a significant
amount of our products pursuant to contractual arrangements.
Certain of our manufacturers currently constitute the sole source
of our products. For example, Teikoku Seiyaku Co., Ltd. is our sole
source of our lidocaine patch 5% product. As a result of the sale
of certain of our manufacturing facilities and related assets, as
further discussed in Note 4. Discontinued Operations and Asset
Sales in the Consolidated Financial Statements included in Part IV,
Item 15 of this report, our reliance on third-party manufacturers
has increased and we are working with new third-party manufacturers
that we have not worked with before. Because of contractual
restraints and the lead-time necessary to obtain FDA approval
and/or DEA registration of a new manufacturer, there are no readily
accessible alternatives to these manufacturers and replacement of
any of these manufacturers may be expensive and time consuming and
may cause interruptions in our supply of products to customers. Our
business and financial viability are dependent on these third-party
manufacturers for continued manufacture of our products, the
continued regulatory compliance of these manufacturers and the
strength, validity and terms of our various contracts with these
manufacturers. Any interruption or failure by these manufacturers
to meet their obligations pursuant to various agreements with us on
schedule or in accordance with our expectations, or any termination
by these manufacturers of our supply arrangements, which, in each
case, could be the result of one or many factors outside of our
control, could delay or prevent our ability to achieve sales
expectations, cause interruptions in our supply of products to
customers, cause us to incur failure-to-supply penalties, disrupt
our operations or cause reputational harm to our company, any or
all of which could have a material adverse effect on our business,
financial condition, results of operations and cash
flows.
We are dependent on third parties to supply raw materials used in
our products and to provide services for certain core aspects of
our business. Any interruption, mistake or failure by suppliers,
distributors and collaboration partners to meet their obligations
pursuant to various agreements with us could have a material
adverse effect on our business, financial condition, results of
operations and cash flows.
We rely on third parties to supply raw materials used in our
products. In addition, we rely on third-party suppliers,
distributors and collaboration partners to provide services for
certain core aspects of our business, including manufacturing,
packaging, shipping, warehousing, distribution, customer service
support, medical affairs services, clinical studies, sales and
other technical and financial services. Third-party suppliers and
contractors are subject to FDA and very often DEA requirements. Our
business and financial viability are dependent on the continued
supply of goods and services by these third parties, the regulatory
compliance of these third parties and on the strength, validity and
terms of our various contracts with these third parties. Any
interruption, mistake or failure by our suppliers, distributors and
collaboration partners to meet their obligations pursuant to
various agreements with us on schedule or in accordance with our
expectations, or any termination by these third parties of their
arrangements with us, which, in each case, could be the result of
one or many factors outside of our control, could delay or prevent
the development, approval, manufacture or commercialization of our
products, result in non-compliance with applicable laws and
regulations, cause us to incur failure-to-supply penalties, disrupt
our operations or cause reputational harm to our company, any or
all of which could have a material adverse effect on our business,
financial condition, results of operations and cash flows. We may
also be unsuccessful in resolving any underlying issues with such
suppliers, distributors and partners or replacing them within a
reasonable time and on commercially reasonable terms.
APIs imported into the European Union (EU) must be certified as
complying with the good manufacturing practice standards
established by the EU, as stipulated by the International
Conference for Harmonization. These regulations place the
certification requirement on the regulatory bodies of the exporting
countries. Accordingly, the national regulatory authorities of each
exporting country must: (i) ensure that all manufacturing plants
within their borders that export API into the EU comply with EU
manufacturing standards and (ii) for each API exported, present a
written document confirming that the exporting plant conforms to EU
manufacturing standards. The imposition of this responsibility on
the governments of the nations exporting API may cause a shortage
of API necessary to manufacture our products, as certain
governments may not be willing or able to comply with the
regulation in a timely fashion, or at all. A shortage in API may
cause us to cease manufacturing of certain products or to incur
costs and delays to qualify other suppliers to substitute for those
API manufacturers unable to export. This could have a material
adverse effect on our business, financial condition, results of
operations and cash flows.
We are dependent on third parties to provide us with various
estimates as a basis for our financial reporting. While we
undertake certain procedures to review the reasonableness of this
information, we cannot obtain absolute assurance over the
accounting methods and controls over the information provided to us
by third parties. As a result, we are at risk of them providing us
with erroneous data which could impact our reporting. Refer to
“CRITICAL ACCOUNTING ESTIMATES” in Part II, Item 7 of this report
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations” for information about our most significant
accounting estimates.
We have limited experience in manufacturing biologic products and
may encounter difficulties in our manufacturing processes, which
could materially adversely affect our results of operations or
delay or disrupt the manufacture and supply of those products which
are reliant upon our manufacturing operations.
The manufacture of biologic products requires significant expertise
and capital investment. Although we manufacture CCH, which is
included in XIAFLEX®,
in our Horsham, Pennsylvania facility, we have limited experience
in manufacturing biologic products. Biologics such as CCH require
processing steps that are highly complex and generally more
difficult than those required for most chemical pharmaceuticals. In
addition, TESTOPEL®
is manufactured using a unique, proprietary process. If the
manufacturing processes are disrupted at the facilities where our
biologic products are manufactured, it may be difficult to find
alternate manufacturing sites. We may encounter difficulties with
the manufacture of CCH and the active ingredient of
TESTOPEL®,
which could delay, disrupt or halt our manufacture of such products
and/or product candidates, result in supply disruption or delay,
product recalls or product liability claims, require write-offs or
otherwise have a material adverse effect on our business, financial
condition, results of operations and cash flows.
The DEA limits the availability of the active ingredients used in
many of our products as well as the production of these products,
and, as a result, our procurement and production quotas may not be
sufficient to meet commercial demand or complete clinical
trials.
The DEA limits the availability of the active ingredients used in
many of our products and sets a quota on the production of these
products. We, or our contract manufacturing organizations, must
annually apply to the DEA for procurement and production quotas in
order to obtain these substances and produce our products. In
addition, H.R. 6 amended the CSA with respect to quotas by
requiring the DEA to estimate the amount and impact of diversion
(including overdose deaths and abuse and overall public health
impact) of fentanyl, oxycodone, hydrocodone, oxymorphone or
hydromorphone and to make appropriate quota reductions. As a
result, our procurement and production quotas may not be sufficient
to meet commercial demand or to complete clinical trials. Moreover,
the DEA may adjust these quotas from time to time during the year.
Any delay or refusal by the DEA in establishing our quotas, or
modification of our quotas, for controlled substances could delay
or result in the stoppage of clinical trials or product launches,
or could cause trade inventory disruptions for those products that
have already been launched, which could have a material adverse
effect on our business, financial condition, results of operations
and cash flows.
If we are unable to retain our key personnel and continue to
attract additional professional staff, we may be unable to maintain
or expand our business.
Because of the specialized scientific nature of our business, our
ability to develop products and to compete with our current and
future competitors will remain highly dependent, in large part,
upon our ability to attract and retain qualified scientific,
technical and commercial personnel. The loss of key scientific,
technical and commercial personnel or the failure to recruit
additional key scientific, technical and commercial personnel could
have a material adverse effect on our business, financial
condition, results of operations and cash flows. While we have
consulting agreements with certain key individuals and institutions
and have employment agreements with our key executives, we may be
unsuccessful in retaining personnel or their services under
existing agreements. There is intense competition for qualified
personnel in our industry, and we may be unable to continue to
attract and retain the qualified personnel necessary for the
successful development of our business. These risks have been and
are likely to continue to be exacerbated by our ongoing bankruptcy
proceedings.
Our operations could be disrupted if our information systems fail,
if we are unsuccessful in implementing necessary upgrades or if we
are subject to cyber-attacks.
Our business depends on the efficient and uninterrupted operation
of our computer and communications systems and networks, hardware
and software systems and our other information technology. As such,
we continuously invest financial and other resources to maintain,
enhance, further develop, replace or add to our information
technology infrastructure. Such efforts carry risks such as cost
overruns, project delays and business interruptions, which could
have a material adverse effect on our business, financial
condition, results of operations and cash flows. Additionally,
these measures are not guaranteed to protect against all
cybersecurity incidents.
In the ordinary course of our business, we collect and maintain
information, which includes confidential, proprietary and personal
information regarding our customers and employees, in digital form.
Data maintained in digital form is subject to risk of
cyber-attacks, which are increasing in frequency and sophistication
and are made by groups and individuals with a wide range of motives
and expertise, including criminal groups, “hackers” and others.
Cyber-attacks could include the deployment of harmful malware,
viruses, worms, denial-of-service attacks, ransomware, phishing,
social engineering and other means to affect service reliability
and threaten data confidentiality, integrity and availability.
Despite our efforts to monitor and safeguard our systems to prevent
data compromise, the possibility of a future data compromise cannot
be eliminated entirely, and risks associated with intrusion,
tampering and theft remain. If our systems were to fail or we are
unable to successfully expand the capacity of these systems, or we
are unable to integrate new technologies into our existing systems,
our operations and financial results could suffer.
We also have outsourced certain elements and functions of our
operations, including elements of our information technology
infrastructure, to third parties, some of which operate outside the
U.S. As a result, we manage many independent vendor relationships
with third parties who may or could have access to our confidential
information. The size and complexity of our and our vendors’
systems make such systems potentially vulnerable to service
interruptions and to security breaches from inadvertent or
intentional actions by our employees, our partners, our vendors or
other third parties, or from attacks by malicious third
parties.
The Company and its vendors’ information technology operations are
spread across multiple, sometimes inconsistent platforms, which
pose difficulties in maintaining data integrity across systems. The
ever-increasing use and evolution of technology, including
cloud-based computing, creates opportunities for the unintentional
or improper dissemination or destruction of confidential
information stored in the Company’s systems.
Any breach of our security measures or the accidental loss,
inadvertent disclosure, unapproved dissemination, misappropriation
or misuse of trade secrets, proprietary information or other
confidential information, whether as a result of theft, fraud,
cyber-attacks, hacking, trickery or other forms of deception or any
other cause, could enable others to produce competing products, use
our proprietary technology or information and/or adversely affect
our business position. Further, any such interruption, security
breach, loss or disclosure of confidential, proprietary or personal
information could result in financial, legal, business and
reputational harm to our company and could have a material adverse
effect on our business, financial condition, results of operations
and cash flows.
The risks related to our global operations may adversely impact our
revenues, results of operations and financial
condition.
In 2022, approximately 4% of our total revenues were from customers
outside the U.S. Some of these sales were to governmental entities
and other organizations with extended payment terms. Conducting
business internationally, including the sourcing, manufacturing,
development, sale and distribution of our products and services
across international borders, subjects us to extensive U.S. and
foreign governmental trade regulations, such as various
anti-bribery laws, including the U.S. Foreign Corrupt Practices Act
(FCPA), export control laws, customs and import laws and
anti-boycott laws. The FCPA and similar anti-corruption laws in
other jurisdictions generally prohibit companies and their
intermediaries from making improper payments to government
officials for the purpose of obtaining or retaining business. We
cannot provide assurance that our internal controls and procedures
will always protect us from criminal acts committed by our
employees or third parties with whom we work. If we are found
liable for violations of the FCPA or other applicable laws and
regulations, either due to our own acts or out of inadvertence, or
due to the acts or inadvertence of others, we could suffer
significant criminal, civil and administrative penalties,
including, but not limited to, imprisonment of individuals, fines,
denial of export privileges, seizure of shipments, restrictions on
certain business activities and exclusion or debarment from
government contracting, as well as reputational harm. Also, the
failure to comply with applicable legal and regulatory obligations
could result in the disruption of our shipping and sales
activities.
In addition, some countries where we source, develop, manufacture
or sell products are subject to political, economic and/or social
instability. Our non-U.S. R&D, manufacturing and sales
operations expose us and our employees, representatives, agents and
distributors to risks inherent in operating in non-U.S.
jurisdictions. For example, we currently perform certain R&D
and manufacturing operations in India and plan to expand these
operations, including through investment in our manufacturing site
in Indore. A disruption in our Indian operations could have a
material adverse effect on our business, financial condition,
results of operations and cash flows. These risks include, among
others:
•the
imposition of additional U.S. and non-U.S. governmental controls or
regulations;
•the
imposition of costly and lengthy new export licensing
requirements;
•the
imposition of U.S. and/or international sanctions against a
country, company, person or entity with whom we do business that
would restrict or prohibit continued business with the sanctioned
country, company, person or entity;
•economic
or political instability or disruptions, including local or
regional instability, civil unrest or hostilities, rioting,
military activity, terror attacks or armed
hostilities;
•disruptions
due to natural disasters, earthquakes, cyclones, tornados,
typhoons, flooding, droughts, landslides, geological events or
severe weather events which may be exacerbated by the effects of
climate change;
•disruptions
related to COVID-19 or other pandemics;
•changes
in duties and tariffs, license obligations and other non-tariff
barriers to trade;
•the
imposition of new trade restrictions including foreign exchange
controls;
•supply
disruptions and increases in energy and transportation
costs;
•the
imposition of restrictions on the activities of foreign agents,
representatives and distributors;
•changes
in global tax laws and/or the imposition by tax authorities of
significant fines, penalties and additional taxes;
•pricing
pressure that we may experience internationally;
•fluctuations
in foreign currency exchange rates;
•competition
from local, regional and international competitors;
•difficulties
and costs of staffing and managing foreign operations, including
cultural differences and additional employment regulations, union
workforce negotiations and potential disputes in the jurisdictions
in which we operate;
•difficulties
and costs of obtaining and maintaining labs, R&D sites,
manufacturing facilities and other locations in which we
operate;
•COVID‐19
or other outbreaks, epidemics or pandemics as described in the risk
factor “Widespread health problems, including the recent global
coronavirus, could materially and adversely affect our business”
set forth in this report;
•laws
and business practices favoring local companies;
•difficulties
in enforcing or defending intellectual property rights;
and
•exposure
to different legal and political standards due to our conducting
business in foreign countries.
We also face the risk that some of our competitors have more
experience with operations in such countries or with international
operations generally and may be able to manage unexpected crises
more easily. Furthermore, whether due to language, cultural or
other differences, public and other statements that we make may be
misinterpreted, misconstrued or taken out of context in different
jurisdictions. Moreover, the internal political stability of, or
the relationship between, any country or countries where we conduct
business operations may deteriorate, including relationships
between the U.S. and other countries. Changes in other countries’
economic conditions, product pricing, political stability or the
state of relations between any such countries are difficult to
predict and could adversely affect our operations, payment and
credit terms and our ability to collect foreign receivables. Any
such changes could lead to a decline in our profitability and/or
adversely impact our ability to do business. Any meaningful
deterioration of the political or social stability in and/or
diplomatic relations between any countries in which we or our
partners and suppliers do business could have a material adverse
effect on our business, financial condition, results of operations
and cash flows. A substantial slowdown of the global economy, or
major national economies, could negatively affect growth in the
markets in which we operate. Such a slowdown could result in
national governments making significant cuts to their public
spending, including national healthcare budgets, or reducing the
level of reimbursement they are willing and able to provide to us
for our products and, as a result, adversely affect our revenues,
financial condition or results of operations. We have little
influence over these factors and changes could have a material
adverse effect on our business, financial condition, results of
operations and cash flows.
We cannot provide assurance that one or more of these factors will
not harm our business. Risks associated with our non-U.S. R&D,
manufacturing or sales could have a material adverse effect on our
business, financial condition, results of operations and cash
flows.
Widespread health problems, including the recent global
coronavirus, could materially and adversely affect our
business.
Public health outbreaks, epidemics or pandemics, such as the
coronavirus, could materially and adversely impact our business.
For example, the COVID-19 pandemic has resulted in global business
and economic disruption and extreme volatility in the financial
markets as many jurisdictions have placed restrictions on travel
and non-essential business operations and implemented social
distancing, shelter-in-place, quarantine and other similar measures
for their residents to contain the spread of the virus. In response
to these public health directives and orders and in order to
provide for the well-being of our workforce around the globe while
continuing to safely produce products upon which patients and their
healthcare providers rely, we implemented alternative working
practices and work-from-home requirements for appropriate
employees, inclusive of our Senior Executive Team. We limited
international and domestic travel, increased our already-thorough
cleaning protocols throughout our facilities and prohibited
non-essential visitors from our sites. We also implemented
temperature screenings, health questionnaires, social distancing,
modified schedules, shift rotation and/or other similar policies at
our manufacturing facilities. We have since begun to adjust certain
of these practices, reflecting the evolved guidelines from health
and other governmental authorities. The effects of COVID-19,
including these public health directives and orders and our
policies, have had an impact on our business and may in the future
materially disrupt our business (including our manufacturing and
supply chain operations by significantly reducing our output),
negatively impact our productivity and delay our product
development programs. COVID-19 contributed to some delays in the
completion of our facility in Indore, including delays related to
construction and FDA inspections.
Widespread health problems may have significant impacts on
third-party arrangements, including those with our manufacturing,
supply chain and distribution partners, information technology and
other service providers and business partners. For example, there
may be significant disruptions in the ability of any or all of
these third-party providers to meet their obligations to us on a
timely basis, or at all, which may be caused by their own financial
or operational difficulties, including any closures of their
facilities pursuant to a governmental order or otherwise.
Additionally, the supply of goods and services worldwide may be
adversely affected as a result of increased pressure on global
logistics network infrastructure and capacity or otherwise, which
could result in interruptions of supply and/or increased costs
based upon inability to obtain, and/or delayed deliveries of, raw
materials and/or critical supplies necessary to continue our
manufacturing activities and/or those of our third-party suppliers.
See the risk factor “Supply chain and other manufacturing
disruptions could negatively impact our businesses” for more
information.
Due to these disruptions and other factors, including changes in
our workforce availability and increased demand for some of our
critical care products, our ability to meet our obligations to
third-party distribution partners may be negatively impacted. We
have delivered, and in the future we or our third-party providers
may deliver, notices of the occurrence of
force majeure
or similar events under certain of our third-party contracts, which
could result in prolonged commercial disputes and ultimately legal
proceedings to enforce contractual performance and/or recover
losses. Any such occurrences could result in significant management
distraction and use of resources and, in the event of an adverse
judgment, could result in significant cash payments. Further, the
publicity of any such dispute could harm our reputation and make
the negotiation of any replacement contracts more difficult and
costly, thereby prolonging the effects of any resulting disruption
in our operations. Such disruptions could be acute with respect to
certain of our raw material suppliers where we may not have readily
accessible alternatives or alternatives may take longer to source
than usual. While we attempt, when possible, to mitigate our raw
material supply risks through stock management and alternative
sourcing strategies, some raw materials are only available from one
source. Any of these disruptions could harm our ability to meet
consumer demand, including any increase in demand for any of our
products, including our critical care products used during a
pandemic.
We have experienced, and expect to continue to experience, changes
in customer demand as the COVID-19 pandemic continues to evolve,
which are difficult to predict. For example, certain of our
products that are physician administered, including
XIAFLEX®,
generally experienced decreased sales volumes during the COVID-19
pandemic due to reduced physician office activity and patient
office visits because of the COVID-19 pandemic. While these
products have generally been recovering since early 2020, they have
at times continued to be impacted by COVID-19-related and, more
recently, other market conditions for specialty product
office-based procedures, including medical and administrative staff
shortages in physicians’ offices, reduced physician office activity
and lower numbers of in-person patient office visits. The pandemic
and other market conditions also created a high backlog of demand
for non-elective urology procedures, which has in certain cases
reduced the utilization of XIAFLEX®
by healthcare providers. Additionally, we believe that concerns by
healthcare providers regarding economic uncertainty have impacted
purchasing patterns of XIAFLEX®.
Economic crises and increases in unemployment rates resulting from
widespread health problems have the potential to significantly
reduce individual disposable income, result in lower levels of
healthcare insurance coverage and/or depress consumer confidence,
any of which could limit the ability of some consumers to purchase
certain pharmaceutical products and reduce consumer spend on
certain medical procedures in both the short- and medium-term. We
are unable to predict the impact that widespread health problems
may have going forward on the business, results of operations or
financial position of any of our major customers, which could
impact each customer to varying degrees and at different times and
could ultimately impact our own financial performance. Certain of
our competitors may also be better equipped to weather the impact
of widespread health problems both domestically and abroad and
better able to address changes in customer demand.
Additionally, our product development programs have been, and may
continue to be, adversely affected by epidemics, pandemics and
other widespread health problems. Public health directives may
cause delays, increased costs and additional challenges in our
product development programs, including obtaining adequate patient
enrollment and successfully bringing product candidates to market.
In addition, we may face additional challenges receiving regulatory
approvals as previously scheduled dates or anticipated deadlines
for action by the FDA on our applications and products in
development could be subject to delays beyond our
control.
Widespread health problems could increase the magnitude of many of
the other risks described herein and have other adverse effects on
our operations that we are not able to predict. For example, global
economic disruptions and volatility in the financial markets could
further depress our ability to obtain or renew insurance on
satisfactory terms or at all. Further, we may be required to delay
or limit our internal strategies in the short- and medium-term by,
for example, redirecting significant resources and management
attention away from implementing our strategic priorities or
executing opportunistic corporate development
transactions.
Any of the risks described herein could also apply in the event of
future outbreaks. COVID-19 and other similar outbreaks, epidemics
or pandemics could have a material adverse effect on our business,
financial condition, results of operations and cash flows and could
cause significant volatility in the trading prices of our
securities.
Supply chain and other manufacturing disruptions could negatively
impact our businesses.
We have experienced increased pressure and infrastructure capacity
challenges to our global logistics network. Materials, equipment
and labor shortages, shipping, logistics and other delays and other
supply chain and manufacturing disruptions, whether due to the
evolving effects of the COVID-19 pandemic or otherwise, continue to
make it more difficult and costly for us to obtain raw materials,
supplies or services from third parties, to manufacture our own
products and to pursue clinical development activities. Economic or
political instability or disruptions, such as the conflict in
Ukraine, could negatively affect our supply chain or increase our
costs. If these types of events or disruptions continue to occur,
they could have a material adverse effect on our business,
financial condition, results of operations and cash
flows.
We may be impacted by the effects of climate change and encounter
challenges implementing sustainability-related
measures.
Climate change resulting from increased concentrations of carbon
dioxide and other greenhouse gases in the atmosphere could present
risks to our operations, including an adverse impact on global
temperatures, weather patterns and the frequency and severity of
extreme weather and natural disasters. Severe weather events,
natural disasters and other disruptions, such as earthquakes,
geological events, hurricanes, cyclones, tornados, typhoons,
flooding, droughts, landslides and wildfires, may pose physical
risks to our facilities and disrupt the operation of our supply
chain. The impacts of the changing climate on water resources may
result in water scarcity, limiting our ability to access sufficient
high-quality water in certain locations, which may increase
operational costs.
Concern over climate change may also result in new or additional
legal or regulatory requirements designed to reduce greenhouse gas
emissions and/or mitigate the effects of climate change on the
environment. If such laws or regulations are more stringent than
current legal or regulatory obligations, we may experience
disruption in, or an increase in the costs associated with,
sourcing, manufacturing and distributing our products, which could
have a material adverse effect on our business, financial
condition, results of operations and cash flows. We may be unable
to successfully implement sustainability-related measures pursuant
to our ESG strategy or to adequately respond to increased
stakeholder focus on ESG matters including climate
change.
Risks Related to Bankruptcy and Our Ordinary Shares
We are subject to risks and uncertainties associated with the
Chapter 11 Cases.
The Chapter 11 Cases could have a material adverse effect on our
business, financial condition, results of operations and cash
flows. So long as the Chapter 11 Cases continue, our senior
management may be required to spend a significant amount of time
and effort dealing with bankruptcy proceedings instead of focusing
on our business operations. The bankruptcy proceedings also may
make it more difficult to retain management and the key personnel
necessary to the success and growth of our business. In addition,
during the period of time we are involved in the Chapter 11 Cases,
our customers and suppliers may lose confidence in our ability to
restructure our business and may seek to establish alternative
commercial relationships.
Other significant risks associated with the Chapter 11 Cases that
could have a material adverse effect on our business, financial
condition, results of operations and cash flows include or relate
to the following, among others:
•our
ability to obtain approval from the Bankruptcy Court (as defined
below) with respect to motions or other requests made to the
Bankruptcy Court in the Chapter 11 Cases, including maintaining
control as debtors-in-possession;
•our
ability to consummate the Sale or another restructuring
transaction, including in light of the currently outstanding
objections relating to the Sale and proposed marketing process
filed by certain stakeholders in the Chapter 11 Cases;
•the
effects of the filing of the Chapter 11 Cases on our business and
the interests of various constituents, including our
shareholders;
•the
high costs of the Chapter 11 Cases and related fees;
•our
ability to maintain relationships with suppliers, customers,
employees and other third parties as a result of the Chapter 11
Cases;
•Bankruptcy
Court rulings in the Chapter 11 Cases as well as the outcome of
other pending litigation and the outcome of the Chapter 11 Cases in
general;
•the
length of time that we will operate with chapter 11 protection and
any resulting risk that we will not satisfy the milestones
specified in the RSA and in our agreement with our secured lenders
with respect to our use of their cash collateral;
•the
availability of operating capital during the pendency of the
Chapter 11 Cases, including any event that could terminate our
right to continued access to the cash collateral of our lenders to
use as operating capital;
•third-party
motions in the Chapter 11 Cases, which may interfere with our
ability to consummate the Sale or another restructuring
transaction;
•the
impact on our business following the Sale in light of possible
changes in our business and its prospects;
•the
adequacy of our cash balances at the time of the Sale and our
projected exit from the Chapter 11 Cases; and
•our
ability to continue as a going concern.
Because of the risks and uncertainties associated with the Chapter
11 Cases, we may not be able to accurately predict or quantify the
ultimate impact the Chapter 11 Cases may have on our business,
financial condition, results of operations and cash flows, nor can
we accurately predict the ultimate impact the Chapter 11 Cases may
have on our corporate or capital structure.
Delays in the Chapter 11 Cases may increase the risks of our being
unable to consummate the Sale and increase our costs associated
with the Chapter 11 Cases.
The RSA contemplates the consummation of the Sale, but there can be
no assurance that we will be able to consummate the Sale. A
prolonged chapter 11 proceeding could adversely affect our
relationships with customers, suppliers and employees, among other
parties, which in turn could have a material adverse effect on our
business, financial condition, results of operations and cash
flows, as well as our ability to continue as a going concern. A
weakening of our business, financial condition, results of
operations and cash flows could adversely affect our ability to
implement the Sale (or any alternative restructuring transaction).
If we are unable to consummate the Sale (or an alternative
restructuring transaction), we may be forced to liquidate our
assets.
The RSA is subject to significant conditions and milestones that
may be difficult for us to satisfy.
There are certain material conditions we must satisfy under the
RSA, including the timely satisfaction of milestones in the Chapter
11 Cases, which include the consummation of the Sale. Our ability
to timely complete such milestones is subject to risks and
uncertainties, many of which are beyond our control. Failure to
meet such milestones could have a material adverse effect on our
business, financial condition, results of operations and cash
flows.
If the RSA is terminated, our ability to confirm and consummate the
Sale could be materially and adversely affected.
The RSA contains a number of termination events, upon the
occurrence of which certain parties to the RSA may terminate the
agreement. If the RSA is terminated as to all parties thereto, each
of the parties thereto will be released from its obligations in
accordance with the terms of the RSA. Such termination may result
in the loss of support for the Sale by the parties to the RSA,
which could adversely affect our ability to consummate the Sale. If
the Sale is not consummated, there can be no assurance that the
Chapter 11 Cases would not be converted to chapter 7 liquidation
cases or that an alternative restructuring transaction would be as
favorable to holders of claims against us as the Sale
transaction.
Even if the Sale or an alternative restructuring transaction is
consummated, we may not be able to achieve our stated goals or
continue as a going concern.
Even if the Sale or an alternative restructuring transaction is
consummated, we may continue to face a number of risks, such as
changes in economic conditions, changes in our industry, changes in
demand for our products and increasing expenses. Some of these
risks become more acute when cases under the Bankruptcy Code
continue for a protracted period without indication of how or when
the cases may be completed. As a result of these risks and others,
we cannot guarantee that the Sale or an alternative restructuring
transaction will achieve our stated goals or that our business will
be able to continue as a going concern.
Furthermore, even if our debts and other liabilities are reduced or
discharged through the chapter 11 process, we may need to raise
additional funds through public or private debt or equity financing
or other various means to fund our business after the completion of
the Chapter 11 Cases. Our access to additional financing may be
limited, if it is available at all. Therefore, adequate funds may
not be available when needed or may not be available on favorable
terms, or at all.
Our ability to prosecute the Chapter 11 Cases and consummate the
Sale may be contested by third parties with
litigation.
Certain of our creditors and other parties in interest may bring
litigation against us during the course of the Chapter 11 Cases,
the outcome of which is uncertain. Such litigation may prolong the
Chapter 11 Cases and may make it difficult for us to reach the
contractual milestones for the Chapter 11 Cases within the
timeframe set out in the RSA. Failure to meet such milestones could
have a material adverse effect on our business, financial
condition, results of operations and cash flows.
In certain instances, a chapter 11 case may be converted to a case
under chapter 7 of the Bankruptcy Code.
Upon a showing of cause, the Bankruptcy Court may convert the
Chapter 11 Cases to cases under chapter 7 of the Bankruptcy Code.
In such event, a chapter 7 trustee would be appointed or elected to
liquidate our assets for distribution in accordance with the
priorities established by the Bankruptcy Code. We believe that
liquidation under chapter 7 would diminish recoveries for our
creditors because of: (i) the likelihood that the assets would have
to be sold or otherwise disposed of in a distressed fashion over a
short period of time rather than in a controlled manner and as a
going concern; (ii) additional administrative expenses involved in
the appointment of a chapter 7 trustee; and (iii) additional
expenses and claims, some of which would be entitled to priority,
that would be generated during the liquidation and from the
rejection of leases and other executory contracts in connection
with a cessation of operations.
Termination of our exclusive right to file a chapter 11 plan and
the exclusive right to solicit acceptances could result in other
parties in interest filing plans of reorganization, which could
have less favorable terms than under the Sale transaction or result
in significant litigation and expenses.
Following the commencement of the Chapter 11 Cases, we had the
exclusive right to file a chapter 11 plan through and including
December 14, 2022, and the exclusive right to solicit acceptances
of any such plan through February 13, 2023. Deadlines such as these
may be extended from time to time by the Bankruptcy Court for cause
as permitted by section 1121(d) of the Bankruptcy Code. It is also
possible that: (i) parties in interest could seek to shorten or
terminate such exclusive plan filing and solicitation periods “for
cause” (as permitted by section 1121(d) of the Bankruptcy Code) or
seek to oppose any requested extension or (ii) that such periods
could expire without extension.
On December 14, 2022, we filed a motion with the Bankruptcy Court
seeking extensions of our initial exclusive filing and solicitation
periods. Several parties in interest have filed objections to the
requested extensions. While certain of these objections have been
consensually resolved in principle, others remain outstanding. The
Bankruptcy Court hearing on the exclusivity extension motion has
been adjourned to an undetermined date, and in the interim, our
exclusive periods have been extended to March 20, 2023 and may be
subject to further extension based on when the hearing on the
exclusivity extension motion is scheduled.
If our exclusive filing and solicitation periods expire or are
terminated, other parties in interest will be permitted to file
plans of reorganization. There can be no assurances that recoveries
under any such plans would be more favorable to creditors than
under the Sale or an alternative restructuring transaction. In
addition, such plans of reorganization may entail significant
litigation and significantly increase the expenses of
administration of the Debtors’ cases, which could deplete creditor
recoveries. Furthermore, if the Bankruptcy Court does not extend
the Debtors’ exclusive periods, the Ad Hoc First Lien Group (as
defined below) could contend that such failure to obtain an
extension gives rise to a default under the Cash Collateral Order.
If the Ad Hoc First Lien Group seeks to terminate our use of cash
collateral, such action could have a material adverse effect on our
business, financial condition, results of operations and cash
flows.
As a result of the Chapter 11 Cases, our historical financial
information may not be indicative of our future performance, which
may be volatile.
During the Chapter 11 Cases, we expect our financial results to
continue to be volatile as restructuring activities and expenses,
potential contract terminations and/or rejections and claims
assessments significantly impact our Consolidated Financial
Statements. As a result, our historic financial performance is
likely not indicative of our financial performance after the
Petition Date. In addition, if we emerge from chapter 11, the
amounts reported in subsequent periods may materially change
relative to historic amounts. We also may be required to adopt
fresh start accounting, in which case our assets and liabilities
would generally be recorded at fair value as of the fresh start
reporting date, which may differ materially from the recorded
values of assets and liabilities currently included in our
Consolidated Balance Sheets. Our financial results after the
application of fresh start accounting could also differ
significantly from historic trends.
We may be subject to claims that will not be discharged in the
Chapter 11 Cases, which could have a material adverse effect on our
business, financial condition, results of operations and cash
flows.
With certain exceptions, the Bankruptcy Code provides that the
confirmation of a plan of reorganization generally discharges a
debtor from claims arising prior to consummation of a plan of
reorganization. Any claims not ultimately discharged pursuant to a
plan of reorganization could be asserted against the reorganized
entities and could have a material adverse effect on our business,
financial condition, results of operations and cash flows. In
addition, if we do not pursue a plan of reorganization following
consummation of the Sale, there is a risk that claims against us
will not be discharged upon our exit from chapter 11.
If we consummate the Sale with the Stalking Horse Bidder, we may
not have sufficient liquidity to implement an orderly wind-down
process.
The RSA contemplates a marketing process and auction that will be
conducted under the supervision of the Bankruptcy Court. The
purchaser pursuant to the auction shall be responsible for, among
other things, providing cash for the Wind-Down Amount (as defined
below) to fund an orderly wind down process, as further discussed
in Note 2. Bankruptcy Proceedings in the Consolidated Financial
Statements included in Part IV, Item 15 of this report. The
Wind-Down Amount relies on certain assumptions, including a
nine-month wind-down process. It also reflects an estimate of
anticipated costs to fund various items, such as director fees,
professional fees, liquidation proceedings in non-U.S.
jurisdictions and other administrative expenses arising after
consummation of the Sale. However, there is no guarantee that the
assumptions or estimates taken into account in calculating the
Wind-Down Amount will result in the provision of sufficient funds
to implement an orderly wind-down process.
The pursuit of the Chapter 11 Cases has consumed, and will continue
to consume, a substantial portion of the time and attention of our
management, which could have a material adverse effect on our
business, financial condition, results of operations and cash
flows, and could cause us to experience increased levels of
employee attrition.
While the Chapter 11 Cases continue, our management will be
required to spend a significant amount of time and effort focusing
on the Chapter 11 Cases instead of focusing exclusively on our
business operations. This diversion of attention could have a
material adverse effect on our business, financial condition,
results of operations and cash flows, particularly if the Chapter
11 Cases are protracted.
Furthermore, during the pendency of the Chapter 11 Cases, we may
experience increased levels of employee attrition and our employees
may face considerable distraction and uncertainty. A prolonged
period of operating under Bankruptcy Court protection also may make
it more difficult to retain management and other key personnel
necessary to the success and growth of our business. A loss of key
personnel or material erosion of employee morale could adversely
affect our business and results of operations. The loss of services
of members of our senior management team could also impair our
ability to execute our strategy and implement operational
initiatives, which would be likely to have a material adverse
effect on our business, financial condition, results of operations
and cash flows. In addition, the longer the Chapter 11 Cases
continue, the more likely it is that vendors and employees will
lose confidence in our ability to reorganize our business
successfully.
Our current operations and future growth may require significant
additional capital, and the amount and terms of our indebtedness
could impair our ability to fund our capital requirements. Our
current sources of financing may be insufficient to fund our cash
requirements through emergence from bankruptcy.
Our business requires substantial capital. We may require
additional capital in the event of growth opportunities,
unanticipated maintenance requirements or significant departures
from our current business plan. Additional financing may not be
available on a timely basis or on terms acceptable to us, or at
all.
Failure to obtain additional financing, should the need for it
develop, could impair our ability to fund capital expenditure
requirements and meet debt service requirements and could have a
material adverse effect on our business, financial condition,
results of operations and cash flows. Further, for the duration of
the Chapter 11 Cases, we will be subject to various risks,
including but not limited to: (i) the inability to maintain or
obtain sufficient financing sources for operations or to fund the
Chapter 11 Cases and meet future obligations and (ii) increased
legal and/or professional costs associated with the Chapter 11
Cases and our reorganization.
We may be unable to comply with restrictions imposed by the Cash
Collateral Order.
The Cash Collateral Order imposes a number of restrictions on us.
For example, the Cash Collateral Order requires the Debtors to
maintain at least $600.0 million of “liquidity,” calculated at
the end of each week as unrestricted cash and cash equivalents plus
certain specified amounts of restricted cash associated with the
TLC Agreement (as defined below). The Cash Collateral Order also
requires compliance with variance covenants that compare actual
operating disbursements and receipts and capital expenditures to
the budgeted amounts set forth in the cash collateral budgets
delivered thereunder from time to time pursuant to the terms of the
Cash Collateral Order. The Ad Hoc First Lien Group may also contend
that the Cash Collateral Order requires the Debtors to obtain
extensions to our exclusive plan filing and solicitation periods,
as described in more detail herein. Our ability to comply with
these provisions may be affected by events beyond our control and
our failure to comply could result in an event of default under the
Cash Collateral Order, which could have a material adverse effect
on our business, financial condition, results of operations and
cash flows.
Aspects of the Chapter 11 Cases limit the flexibility of our
management team in running our business.
While we operate our business under supervision by the Bankruptcy
Court, we are required to obtain approval by the Bankruptcy Court,
and in some cases certain other parties, prior to engaging in
activities or transactions outside the ordinary course of business.
Bankruptcy Court approval of non-ordinary course activities entails
preparation and filing of appropriate motions with the Bankruptcy
Court, negotiation with various parties in interest and one or more
hearings. Parties in interest may be heard at any Bankruptcy Court
hearing and may raise objections with respect to these motions.
This process may delay major transactions and limit our ability to
respond quickly to opportunities and events in the marketplace.
Furthermore, in the event the Bankruptcy Court does not approve a
proposed activity or transaction, we would be prevented from
engaging in such activities or transactions, even if we believed
they would be beneficial. Delays in receiving approvals or failures
to receive approvals could have a material adverse effect on our
business, financial condition, results of operations and cash
flows.
In addition, as noted above, the Cash Collateral Order imposes a
number of restrictions on us that may limit the flexibility of our
management team in running our business.
We also may become subject to operating covenants that apply to
substantially all of our business under the purchase and sale
agreement that we anticipate entering into in connection with the
Sale. These covenants may require us to operate in the ordinary
course of business, to refrain from taking certain enumerated
actions and to affirmatively take other enumerated actions. Such
covenants may limit the flexibility of our management to respond to
various events and circumstances that may arise from time to time,
including as a result of the Chapter 11 Cases. If those covenants
apply to our business, there can be no assurances that we will be
able to obtain appropriate waivers from such covenants as may be
necessary or advisable, which could have a material adverse effect
on our business, financial condition, results of operations and
cash flows.
The trading prices of our securities have been volatile, and
investments in our securities could decline in value.
The market prices for securities of Endo, and of pharmaceutical
companies in general, have been highly volatile and may continue to
be highly volatile in the future. For example, in 2022, our
ordinary shares were quoted at prices between approximately $0.06
and $3.98 per share. The following factors, in addition to other
risk factors described in this section, may have caused and may in
the future cause the market value of our securities to
fluctuate:
•Developments
related to our bankruptcy proceedings and certain related
transactions;
•FDA
approval or disapproval of any of the drug applications we have
submitted;
•the
success or failure of our clinical trials;
•the
success or failure of our ESG strategy and our ability to respond
to increased stakeholder focus on ESG matters including climate
change;
•new
data or new analyses of older data that raise potential safety or
effectiveness issues concerning our approved products;
•product
recalls or withdrawals;
•competitors
announcing technological innovations or new commercial
products;
•introduction
of generic, compounded or other substitutes for our products,
including the filing of ANDAs with respect to generic versions of
our branded products;
•developments
concerning our or others’ proprietary rights, including
patents;
•competitors’
publicity regarding actual or potential products under development
or other activities affecting our competitors or the industry in
general;
•regulatory
developments in the U.S. and foreign countries, or announcements
relating to these matters;
•period-to-period
fluctuations in our financial results;
•new
legislation, regulation, administrative guidance or executive
orders, or changes in interpretation of existing legislation,
regulation, administrative guidance or executive orders, including
by virtue of new judicial decisions, that could affect the
development, sale or pricing of pharmaceutical products, the number
of individuals with access to affordable healthcare, the taxes we
pay and/or other factors;
•a
determination by a regulatory agency that we are engaging in or
have engaged in inappropriate sales or marketing activities,
including promoting off-label uses of our products;
•social
and political pressure to lower the cost of pharmaceutical
products;
•social
and political scrutiny over increases in prices of shares of
pharmaceutical companies that are perceived to be caused by a
strategy of growth through acquisitions;
•litigation
against us or others;
•reports
of security analysts and rating agencies;
•judgments
or settlements or reports of settlement negotiations concerning
opioid-related litigation or claims; and
•changes
in the political landscape, regulatory environment and
international relations, including different policies that may be
pursued by the current U.S. presidential
administration.
We have no plans to pay regular dividends on our ordinary shares or
to conduct ordinary share repurchases.
We currently do not intend to pay any cash dividends in the
foreseeable future on our ordinary shares and our ability to do so
is restricted during the pendency of the Chapter 11 Cases.
Additionally, while our Board of Directors (the Board) has approved
a share buyback program (the 2015 Share Buyback Program), of which
there is approximately $2.3 billion available as of
December 31, 2022, we currently do not intend to conduct
ordinary share repurchases in the foreseeable future. Any
declaration and payment of future dividends to holders of ordinary
shares as well as any repurchase of our ordinary shares under the
2015 Share Buyback Program will be at the sole discretion of the
Board and will depend on many factors, including our financial
condition, earnings, capital requirements, level of indebtedness,
statutory and contractual restrictions applying to the payment of
both cash and property dividends or share repurchases (including
restrictions imposed by the Bankruptcy Code and related rules and
guidelines during the pendency of the Chapter 11 Cases) and other
considerations that the Board deems relevant. In addition, our
existing debt instruments restrict or prevent us from paying
dividends on our ordinary shares and conducting ordinary share
repurchases. Agreements governing any future indebtedness, in
addition to those governing our current indebtedness, may not
permit us to pay dividends on our ordinary shares or conduct
ordinary share repurchases.
Our business and operations could be negatively affected by
shareholder activism, which could cause us to incur significant
expenses, hinder execution of our business strategy and impact our
share price.
In recent years, shareholder activism involving corporate
governance, strategic direction and operations has become
increasingly prevalent. If we become the subject of such
shareholder activism, their demands may disrupt our business and
divert the attention of our management, employees and Board. Also,
we may incur substantial costs, including legal fees and other
expenses, related to such activist shareholder matters. Perceived
uncertainties resulting from such activist shareholder matters may
result in loss of potential business opportunities with our current
and potential customers and business partners, be exploited by our
competitors and make attracting and retaining qualified personnel
more difficult. In addition, such shareholder activism may cause
significant fluctuations in our share price based on temporary or
speculative market perceptions, uncertainties or other factors that
do not necessarily reflect the underlying fundamentals and
prospects of our business.
Our ordinary shares are quoted on the over-the-counter market, and
thus may have a limited market and lack of liquidity.
The delisting of our ordinary shares from the Nasdaq Global Select
Market could result in significantly lower trading volumes and
reduced liquidity for investors seeking to buy or sell ordinary
shares. Our ordinary shares are currently quoted on the
over-the-counter market, which may have an unfavorable impact on
our share price and liquidity. The over-the-counter market is a
significantly more limited market than the Nasdaq Global Select
Market. The quotation of our shares on the over-the-counter market
may result in a less liquid market available for existing and
potential shareholders to trade our ordinary shares, could further
depress the trading price of our ordinary shares and could have a
long-term adverse impact on our ability to raise capital in the
future. There can be no assurance that there will be an active
market for our ordinary shares, either now or in the future, or
that shareholders will be able to liquidate their investments or
the price at which they may be liquidated. Accordingly, we urge
extreme caution with respect to existing and future investments in
our equity and other securities.
We believe it is likely that our ordinary shares will continue to
decrease in value as a result of the Chapter 11 Cases.
We have a significant amount of indebtedness that is senior to our
ordinary shares in our capital structure. Our existing ordinary
shares have substantially decreased in value leading up to and
during the Chapter 11 Cases. The proposed Sale transaction to the
Stalking Horse Bidder does not contemplate the distribution of any
value with respect to our shares, and we do not foresee a market
for our existing ordinary shares after any emergence from the
Chapter 11 Cases. Accordingly, any trading in our ordinary shares
during the pendency of the Chapter 11 Cases is highly speculative
and poses substantial risks to purchasers of our ordinary
shares.
Litigation and Liability Related Risks
We are regularly the subject of material legal proceedings,
including significant lawsuits, product liability claims,
governmental investigations and product recalls, any of which could
have a material adverse effect on our company.
Our business exposes us to significant potential risks from
lawsuits and other material legal proceedings including, but not
limited to, matters associated with the testing, manufacturing,
marketing, sale and use of our products. Some plaintiffs have
received substantial damage awards against or entered into
significant settlements with healthcare companies based upon
various legal theories including, without limitation, claims for
injuries allegedly caused by the use of their products. A number of
legal proceedings that we are currently subject to have the
potential to result in significant monetary and other damages for
which we could be liable. As further described herein, some of
these cases are at advanced procedural stages and are scheduled for
trial in the near future. We have been, are currently and expect to
continue to be subject to various lawsuits, product liability
claims, other material legal proceedings, governmental
investigations and/or product recalls, any of which could have a
material adverse effect on our company.
As further discussed in Note 2. Bankruptcy Proceedings and Note 16.
Commitments and Contingencies in the Consolidated Financial
Statements included in Part IV, Item 15 of this report, on the
Petition Date, the Debtors filed voluntary petitions for relief
under the Bankruptcy Code. Under the Bankruptcy Code, third-party
actions to collect pre-petition indebtedness owed by the Debtors,
as well as most litigation pending against the Debtors as of the
Petition Date, are generally subject to an automatic stay. However,
under the Bankruptcy Code, certain legal proceedings, such as those
involving the assertion of a governmental entity’s police or
regulatory powers, may not be subject to the automatic stay and may
continue unless otherwise ordered by the Bankruptcy Court. As a
result, some proceedings may continue (or certain parties may
attempt to argue that such proceedings should continue)
notwithstanding the automatic stay. It is possible that legal
proceedings such as those described herein and/or other matters
could in the future cause us to take one or more additional
significant corporate transactions or other remedial measures,
including on a preventative or proactive basis.
As an example of our legal proceedings, we, as well as various
other manufacturers, distributors, pharmacies and/or others, are
the subject of numerous lawsuits consisting of cases filed by or on
behalf of a wide variety of plaintiffs asserting claims relating to
the defendants’ alleged sales, marketing and/or distribution
practices with respect to prescription opioid medications. In these
cases, plaintiffs seek various remedies including, without
limitation, declaratory and/or injunctive relief; compensatory,
punitive and/or treble damages; restitution, disgorgement, civil
penalties, abatement, attorneys’ fees, costs and/or other relief.
Notwithstanding any relief that may be available as a result of our
bankruptcy proceedings, it is possible that our legal proceedings,
including those relating to opioid claims, could have a material
adverse effect on our business, financial condition, results of
operations and cash flows, including in the short term. Refer to
Note 16. Commitments and Contingencies in the Consolidated
Financial Statements included in Part IV, Item 15 of this report
for more information.
As a result of the Chapter 11 Cases and the associated automatic
stay, we are no longer actively pursuing our prior integrated
settlement and litigation strategy to seek resolution of unsettled
cases that have been stayed. Nevertheless, at any given time, we
may be engaged in settlement or similar discussions regarding
various legal matters including those that arise in connection with
the Chapter 11 Cases; however, settlement demands and discussions
often involve significant monetary and other remedies and there can
be no assurance that we will receive settlement offers that are on
terms that we consider reasonable under the circumstances or
indicative of the merits or potential outcome of any court
proceeding with respect to the underlying claims.
In the past, we have made the decision to settle some claims even
though we believe we had meritorious defenses because of the
significant legal and other costs that would have been required to
defend such claims. To the extent that any litigation arises or
proceeds during the pendency of the Chapter 11 Cases, there can be
no assurance that settlement opportunities will continue to be
available generally, or be consistent with our historic experience,
or that we will not settle additional claims even if we believe we
have meritorious defenses. Even where settlement agreements have
been reached, in certain instances they are subject to conditions
and contingencies, including but not limited to participation
thresholds and approval of the Bankruptcy Court during the pendency
of the Chapter 11 Cases, which may be outside of our control and
may not come to pass. In addition, there can be no assurance of the
impact of any settlement agreement on existing or future
claims.
Awards against or settlements by us or our competitors could
incentivize parties to bring additional claims against us or
increase settlement demands against us. In addition to the risks of
direct expenditures for defense costs, settlements and/or judgments
in connection with various claims, proceedings and investigations,
there is a possibility of loss of revenues, injunctions and
disruption of business. Additionally, we have received, and may
continue to receive, claims or requests for indemnification from
other persons or entities named in or subject to discovery in
various lawsuits or other legal proceedings, including certain of
our customers.
We and other manufacturers of prescription opioid medications have
been, and will likely continue to be, subject to negative publicity
and press, which could harm our brand and the demand for our
products.
Our current and former products may cause or appear to cause
serious adverse side effects or potentially dangerous drug
interactions if misused or improperly prescribed or as a result of
faulty surgical technique. We are subject to various risks
associated with having operated a medical device manufacturing
business, including potential and actual product liability claims
for defective or allegedly defective goods and increased government
scrutiny and/or potential claims regarding the marketing of medical
devices. For example, we and certain other manufacturers have been
named as defendants in multiple lawsuits in various federal and
state courts alleging personal injury resulting from the use of
transvaginal surgical mesh products designed to treat pelvic organ
prolapse (POP) and stress urinary incontinence (SUI). The FDA held
a public advisory committee meeting in February 2019 during which
the members of the Obstetrics and Gynecology Devices Panel of the
Medical Devices Advisory Committee discussed and made
recommendations regarding the safety and effectiveness of surgical
mesh to treat POP. In April 2019, following the meeting, the FDA
ordered that the manufacturers of all remaining surgical mesh
products indicated for the transvaginal repair of POP cease selling
and distributing their products in the U.S. effective immediately.
Although we have not sold transvaginal surgical mesh products since
March 2016, it is possible that the FDA’s order and any additional
FDA actions based on the outcome of the advisory committee meeting
could result in additional litigation against the Company or the
expansion of ongoing litigation against the Company. See Note 16.
Commitments and Contingencies in the Consolidated Financial
Statements included in Part IV, Item 15 of this report for more
information.
Any failure to effectively identify, analyze, report and protect
adverse event data and/or to fully comply with relevant laws, rules
and regulations around adverse event reporting could expose the
Company to legal proceedings, penalties, fines and/or reputational
damage. As a result of our ongoing bankruptcy proceedings, we could
see an increase in the number of adverse events reported, which
could increase costs and have other negative impacts.
In addition, in the age of social media, plaintiffs’ attorneys have
a wide variety of tools to advertise their services and solicit new
clients for litigation, including using judgments and settlements
obtained in litigation against us or other pharmaceutical companies
as an advertising tool. For these or other reasons, any product
liability or other litigation in which we are a defendant could
have a larger number of plaintiffs than such actions have seen
historically and we could also see an increase in the number of
cases filed against us because of the increasing use of widespread
and media-varied advertising. This could also complicate any
settlement discussions we may be engaged in. Furthermore, a ruling
against other pharmaceutical companies in product liability or
other litigation, or any related settlement, in which we are not a
defendant could have a negative impact on pending litigation where
we are a defendant.
In addition, in certain circumstances, such as in the case of
products that do not meet approved specifications or which
subsequent data demonstrate may be unsafe, ineffective or misused,
it may be necessary for us to initiate voluntary or mandatory
recalls or withdraw such products from the market. Any such recall
or withdrawal could result in adverse publicity, costs connected to
the recall and loss of revenue. Adverse publicity could also result
in an increased number of additional product liability claims,
whether or not these claims have a basis in scientific fact. See
the risk factor “Public concern around the abuse of opioids or
other products including, without limitation, law enforcement
concerns over diversion or marketing practices, regulatory efforts
to combat abuse and litigation could result in costs to our
business and damage our reputation” for more
information.
If we are found liable in any lawsuits, including the legal
proceedings related to our sale, marketing and/or distribution of
prescription opioid medications, product liability claims or
actions related to our sales, marketing or pricing practices or if
we are subject to governmental investigations or product recalls,
it could result in the imposition of material damages, including
punitive damages, fines, reputational harm, civil lawsuits,
criminal penalties, interruptions of business, modification of
business practices, equitable remedies and other sanctions against
us or our personnel as well as significant legal and other costs.
At any given time, we may be engaged in settlement or similar
discussions, and we may voluntarily settle claims even if we
believe that we have meritorious defenses because of the
significant legal and other costs that may be required to defend
such claims. Any judgments, claims, settlements and related costs
could be well in excess of any applicable insurance or accruals. As
a result, we may experience significant negative impacts on our
results of operations or financial condition. To satisfy judgments
or settlements or to pursue certain appeals, we may need to seek
financing or bonding, which may not be available on terms
acceptable to us, or at all, when required, particularly given the
nature and amount of the claims against us. Judgments against us
could also cause defaults under our debt agreements (which could
result in cross-defaults or cross-accelerations in other
agreements) and/or restrictions on product use or business
practices and we could incur losses as a result. Any of the risks
above could have a material adverse effect on our business,
financial condition, results of operations and cash
flows.
In July 2021, a court in one legal action issued an order granting
a default judgment on liability against Endo Pharmaceuticals Inc.
(EPI) and Endo Health Solutions Inc. (EHSI) and awarding the
plaintiffs fees and costs relating to certain alleged discovery
issues in an opioid-related lawsuit. Although we settled that
matter, plaintiffs have from time to time sought similar relief and
may do so in the future. Any future default judgments or other
sanctions relating to discovery matters could result in the
imposition of material damages or other costs.
The August 16, 2022 bankruptcy filings by the Debtors constituted
an event of default that accelerated our obligations under
substantially all of our then-outstanding debt instruments.
However, section 362 of the Bankruptcy Code stays creditors from
taking any action to enforce the related financial obligations and
creditors’ rights of enforcement in respect of the debt instruments
are subject to the applicable provisions of the Bankruptcy Code.
Refer to Note 15. Debt in the Consolidated Financial Statements
included in Part IV, Item 15 of this report for additional
information.
See Note 16. Commitments and Contingencies in the Consolidated
Financial Statements included in Part IV, Item 15 of this report
for further discussion of the foregoing and other material legal
proceedings.
We may not have and may be unable to obtain or maintain insurance
adequate to cover potential liabilities.
We may not have and may be unable to obtain or maintain insurance
on acceptable terms or with adequate coverage against potential
liabilities or other losses, including costs, judgments,
settlements and other liabilities incurred in connection with
current or future legal proceedings, regardless of the success or
failure of the claim. For example, we do not have insurance
sufficient to satisfy all of the opioid claims that have been made
against us. We also generally no longer have product liability
insurance to cover claims in connection with the mesh-related
litigation described herein. Additionally, we may be limited by the
surviving insurance policies of acquired entities, which may not be
adequate to cover potential liabilities or other losses. Even where
claims are submitted to insurance carriers for defense and
indemnity, there can be no assurance that the claims will be
covered by insurance or that the indemnitors or insurers will
remain financially viable or will not challenge our right to
reimbursement in whole or in part. The failure to generate
sufficient cash flow or to obtain other financing could affect our
ability to pay amounts due under those liabilities not covered by
insurance. Additionally, the nature of our business, the legal
proceedings to which we are exposed and any losses we suffer may
increase the cost of insurance, which could impact our decisions
regarding our insurance programs.
Public concern around the abuse of opioids or other products
including, without limitation, law enforcement concerns over
diversion or marketing practices, regulatory efforts to combat
abuse and litigation could result in costs to our business and
damage our reputation.
Media stories regarding drug abuse and diversion, including the
abuse and diversion of prescription opioid medications and other
controlled substances, are commonplace and have included the
Company. Aggressive enforcement and unfavorable publicity
regarding, for example, the use or misuse of opioids, the
limitations of abuse-deterrent formulations, the ability of abusers
to discover previously unknown ways to abuse our products, public
inquiries and investigations into drug abuse or litigation or
regulatory or enforcement activity regarding sales, marketing,
distribution or storage of opioids could have a material adverse
effect on our reputation, on the results of litigation and on our
ability to attract or maintain relationships with third-party
partners, including suppliers, vendors, advisors, distributors,
manufacturers, collaboration partners, administrators and agents.
As a result of the timing and schedule of certain legal proceedings
against us, we will likely be subject to additional press for the
foreseeable future.
Manufacturers of prescription opioid medications have been the
subject of significant civil and criminal investigatory and
enforcement actions even in cases where such medications have
received approval from the FDA or similar regulatory authorities.
Numerous governmental and private persons and entities are pursuing
litigation against opioid manufacturers, including us, as well as
distributors and others, asserting alleged violations of various
laws and regulations relating to opioids and/or other prescription
medicines, relying on common law theories, and seeking to hold the
defendants accountable for, among other things, societal costs
associated with the misuse and abuse of prescription opioid
medications as well as non-prescription opioids. There is a risk we
will be subject to similar investigations, enforcement actions or
litigations in the future, that we will suffer adverse decisions or
verdicts of substantial amounts or that we will enter into monetary
settlements. Notwithstanding any relief that may be available as a
result of our bankruptcy proceedings, it is possible that our legal
proceedings, including those relating to opioid claims, could have
a material adverse effect on our business, financial condition,
results of operations and cash flows. See Note 16. Commitments and
Contingencies in the Consolidated Financial Statements included in
Part IV, Item 15 of this report for more information.
There have been proposals in certain legislatures to restrict the
ability to compromise or release liability of certain parties in
such cases, and we cannot assure you whether any such proposals
will be made or adopted in the future or predict how any such
proposals may affect the Company.
Regulatory actions at the federal, state and local level may seek
to limit or restrict the manufacturing, distribution or sale of
opioids, both directly and indirectly, and/or to impose novel
policy or regulatory mechanisms regarding the distribution or sales
of opioids. For example, in April 2019, New York enacted an excise
tax on opioids. See the risk factor “Our business and financial
condition may be adversely affected by existing or future
legislation and regulations” for more information.
Various government entities, including the U.S. Congress, state
legislatures or other policy-making bodies in the U.S. or elsewhere
have held hearings, conducted investigations and/or issued reports
calling attention to opioid misuse and abuse, and some have
mentioned or criticized the role of manufacturers, including us, in
supplying or marketing opioid medications or failing to take
adequate steps to detect or report suspicious orders or to prevent
abuse and diversion. Press organizations have reported and likely
will continue to report on these issues, and such reporting has and
may further result in adverse publicity which could have a material
adverse effect on our business, financial condition, results of
operations and cash flows.
Financial and Liquidity Related Risks
Our ability to fund our operations, maintain adequate liquidity and
meet our financing obligations is reliant on our operations, which
are subject to significant risks and uncertainties.
We rely on cash from operations as well as access to the financial
markets to fund our operations, maintain liquidity and meet our
financial obligations. Our operations are subject to many
significant risks and uncertainties, including those related to
generic competition and legal challenges that could impact our key
products, outstanding and future legal proceedings and governmental
investigations, including those related to our sale, marketing
and/or distribution of prescription opioid medications, and others.
Any negative development or outcome in connection with any or all
of these risks and uncertainties could result in significant
consequences, including one or more of the following:
•causing
a substantial portion of our cash flows from operations to be
dedicated to the payment of legal or related expenses and therefore
unavailable for other purposes, including the payment of principal
and interest on our indebtedness, our operations, capital
expenditures and future business opportunities;
•limiting
our ability to adjust to changing market conditions, causing us to
be more vulnerable to periods of negative or slow growth in the
general economy or in our business, causing us to be unable to
carry out capital spending that is important to our growth and
placing us at a competitive disadvantage;
•limiting
our ability to attract and retain key personnel;
•causing
us to be unable to maintain compliance with or making it more
difficult for us to satisfy our financial obligations under certain
of our outstanding debt obligations, causing a downgrade of our
debt and long-term corporate ratings (which could increase our cost
of capital) and exposing us to potential events of default (if not
cured or waived) under financial and operating covenants contained
in our or our subsidiaries’ outstanding indebtedness;
•limiting
our ability to incur additional borrowings under the covenants in
our then-existing facilities or to obtain additional debt or equity
financing for working capital, capital expenditures, business
development, debt service requirements, acquisitions or general
corporate or other purposes, or to refinance our indebtedness;
and/or
•causing
a significant reduction in our short-term and long-term revenues
and/or otherwise causing us to be unable to fund our operations and
liquidity needs, such as future capital expenditures and payment of
our indebtedness.
These risks have been and are likely to continue to be exacerbated
by our ongoing bankruptcy proceedings and the corresponding event
of default on our existing debt instruments, as further discussed
herein.
We have significant goodwill and other intangible assets.
Consequently, potential impairments of goodwill and other
intangibles may significantly impact our
profitability.
Goodwill and other intangibles represent a significant portion of
our assets. As of December 31, 2022 and 2021, goodwill and
other intangibles comprised approximately 54% and 63%,
respectively, of our total assets. Goodwill and other
indefinite-lived intangible assets are subject to impairment tests
at least annually. Additionally, impairment tests must be performed
for certain assets whenever events or changes in circumstances
indicate such assets’ carrying amounts may not be
recoverable.
For the years ended December 31, 2022, 2021 and 2020, we
recorded asset impairment charges of $2.1 billion, $0.4 billion and
$0.1 billion, respectively, which related primarily to goodwill and
other intangible assets. Refer to Note 11. Goodwill and Other
Intangibles in the Consolidated Financial Statements included in
Part IV, Item 15 of this report for examples and a discussion of
material impairment tests and impairment charges during the years
ended December 31, 2022, 2021 and 2020. The procedures and
assumptions used in our goodwill and other intangible assets
impairment testing are discussed in Part II, Item 7 of this report
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations” under the caption “CRITICAL ACCOUNTING
ESTIMATES” and in Note 11. Goodwill and Other Intangibles in the
Consolidated Financial Statements included in Part IV, Item 15 of
this report.
Events giving rise to asset impairments are an inherent risk in the
pharmaceutical industry and often cannot be predicted. As a result
of the significance of goodwill and other intangible assets, our
results of operations and financial position in future periods
could be negatively impacted should additional impairments of our
goodwill or other intangible assets occur. For additional
discussion, refer to Item 7 of this report “Management’s Discussion
and Analysis of Financial Condition and Results of Operations”
under the caption “CRITICAL ACCOUNTING ESTIMATES.”
We have a substantial amount of indebtedness which could adversely
affect our financial position and prevent us from fulfilling our
obligations under such indebtedness, which may require us to
refinance all or part of our then-outstanding indebtedness. Any
refinancing of this substantial indebtedness could be at
significantly higher interest rates. Additionally, we have a
significant amount of floating rate indebtedness and an increase in
interest rates would increase the cost of servicing our
indebtedness. Despite our current level of indebtedness, we may
still be able to incur substantially more indebtedness and increase
the associated risks.
We currently have a substantial amount of indebtedness. As of
December 31, 2022, we have total debt of approximately $8.1
billion in aggregate contractual principal amount. Our substantial
indebtedness may:
•make
it difficult for us to satisfy our financial obligations, including
making any applicable scheduled principal, interest and/or adequate
protection payments on our indebtedness as further discussed
herein;
•limit
our ability to borrow additional funds for working capital, capital
expenditures, acquisitions or other general business
purposes;
•limit
our ability to use our cash flow or obtain additional financing for
future working capital, capital expenditures, acquisitions or other
general business purposes;
•limit
our ability to incur judgments above certain
thresholds;
•expose
us to the risk of rising interest rates with respect to the
borrowings under our variable rate indebtedness;
•require
us to use a substantial portion of our cash on hand and/or from
future operations to make debt service payments;
•limit
our flexibility to plan for, or react to, changes in our business
and industry;
•place
us at a competitive disadvantage compared to our less leveraged
competitors; and
•increase
our vulnerability to the impact of adverse economic and industry
conditions, such as those resulting from the COVID-19 pandemic,
which may further limit our ability to satisfy our financial
obligations.
If we are unable to pay amounts due under our outstanding
indebtedness or to fund other liquidity needs, such as future
capital expenditures or contingent liabilities as a result of
adverse business developments, including expenses related to our
ongoing and future legal proceedings and governmental
investigations, decreased revenues or increased costs and expenses
related to the impact of COVID-19 on our business, as well as
increased pricing pressures or otherwise, we may be required to
refinance all or part of our then-existing indebtedness, sell
assets, reduce or delay capital expenditures or seek to raise
additional capital. Any of these factors could have a material
adverse effect on our business, financial condition, results of
operations and cash flows.
These risks have been and are likely to continue to be exacerbated
by our ongoing bankruptcy proceedings and the corresponding event
of default on our existing debt instruments, as further discussed
herein. To the extent we are required or choose to seek third-party
financing in the future, there can be no assurance that we would be
able to obtain any such required financing on a timely basis or at
all, particularly in light of our ongoing bankruptcy proceedings
and the corresponding event of default on our existing debt
instruments. Additionally, any future financing arrangements could
include terms that are not commercially beneficial to us, which
could further restrict our operations and exacerbate any impact on
our results of operations and liquidity that may result from any of
the factors described herein or other factors.
At December 31, 2022, approximately $2.0 billion and $0.3
billion of principal amounts outstanding under the Term Loan
Facility (as defined below) and the Revolving Credit Facility (as
defined below), respectively, bear interest and/or adequate
protection payments at variable rates that are affected by
benchmark interest rates. Additionally, the amounts of interest
and/or adequate protection payments we are required to make on our
various debt instruments are subject to changes based on
contractual terms set forth in the applicable agreements and/or
court orders. Recent increases in benchmark interest rates and
certain other developments, including those related to our
bankruptcy proceedings, have resulted in increases in the rates
used to calculate the interest and/or adequate protection payments
we are required to make, and such rates could further increase in
future periods. Any future borrowings could also be subject to such
risks.
We may not realize the anticipated benefits from our strategic
actions.
We continuously seek to optimize our operations and increase our
overall efficiency through strategic actions. These actions may
involve decisions to exit manufacturing or research sites, transfer
the manufacture of products to other internal and external sites
within our manufacturing network and simplify business process
activities. For example, we announced plans in November 2020 to
optimize our retail generics business cost structure, transfer
certain transaction processing activities to third-party global
business process service providers and further integrate our
commercial, operations and research and development functions.
There can be no assurance that we will achieve the benefits and
savings of actions such as these in the expected amounts and/or
with the expected timing, if at all. We will also incur certain
charges in connection with such actions and future costs could also
be incurred. It is also possible that charges and cash expenditures
associated with such actions could be higher than estimated. Any of
these risks could ultimately have a material adverse effect on our
business, financial condition, results of operations and cash
flows.
Legal and Regulatory Related Risks
Agreements between branded pharmaceutical companies and generic
pharmaceutical companies are facing increased government scrutiny
and we may be subject to additional investigations or
litigation.
We are and may in the future be involved in patent litigations in
which generic companies challenge the validity or enforceability of
our products’ listed patents and/or the applicability of these
patents to the generic applicant’s products. Likewise, we are and
may in the future be involved in patent litigations in which we
challenge the validity or enforceability of innovator companies’
listed patents and/or their applicability to our generic products.
Therefore, settling patent litigations has been and is likely to
continue to be part of our business. Parties to such settlement
agreements in the U.S., including us, are required by law to file
them with the U.S. Federal Trade Commission (FTC) and the Antitrust
Division of the DOJ for review. In some instances, the FTC has
brought actions against brand and generic companies that have
entered into such agreements, alleging that they violate antitrust
laws. Even in the absence of an FTC challenge, other governmental
or private litigants may assert antitrust or other claims relating
to such agreements. We may receive formal or informal requests from
the FTC or other governmental entities for information about any
such settlement agreement we enter into or about other matters, and
there is a risk that the FTC or other governmental or private
litigants may commence an action against us alleging violation of
antitrust laws or other claims. For example, in December 2021, in
response to a citizen petition filed on behalf of PSP LLC regarding
vasopressin ANDA products referencing VASOSTRICT®,
the FDA denied the petition and stated that it intended to refer
the matter to the FTC.
The U.S. Supreme Court, in
FTC v. Actavis,
determined that patent settlement agreements between generic and
brand companies should be evaluated under the rule of reason, but
provided limited guidance beyond the selection of this standard.
Because the U.S. Supreme Court did not articulate the full range of
criteria upon which a determination of the legality of such
settlements would be based, or provide guidance on the precise
circumstances under which such settlements would qualify as legal,
there has been and may continue to be extensive litigation over
what constitutes a reasonable and lawful patent settlement between
a brand and generic company. The Company and/or its subsidiaries
have been named in several such lawsuits. For example, beginning in
May 2018, multiple complaints were filed in the U.S. District Court
for the Southern District of New York against PPI, EPI and/or us,
as well as other pharmaceutical companies, alleging violations of
antitrust law arising out of the settlement of certain patent
litigation concerning the generic version of
Exforge®
(amlodipine/valsartan). See Note 16. Commitments and Contingencies
in the Consolidated Financial Statements included in Part IV, Item
15 of this report for more information.
There have been federal and state legislative efforts to overturn
the
FTC v. Actavis
decision and make certain terms in patent settlement
agreements
per se
unlawful. For example, some members of the U.S. Congress have
proposed legislation that would limit the types of settlement
agreements generic manufacturers and brand companies can enter
into. The state of California enacted legislation, effective
January 1, 2020, that deems a settlement of a patent infringement
claim to be presumptively anticompetitive and allows the California
Attorney General to seek monetary penalties if a generic company
receives anything of value from the branded company and the generic
company agrees to delay research and development, manufacturing,
marketing or sales of the generic product for any period of time.
The California law carves out from the definition of “anything of
value” certain types of settlement terms and it allows the settling
parties to rebut the presumption of anticompetitive
harm.
We are subject to various laws and regulations pertaining to the
marketing of our products and services.
The marketing and pricing of our products and services, including
product promotion, educational activities, support of continuing
medical education programs and other interactions with healthcare
professionals, are governed by various laws and regulations,
including FDA regulations and the U.S. federal Anti-Kickback
Statute. Additionally, many states have adopted laws similar to the
Anti-Kickback Statute, without identical exceptions or exemptions.
Some of these state prohibitions apply to referral of patients for
healthcare items or services reimbursed by any third-party payer,
not only the Medicare and Medicaid programs. Any such regulations
or requirements could be difficult and expensive for us to comply
with, could delay our introduction of new products and could have a
material adverse effect on our business, financial condition,
results of operations and cash flows.
Sanctions for violating these laws include criminal penalties and
civil sanctions and possible exclusion from federally funded
healthcare programs such as Medicare and Medicaid, as well as
potential liability under the FCA and applicable state false claims
acts. There can be no assurance that our practices will not be
challenged under these laws in the future, that changes in these
laws or interpretation of these laws would not give rise to new
challenges of our practices or that any such challenge would not
have a material adverse effect on our business, financial
condition, results of operations and cash flows. For example, in
December 2021, the Attorney General of Texas announced an
investigation of EPI and AbbVie Inc. under the Texas Deceptive
Trade Practices Act for allegedly advertising and promoting hormone
(puberty) blockers for unapproved uses without disclosing potential
risks. Law enforcement agencies sometimes initiate investigations
into sales, marketing and/or pricing practices based on preliminary
information or evidence, and such investigations can be and often
are closed without any enforcement action. Nevertheless, these
types of investigations and any related litigation can result in:
(i) large expenditures of cash for legal fees, payment of penalties
and compliance activities; (ii) limitations on operations; (iii)
diversion of management resources; (iv) injury to our reputation;
and (v) decreased demand for our products.
The FFDCA and FDA regulations and guidance restrict the ability of
healthcare companies, such as our company, to communicate with
patients, physicians and other third parties about uses of
prescription pharmaceuticals or devices that are not cleared or
approved by the FDA, which are commonly referred to as “off-label”
uses. Prohibitions on the promotion of off-label uses and against
promotional practices deemed false or misleading are actively
enforced by various parties at both the federal and state levels. A
company that is found to have improperly promoted its products
under these laws may be subject to significant liability, such as
significant administrative, civil and criminal sanctions including,
but not limited to, significant civil damages, criminal fines and
exclusion from participation in Medicare, Medicaid and other
federal healthcare programs. Applicable laws governing product
promotion also provide for administrative, civil and criminal
liability for individuals, including, in some circumstances,
potential strict vicarious liability. Conduct giving rise to such
liability could also form the basis for private civil litigation by
third-party payers or other persons allegedly harmed by such
conduct.
We have established and implemented a corporate compliance program
designed to prevent, detect and correct violations of state and
federal healthcare laws, including laws related to advertising and
promotion of our products. Nonetheless, governmental agencies or
private parties may take the position that we are not in compliance
with such requirements and, if such non-compliance is proven, the
Company and, in some cases, individual employees, may be subject to
significant liability, including the aforementioned administrative,
civil and criminal sanctions.
In February 2014, EPI entered into a Deferred Prosecution Agreement
and a Corporate Integrity Agreement (CIA) with HHS to resolve
allegations regarding the promotion of LIDODERM®.
In March 2013, our subsidiary Par Pharmaceutical Companies, Inc.
(PPCI) entered into a CIA and plea agreement with the DOJ to
resolve allegations regarding the promotion of
MEGACE®
ES, which was subsequently subsumed by EPI’s CIA. Those agreements
placed certain obligations on us related to the marketing of our
pharmaceutical products and our healthcare regulatory compliance
program, including reporting requirements to the U.S. government,
detailed requirements for our compliance program, code of conduct
and policies and procedures and the requirement to engage an
Independent Review Organization. We implemented procedures and
practices to comply with the CIAs, including the engagement of an
Independent Review Organization. In February 2020, Endo was
notified that it had satisfied its CIA requirements and the 5-year
term of Endo’s CIA has now concluded.
The pharmaceutical industry is heavily regulated, which creates
uncertainty about our ability to bring new products to market and
imposes substantial compliance costs on our business, including
withdrawal or suspension of existing products.
Governmental authorities, including without limitation the FDA,
impose substantial requirements on the development, manufacture,
holding, labeling, marketing, advertising, promotion, distribution
and sale of therapeutic pharmaceutical products. See “Governmental
Regulation” in Part I, Item 1.
Regulatory approvals for the sale of any new product candidate may
require preclinical studies and clinical trials that such product
candidate is safe and effective for its intended use. Preclinical
and clinical studies may fail to demonstrate the safety and
effectiveness of a product candidate. Likewise, we may not be able
to demonstrate through clinical trials that a product candidate’s
therapeutic benefits outweigh its risks. Even promising results
from preclinical and early clinical studies do not always
accurately predict results in later, large-scale trials. A failure
to demonstrate safety and efficacy would result in our failure to
obtain regulatory approvals.
Clinical trials can be delayed for reasons outside of our control,
which can lead to increased development costs and delays in
regulatory approval. It is possible that regulators, independent
data monitoring committees, institutional review boards, safety
committees, ethics committees and/or other third parties may
request or require that we suspend or terminate our clinical trials
for various reasons, including, among others, noncompliance with
regulatory requirements, unforeseen safety issues or adverse side
effects or failure to demonstrate a benefit from using our product
candidates. There is substantial competition to enroll patients in
clinical trials, and such competition has delayed clinical
development of our products in the past. For example, patients
could enroll in clinical trials more slowly than expected or could
drop out before or during clinical trials. In addition, we may rely
on collaboration partners that may control or make changes in trial
protocol and design enhancements, or encounter clinical trial
compliance-related issues, which may also delay clinical trials.
Product supplies may be delayed or insufficient to treat the
patients participating in the clinical trials, and manufacturers or
suppliers may not meet the requirements of the FDA or foreign
regulatory authorities, such as those relating to
cGMP.
Compliance with clinical trial requirements and cGMP regulations
requires significant expenditures and the dedication of substantial
resources. The FDA may place a hold on a clinical trial and may
cause a suspension or withdrawal of product approvals if regulatory
standards are not maintained. In the event an approved
manufacturing facility for a particular drug is required by the FDA
to curtail or cease operations, or otherwise becomes inoperable, or
a third-party contract manufacturing facility faces manufacturing
problems, obtaining the required FDA authorization to manufacture
at the same or a different manufacturing site could result in
production delays, which could have a material adverse effect on
our business, financial condition, results of operations and cash
flows.
Additional delays may result if an FDA advisory committee or other
regulatory authority recommends non-approval or restrictions on
approval. Although the FDA is not required to follow the
recommendations of its advisory committees, it usually does. A
negative advisory committee meeting could signal a lower likelihood
of approval, although the FDA may still end up approving our
application. Regardless of an advisory committee meeting outcome or
the FDA’s final approval decision, public presentation of our data
may shed positive or negative light on our
application.
We may seek FDA approval for certain unapproved marketed products
through the 505(b)(2) regulatory pathway. See “Governmental
Regulation” in Part I, Item 1. Even if we receive approval for an
NDA under section 505(b)(2) of the FFDCA, the FDA may not take
timely enforcement action against companies marketing unapproved
versions of the product; therefore, we cannot be sure that that we
will receive the benefit of any de facto exclusive marketing period
or that we will fully recoup the expenses incurred to obtain an
approval. In addition, certain competitors and others have objected
to the FDA’s interpretation of Section 505(b)(2). If the FDA’s
interpretation of Section 505(b)(2) is successfully challenged,
this could delay or even prevent the FDA from approving any NDA
that we submit under Section 505(b)(2).
The ANDA approval process for a new product varies in time,
generally requiring a minimum of 10 months following submission of
the ANDA to the FDA, but could also take several years from the
date of application. The timing for the ANDA approval process for
generic products is difficult to estimate and can vary
significantly. ANDA approvals, if granted, may not include all uses
(known as indications) for which a company may seek to market a
product.
The submission of an NDA, Supplemental New Drug Application, ANDA,
BLA or sBLA to the FDA with supporting clinical safety and efficacy
data does not guarantee that the FDA will grant approval to market
the product. Meeting the FDA’s regulatory requirements to obtain
approval to market a drug product, which vary substantially based
on the type, complexity and novelty of the product candidate,
typically takes years, if approved at all, and is subject to
uncertainty. The FDA or foreign regulatory authorities may not
agree with our assessment of the clinical data or they may
interpret it differently. Such regulatory authorities may require
additional or expanded clinical trials. Any approval by regulatory
agencies may subject the marketing of our products to certain
limits on indicated use. For example, regulatory authorities may
approve any of our product candidates for fewer or more limited
indications than we may request, may grant approval contingent on
conditions such as the performance and results of costly
post-marketing clinical trials or REMS or may approve a product
candidate with a label that does not include the labeling claims
necessary or desirable for the successful commercialization of that
product candidate. Additionally, reimbursement by government payers
or other payers may not be approved at the price we intend to
charge for our products. Any limitation on use imposed by the FDA
or delay in or failure to obtain FDA approvals or clearances of
products developed by us would adversely affect the marketing of
these products and our ability to generate product revenue. We
could also be at risk for the value of any capitalized pre-launch
inventories related to products under development. These factors
could have a material adverse effect on our business, financial
condition, results of operations and cash flows.
Once a product is approved or cleared for marketing, failure to
comply with applicable regulatory requirements can result in, among
other things, suspensions or withdrawals of approvals or
clearances; seizures or recalls of products; injunctions against
the manufacture, holding, distribution, marketing and sale of a
product; and civil and criminal sanctions. For example, any failure
to effectively identify, analyze, report and protect adverse event
data and/or to fully comply with relevant laws, rules and
regulations around adverse event reporting could expose the Company
to legal proceedings, penalties, fines and reputational damage.
Furthermore, changes in existing regulations or the adoption of new
regulations could prevent us from obtaining, or affect the timing
of, future regulatory approvals or clearances. Meeting regulatory
requirements and evolving government standards may delay marketing
of our new products for a considerable period of time, impose
costly procedures upon our activities and result in a competitive
advantage to other companies that compete against us.
In addition, after a product is approved or cleared for marketing,
new data and information, including information about product
misuse or abuse at the user level, may lead government agencies,
professional societies, practice management groups or patient or
trade organizations to recommend or publish guidance or guidelines
related to the use of our products, which may lead to reduced sales
of our products. For example, in May 2016, an FDA advisory panel
recommended mandatory training of all physicians who prescribe
opioids on the risks of prescription opioids. In 2016, the U.S.
Centers for Disease Control and Prevention also issued a guideline
for prescribing opioids for chronic pain that provides
recommendations for primary care clinicians prescribing opioids for
chronic pain outside of active cancer treatment, palliative care
and end-of-life care. In addition, state health departments and
boards of pharmacy have authority to regulate distribution and may
modify their regulations with respect to prescription opioid
medications in an attempt to curb abuse. These or any new
regulations or requirements could be difficult and expensive for us
to comply with and could have a material adverse effect on our
business, financial condition, results of operations and cash
flows.
The FDA scheduled a Joint Meeting of the Drug Safety and Risk
Management Advisory Committee and the Anesthetic and Analgesic Drug
Products Advisory Committee in March 2017 to discuss pre- and
post-marketing data about the abuse of OPANA®
ER and the overall risk-benefit of this product. The advisory
committees were also scheduled to discuss abuse of generic
oxymorphone ER and oxymorphone immediate-release products. In March
2017, the advisory committees voted 18 to eight, with one
abstention, that the benefits of reformulated
OPANA®
ER no longer outweigh its risks. While several of the advisory
committee members acknowledged the role of OPANA®
ER in clinical practice, others believed its benefits were
overshadowed by the continuing public health concerns around the
product’s misuse, abuse and diversion. In June 2017, the FDA
requested that we voluntarily withdraw OPANA®
ER from the market and, in July 2017, after careful consideration
and consultation with the FDA, we decided to voluntarily remove
OPANA®
ER from the market to the Company’s financial detriment. During the
second quarter of 2017, we began to work with the FDA to coordinate
an orderly withdrawal of the product from the market. By September
1, 2017, we ceased shipments of OPANA®
ER to customers and the FDA withdrew the NDA in December 2020.
These actions had an adverse effect on our revenues and, as a
result of these actions, we incurred certain charges. Actions
similar to these, such as recalls or withdrawals, could divert
management time and attention, reduce market acceptance of all of
our products, harm our reputation, reduce our revenues, lead to
additional charges or expenses or result in product liability
claims, any of which could have a material adverse effect on our
business, financial condition, results of operations and cash
flows.
Based on scientific developments, post-market experience,
legislative or regulatory changes or other factors, the current FDA
standards of review for approving new pharmaceutical products, or
new indications or uses for approved or cleared products, are
sometimes more stringent than those that were applied in the
past.
Some new or evolving FDA review standards or conditions for
approval or clearance were not applied to many established products
currently on the market, including certain opioid products. As a
result, the FDA does not have safety databases on these products
that are as extensive as some products developed more recently.
Accordingly, we believe the FDA may develop such databases for
certain of these products, including many opioids. In particular,
the FDA has expressed interest in specific chemical structures that
may be present as impurities in a number of opioid narcotic APIs,
such as oxycodone, which, based on certain structural
characteristics and laboratory tests, may indicate the potential
for having mutagenic effects. The FDA has required, and may
continue to require, more stringent controls of the levels of these
or other impurities in products.
Also, the FDA may require labeling revisions, formulation or
manufacturing changes and/or product modifications for new or
existing products containing impurities. More stringent
requirements, together with any additional testing or remedial
measures that may be necessary, could result in increased costs
for, or delays in, obtaining approvals. Although we do not believe
that the FDA would seek to remove a currently marketed product from
the market unless the effects of alleged impurities are believed to
indicate a significant risk to patient health, we cannot make any
such assurance.
The FDA’s exercise of its authority under the FFDCA could result in
delays or increased costs during product development, clinical
trials and regulatory review, increased costs to comply with
additional post-approval regulatory requirements and potential
restrictions on sales of approved products. For example, in 2015,
the FDA sent letters to a number of manufacturers, including Endo,
requiring that a randomized, double-blind, placebo-controlled
clinical trial be conducted to evaluate the effect of TRT on the
incidence of major adverse cardiovascular events in men. The letter
received by Endo required that we include new safety information in
the labeling and Medication Guide for certain prescription
medications containing testosterone, such as
TESTIM®.
Post-marketing studies and other emerging data about marketed
products, such as adverse event reports, may adversely affect sales
of our products. Furthermore, the discovery of significant safety
or efficacy concerns or problems with a product in the same
therapeutic class as one of our products that implicate or appear
to implicate the entire class of products could have an adverse
effect on sales of our product or, in some cases, result in product
withdrawals. The FDA has continuing authority over the approval of
an NDA, ANDA or BLA and may withdraw approval if, among other
reasons, post-marketing clinical or other experience, tests or data
show that a product is unsafe for use under the conditions upon
which it was approved or licensed, or if FDA determines that there
is a lack of substantial evidence of the product’s efficacy under
the conditions described in its labeling.
In addition to the FDA and other U.S. regulatory agencies, non-U.S.
regulatory agencies may have authority over various aspects of our
business and may impose additional requirements and costs. Similar
to other healthcare companies, our facilities in multiple countries
across the full range of our business units are subject to routine
and new-product related inspections by regulatory authorities
including the FDA, the Medicines and Healthcare products Regulatory
Agency, the Health Products Regulatory Authority and Health Canada.
In the past, some of these inspections have resulted in inspection
observations (including FDA Form 483 observations). Future
inspections may result in additional inspection observations or
other corrective actions, which could have a material adverse
effect on our business, financial condition, results of operations
and cash flows.
Certain of our products contain controlled substances. Stringent
DEA and other governmental regulations on our use of controlled
substances include restrictions on their use in research,
manufacture, distribution and storage. A breach of these
regulations could result in imposition of civil penalties, refusal
to renew or action to revoke necessary registrations, or other
restrictions on operations involving controlled substances. In
addition, failure to comply with applicable legal requirements
could subject the manufacturing facilities of our subsidiaries and
manufacturing partners to possible legal or regulatory action,
including shutdown. Any such shutdown may adversely affect their
ability to manufacture or supply product and thus, our ability to
market affected products. This could have a material adverse effect
on our business, financial condition, results of operations and
cash flows. See also the risk described under the caption “The DEA
limits the availability of the active ingredients used in many of
our products as well as the production of these products, and, as a
result, our procurement and production quotas may not be sufficient
to meet commercial demand or complete clinical
trials.”
In addition, we are subject to the U.S. Drug Supply Chain Security
Act (DSCSA), which requires development of an electronic pedigree
to track and trace each prescription product at the salable unit
level through the distribution system. The DSCSA becomes effective
incrementally over a 10-year period from its enactment on November
27, 2013. Compliance with DSCSA and future U.S. federal or state
electronic pedigree requirements could require significant capital
expenditures, increase our operating costs and impose significant
administrative burdens.
We cannot determine what effect changes in laws, regulations or
legal interpretations or requirements by the FDA, the courts or
others, when and if promulgated or issued, or advisory committee
meetings may have on our business in the future. Changes could,
among other things, require expanded or different labeling,
additional testing, monitoring of patients, interaction with
physicians, education programs for patients or physicians,
curtailment of necessary supplies, limitations on product
distribution, the recall or discontinuance of certain products and
additional recordkeeping. Any such changes could result in
additional litigation and may have a material adverse effect on our
business, financial condition, results of operations and cash
flows. The evolving and complex nature of regulatory science and
regulatory requirements, the broad authority and discretion of the
FDA and the generally high level of regulatory oversight results in
a continuing possibility that, from time to time, we will be
adversely affected by regulatory actions despite our ongoing
efforts and commitment to achieve and maintain full compliance with
all regulatory requirements.
Certain of these risks could be exacerbated by the impact of
COVID-19.
Our reporting and payment obligations under Medicaid and other
governmental drug pricing programs are complex and may involve
subjective decisions. Any failure to comply with those obligations
could subject us to penalties and sanctions.
We are subject to federal and state laws prohibiting the
presentation (or the causing to be presented) of claims for payment
(by Medicare, Medicaid or other third-party payers) that are
determined to be false or fraudulent, including presenting a claim
for an item or service that was not provided. These false claims
statutes include the federal civil FCA, which permits private
persons to bring suit in the name of the government alleging false
or fraudulent claims presented to or paid by the government (or
other violations of the statutes) and to share in any amounts paid
by the entity to the government in fines or settlement. Such suits,
known as
qui tam
actions, have increased significantly in the healthcare industry in
recent years. These actions against pharmaceutical companies, which
do not require proof of a specific intent to defraud the
government, may result in payment of fines to and/or administrative
exclusion from the Medicare, Medicaid and/or other government
healthcare programs.
We are subject to laws that require us to enter into a Medicaid
Drug Rebate Agreement, a 340B Pharmaceutical Pricing Agreement and
agreements with the Department of Veterans Affairs as a condition
for having our products eligible for payment under Medicare Part B
and Medicaid. We have entered into such agreements. In addition, we
are required to report certain pricing information to CMS, the
Health Resources and Services Administration and the Department of
Veterans Affairs on a periodic basis to facilitate rebate payments
to the State Medicaid Programs, to set Medicare Part B
reimbursement levels and to establish the prices that can be
charged to certain purchasers, including 340B-covered entities and
certain government entities. Any failure to comply with these laws
and agreements could have a material adverse effect on our
business, financial condition, results of operations and cash
flows.
With regard to Medicaid, on February 1, 2016, CMS issued a Final
Rule implementing the Medicaid Drug Rebate provisions incorporated
into the PPACA, effective April 1, 2016 in most instances. Ongoing
compliance with these program rules, including the requirement that
we adopt reasonable assumptions where law, regulation and guidance
do not address specific participation issues, may impact the level
of rebates that we owe under the program. The 2016 Final Rule also
expanded the scope of Medicaid to apply to U.S. territories
effective on January 1, 2023), which will require operational
adjustments and may result in additional rebate liability.
Additionally, in December 2020, CMS issued a Final Rule for
Medicaid that makes changes with regard to: (i) the calculation of
Medicaid Best Price for certain value- or outcomes-based
discounting arrangements; (ii) the standard for excluding the value
of manufacturer copayment assistance and other patient support
arrangements from the calculation of Average Manufacturer Price and
Best Price; (iii) the identification of “line extension” drugs that
are subject to higher Medicaid rebate liability; and (iv)
establishment of additional drug utilization review requirements
for opioids. Depending on how these changes are implemented, they
could have a material adverse effect on our business, financial
condition, results of operations and cash flows.
We and other pharmaceutical companies have been named as defendants
in a number of lawsuits filed by various government entities,
alleging generally that we and numerous other pharmaceutical
companies reported false pricing information in connection with
certain products that are reimbursable by state Medicaid programs,
which are partially funded by the federal government. There is a
risk we will be subject to similar investigations or litigations in
the future, that we will suffer adverse decisions or verdicts of
substantial amounts or that we will enter into monetary
settlements. Any unfavorable outcomes as a result of such
proceedings could have a material adverse effect on our business,
financial condition, results of operations and cash
flows.
Decreases in the degree to which individuals are covered by
healthcare insurance could result in decreased use of our
products.
Employers may seek to reduce costs by reducing or eliminating
employer group healthcare plans or transferring a greater portion
of healthcare costs to their employees. Job losses or other
economic hardships, including any that may be related to COVID-19,
may also result in reduced levels of coverage for some individuals,
potentially resulting in lower levels of healthcare coverage for
themselves or their families. Further, in addition to the fact that
the TCJA eliminated the PPACA’s requirement that individuals
maintain insurance or face a penalty, additional steps to limit or
end cost-sharing subsidies to lower-income Americans may increase
instability in the insurance marketplace and the number of
uninsured Americans. These economic conditions may affect patients’
ability to afford healthcare as a result of increased co-pay or
deductible obligations, greater cost sensitivity to existing co-pay
or deductible obligations and lost healthcare insurance coverage or
for other reasons. We believe such conditions could lead to changes
in patient behavior and spending patterns that negatively affect
usage of certain of our products, including some patients delaying
treatment, rationing prescription medications, leaving
prescriptions unfilled, reducing the frequency of visits to
healthcare facilities, utilizing alternative therapies or foregoing
healthcare insurance coverage. Such changes may result in reduced
demand for our products, which could have a material adverse effect
on our business, financial condition, results of operations and
cash flows.
If our manufacturing facilities are unable to manufacture our
products or we face interruptions in the manufacturing process due
to regulatory or other factors, it could have a material adverse
effect on our business, financial condition, results of operations
and cash flows.
If any of our or our third-party manufacturing facilities fail to
comply with regulatory requirements or encounter other
manufacturing difficulties, it could adversely affect our ability
to supply products. All facilities and manufacturing processes used
for the manufacture of pharmaceutical products are subject to
inspection by regulatory agencies at any time and must be operated
in conformity with cGMP and, in the case of controlled substances,
DEA regulations. Compliance with the FDA’s cGMP and DEA
requirements applies to both products for which regulatory approval
is being sought and to approved products. In complying with cGMP
requirements, pharmaceutical manufacturing facilities must
continually expend significant time, money and effort in
production, recordkeeping, quality assurance and quality control so
that their products meet applicable specifications and other
requirements for product safety, efficacy and quality. Failure to
comply with applicable legal requirements subjects our or our
third-party manufacturing facilities to possible legal or
regulatory action, including shutdown, which may adversely affect
our ability to supply our products. Additionally, our facilities
and our third-party manufacturing facilities may face other
significant disruptions due to labor strikes, failure to reach
acceptable agreement with labor unions, infringement of
intellectual property rights, vandalism, natural disaster, outbreak
and spread of viral or other diseases, storm or other environmental
damage, civil or political unrest, export or import restrictions or
other events. If we are not able to manufacture products at our or
our third-party manufacturing facilities because of regulatory,
business or any other reasons, the manufacture and marketing of
these products could be interrupted. This could have a material
adverse effect on our business, financial condition, results of
operations and cash flows.
For example, the manufacturing facilities qualified to manufacture
the enzyme CCH, which is included in XIAFLEX®,
are subject to such regulatory requirements and oversight. If such
facilities fail to comply with cGMP requirements, we may not be
permitted to sell our products or may be limited in the
jurisdictions in which we are permitted to sell them. Further, if
an inspection by regulatory authorities indicates that there are
deficiencies, including non-compliance with regulatory
requirements, we could be required to take remedial actions, stop
production or close our facilities, which could disrupt the
manufacturing processes and could limit the supply of CCH and/or
delay clinical trials and subsequent licensure and/or limit the
sale of commercial supplies. In addition, future noncompliance with
any applicable regulatory requirements may result in refusal by
regulatory authorities to allow use of CCH in clinical trials,
refusal by the government to allow distribution of CCH within the
U.S. or other jurisdictions, criminal prosecution, fines, recall or
seizure of products, total or partial suspension of production,
prohibitions or limitations on the commercial sale of products,
refusal to allow the entering into of federal and state supply
contracts and civil litigation.
We purchase certain API and other materials used in our
manufacturing operations from foreign and U.S. suppliers. The price
and availability of API and other materials is subject to
volatility for a number of reasons, many of which may be outside of
our control. There is no guarantee that we will always have timely,
sufficient or affordable access to critical raw materials or
supplies from third parties. An increase in the price, or an
interruption in the supply, of any API or raw material could have a
material adverse effect on our business, financial condition,
results of operations and cash flows.
Non-U.S. regulatory requirements vary, including with respect to
the regulatory approval process, and failure to obtain regulatory
approval or maintain compliance with requirements in non-U.S.
jurisdictions would prevent or impact the marketing of our products
in those jurisdictions.
We have worldwide intellectual property rights to market many of
our products and product candidates and may seek approval to market
certain of our existing or potential future products outside of the
U.S. Approval of a product by the regulatory authorities of a
particular country is generally required prior to manufacturing or
marketing that product in that country. The approval procedure
varies among countries and can involve additional testing and the
time required to obtain such approval may differ from that required
to obtain FDA approval. Non-U.S. regulatory approval processes
generally include risks similar to those associated with obtaining
FDA approval, as further described herein. FDA approval does not
guarantee approval by the regulatory authorities of any other
country, nor does the approval by foreign regulatory authorities in
one country guarantee approval by regulatory authorities in other
foreign countries or by the FDA.
Outside of the U.S., regulatory agencies generally evaluate and
monitor the safety, efficacy and quality of pharmaceutical products
and devices and impose regulatory requirements applicable to
manufacturing processes, stability testing, recordkeeping and
quality standards, among others. These requirements vary by
jurisdiction. In certain countries, the applicable healthcare and
drug regulatory regimes may continue to evolve and implement new
requirements. Ensuring and maintaining compliance with these
varying and evolving requirements is and will continue to be
difficult, time-consuming and costly. In seeking regulatory
approvals in non-U.S. jurisdictions, we must also continue to
comply with U.S. laws and regulations, including those imposed by
the FCPA. See the risk factor “The risks related to our global
operations may adversely impact our revenues, results of operations
and financial condition.” If we fail to comply with these various
regulatory requirements or fail to obtain and maintain required
approvals, our target market will be reduced and our ability to
generate non-U.S. revenue will be adversely affected.
If pharmaceutical companies are successful in limiting the use of
generics through their legislative, regulatory and other efforts,
our sales of generic products may suffer.
Many pharmaceutical companies increasingly have used state and
federal legislative and regulatory means to delay generic
competition. These efforts have included:
•pursuing
new patents for existing products which may be granted just before
the expiration of earlier patents, which could extend patent
protection for additional years;
•using
the Citizen Petition process (for example, under 21 C.F.R. § 10.30)
to request amendments to FDA standards;
•attempting
to use the legislative and regulatory process to have products
reclassified or rescheduled or to set definitions of
abuse-deterrent formulations to protect patents and profits;
and
•engaging
in state-by-state initiatives to enact legislation that restricts
the substitution of some generic products.
If pharmaceutical companies or other third parties are successful
in limiting the use of generic products through these or other
means, our sales of generic products and our growth prospects may
decline, which could have a material adverse effect on our
business, financial condition, results of operations and cash
flows.
New tariffs and evolving trade policy between the U.S. and other
countries, including China, could have a material adverse effect on
our business, financial condition, results of operations and cash
flows.
We conduct business globally and our operations, including
third-party suppliers, span numerous countries outside the U.S.
There is uncertainty about the future relationship between the U.S.
and various other countries with respect to trade policies,
treaties, government regulations and tariffs.
The U.S. government may seek to impose additional restrictions on
international trade, such as increased tariffs on goods imported
into the U.S. Such tariffs could potentially disrupt our existing
supply chains and impose additional costs on our business,
including costs with respect to raw materials upon which our
business depends. Furthermore, if tariffs, trade restrictions or
trade barriers are placed on products such as ours by foreign
governments, it could cause us to raise prices for our products,
which may result in the loss of customers. If we are unable to pass
along increased costs to our customers, our margins could be
adversely affected. Additionally, it is possible that further
tariffs may be imposed that could affect imports of APIs and other
materials used in our products, or our business may be adversely
impacted by retaliatory trade measures taken by other countries,
including restricted access to APIs or other materials used in our
products, causing us to raise prices or make changes to our
products. Further, the continued threats of tariffs, trade
restrictions and trade barriers could have a generally disruptive
impact on the global economy and, therefore, negatively impact our
sales. Given the volatility and uncertainty regarding the scope and
duration of these tariffs and other aspects of U.S. international
trade policy, the impact on our operations and results is uncertain
and could be significant. Further governmental action related to
tariffs, additional taxes, regulatory changes or other retaliatory
trade measures could occur in the future. Any of these factors
could have a material adverse effect on our business, financial
condition, results of operations and cash flows.
We are subject to information privacy and data protection laws that
include penalties for noncompliance. Our failure to comply with
various laws protecting the confidentiality of personal
information, patient health information or other data could result
in penalties and reputational damage.
We are subject to a number of privacy and data protection laws and
regulations globally. The legislative and regulatory landscape for
privacy and data security continues to evolve. Certain countries in
which we operate have, or are developing, laws protecting the
confidentiality of individually identifiable personal information,
including patient health information. This includes federal and
state laws and regulations in the U.S. as well as in Europe and
other markets.
For example, multiple U.S. states have passed data privacy
legislation that provides new data privacy rights for consumers and
new operational requirements for businesses. The California
Consumer Privacy Act of 2018 (CCPA) went into effect on January 1,
2020 and established a new privacy framework for covered businesses
by creating an expanded definition of personal information,
establishing new data privacy rights for consumers in the state of
California and creating a new and potentially severe statutory
damages framework for violations of the CCPA and for businesses
that fail to implement reasonable security procedures and practices
to prevent data breaches. In 2021, Virginia and Colorado passed
laws similar in scope to the CCPA and California voters passed an
update to the CCPA, the California Privacy Rights Act, which
expanded on the existing consumer rights under the CCPA, imposed
additional obligations on governed businesses and created a new
state enforcement agency dedicated to enforcing California
consumers’ privacy rights. State legislatures can be expected to
continue to regulate data privacy in the absence of legislation
from the U.S. federal government. Many aspects of the CCPA and new
state privacy laws have not been interpreted by courts and best
practices are still being developed, all of which increase the risk
of compliance failure and related adverse impacts.
In addition, data protection laws in other international
jurisdictions impose restrictions on our authority to collect,
analyze and transfer personal data, including health data, across
international borders. For example, the EU’s General Data
Protection Regulation (GDPR), which became enforceable as of May
25, 2018, and related implementing laws in individual EU Member
States strictly regulate our ability to collect, analyze and
transfer personal data regarding persons in the EU, including
health data from clinical trials and adverse event reporting. The
GDPR, which has extra-territorial scope and substantial fines for
breaches (up to 4% of global annual revenue or €20 million,
whichever is greater) grants individuals whose personal data (which
is very broadly defined) is collected or otherwise processed the
right to access the data, request its deletion and control its use
and disclosure. The GDPR also requires notification of a breach in
the security of such data to be provided within 72 hours of
discovering the breach. Although the GDPR itself is self-executing
across all EU Member States, data protection authorities from
different EU Member States may interpret and apply the regulation
somewhat differently, which adds to the complexity of processing
personal data in the EU. Uncertainty in the interpretation and
enforcement of the regulation by the EU Member States’ different
data protection authorities contributes to liability exposure
risk.
The GDPR prohibits the transfer of personal data to countries
outside of the EU that are not considered by the European
Commission to provide an adequate level of data protection, and
transfers of personal data to such countries may be made only in
certain circumstances, such as where the transfer is necessary for
important reasons of public interest or the individual to whom the
personal data relates has given his or her explicit consent to the
transfer after being informed of the risks involved. Even when
certain circumstances are met, a July 2020 decision by the Court of
Justice of the European Union (Schrems II), placed transfers of
personal data from the EU to the U.S. under considerable
uncertainty as the decision raised concerns about governmental
entity access to personal data under U.S. national security laws.
Transfers of personal data out of the EU to the U.S. remain an
unresolved matter for political negotiation between the U.S. and EU
representatives.
Similar international data privacy laws also impose stringent
requirements on the collection, use of and ability to analyze and
transfer personal data from each country and increase the
complexity of our global operations. In all cases, enforcement of
international data privacy laws and regulations is new, or
priorities are shifting, which may constrain the implementation of
global business processes and may impose additional costs for
compliance.
We have policies and practices that we believe make us compliant
with applicable privacy regulations. Nevertheless, there remains a
risk of failure to comply with the rules arising from the GDPR or
privacy laws in other jurisdictions in which we operate. Should a
transgression be deemed to have occurred, it could lead to
government enforcement actions and significant sanctions or
penalties against us, adversely impact our results of operations
and subject us to negative publicity. Such liabilities could
materially affect our operations.
There has also been increased enforcement activity in the U.S.
particularly related to data security breaches. A violation of
these laws or regulations by us or our third-party vendors could
subject us to penalties, fines, liability and/or possible exclusion
from Medicare or Medicaid. Such sanctions could have a material
adverse effect on our business, financial condition, results of
operations and cash flows.
Intellectual Property Related Risks
Our ability to protect and maintain our proprietary and licensed
third-party technology, which is vital to our business, is
uncertain.
Our success, competitive position and future income depend in part
on our ability, and the ability of our partners and suppliers, to
obtain and protect patent and other intellectual property rights
relating to our current and future technologies, processes and
products. The degree of protection any patents will afford is
uncertain, including whether the protection obtained will be of
sufficient breadth and degree to protect our commercial interests
in all the jurisdictions where we conduct business. That is, the
issuance of a patent is not conclusive as to its claimed scope,
validity or enforceability. Patent rights may be challenged,
revoked, invalidated, infringed or circumvented by third parties.
For example, if an invention qualifies as a joint invention, the
joint inventor may have intellectual property rights in the
invention, which might not be protected. A third party may also
infringe upon, design around or develop uses not covered by any
patent issued or licensed to us and our patents may not otherwise
be commercially viable. In this regard, the patent position of
pharmaceutical compounds and compositions is particularly uncertain
and involves complex legal and factual questions. Even issued
patents may later be modified or revoked by the PTO, by comparable
foreign patent offices or by a court following legal proceedings.
Laws relating to such rights may in the future also be changed or
withdrawn.
There is no assurance that any of our patent claims in our pending
non-provisional and provisional patent applications relating to our
technologies, processes or products will be issued or, if issued,
that any of our existing and future patent claims will be held
valid and enforceable against third-party infringement. We could
incur significant costs and management distraction if we initiate
litigation against others to protect or enforce our intellectual
property rights. Such patent disputes may be lengthy and a
potential violator of our patents may bring a potentially
infringing product to market during the dispute, subjecting us to
competition and damages due to infringement of the competitor
product. Upon the expiration or loss of intellectual property
protection for a product, others may manufacture and distribute
such patented product, which may result in the loss of a
significant portion of our sales of that product.
We also rely on trade secrets and other unpatented proprietary
information, which we generally seek to protect by confidentiality
and nondisclosure agreements with our employees, consultants,
advisors and partners. These agreements may not effectively prevent
disclosure of confidential information and may not provide us with
an adequate remedy in the event of unauthorized disclosure. Even if
third parties misappropriate or infringe upon our proprietary
rights, we may not be able to discover or determine the extent of
any such unauthorized use and we may not be able to prevent third
parties from misappropriating or infringing upon our proprietary
rights. In addition, if our employees, scientific consultants or
partners develop inventions or processes that may be applicable to
our existing products or products under development, such
inventions and processes will not necessarily become our property
and may remain the property of those persons or their
employers.
Any failure by us to adequately protect our technology, trade
secrets or proprietary know-how or to enforce our intellectual
property rights could have a material adverse effect on our
business, financial condition, results of operations and cash
flows.
Our competitors or other third parties may allege that we are
infringing their intellectual property, forcing us to expend
substantial resources in litigation, the outcome of which is
uncertain. Any unfavorable outcome of such litigation, including
losses related to “at-risk” product launches, could have a material
adverse effect on our business, financial condition, results of
operations and cash flows.
Companies that produce branded pharmaceutical products routinely
bring litigation against ANDA or similar applicants that seek
regulatory approval to manufacture and market generic forms of
branded products, alleging patent infringement or other violations
of intellectual property rights. Patent holders may also bring
patent infringement suits against companies that are currently
marketing and selling approved generic products. Litigation often
involves significant expense. Additionally, if the patents of
others are held valid, enforceable and infringed by our current
products or future product candidates, we would, unless we could
obtain a license from the patent holder, need to delay selling our
corresponding generic product and, if we are already selling our
product, cease selling and potentially destroy existing product
stock. Additionally, we could be required to pay monetary damages
or royalties to license proprietary rights from third parties and
we may not be able to obtain such licenses on commercially
reasonable terms or at all.
There may be situations in which we may make business and legal
judgments to market and sell products that are subject to claims of
alleged patent infringement prior to final resolution of those
claims by the courts based upon our belief that such patents are
invalid, unenforceable or are not infringed by our marketing and
sale of such products. This is commonly referred to in the
pharmaceutical industry as an “at-risk” launch. The risk involved
in an at-risk launch can be substantial because, if a patent holder
ultimately prevails against us, the remedies available to such
holder may include, among other things, damages calculated based on
the profits lost by the patent holder, which can be significantly
higher than the profits we make from selling the generic version of
the product. Moreover, if a court determines that such infringement
is willful, the damages could be subject to trebling. We could face
substantial damages from adverse court decisions in such matters.
We could also be at risk for the value of such inventory that we
are unable to market or sell.
Tax Related Risks
Future changes to tax laws could materially adversely affect
us.
Under current law, we expect Endo International plc to be treated
as a non-U.S. corporation for U.S. federal income tax purposes.
However, changes to the rules in Section 7874 of the Internal
Revenue Code (the Code) or regulations promulgated thereunder or
other guidance issued by the Treasury or the IRS could adversely
affect our status as a non-U.S. corporation for U.S. federal income
tax purposes, and any such changes could have prospective or
retroactive application to us, EHSI and/or their respective
shareholders and affiliates. Consequently, there can be no
assurance that there will not exist in the future a change in law
that might cause us to be treated as a U.S. corporation for U.S.
federal income tax purposes, including with retroactive effect.
Further, we are continuing to evaluate the Inflation Reduction Act
of 2022 and its requirements, as well as any potential impact on
our business. Based on our current analysis of the act, we do not
believe this legislation will have a material impact on our
provision for income taxes.
In addition, Ireland’s Department of Finance, Luxembourg’s Ministry
of Finance, the Organization for Economic Co-operation and
Development, the European Commission and other government agencies
in jurisdictions where we and our affiliates do business, including
the U.S. Congress, have had an extended focus on issues related to
the taxation of multinational corporations. There are several
proposals pending in various jurisdictions in which we do business
that, if enacted, would substantially change the taxation of
multinational corporations. As a result, the tax laws in the
jurisdictions in which we operate could change on a prospective or
retroactive basis, and any such changes could affect recorded
deferred tax assets and liabilities and increase our effective tax
rate, which could have a material adverse effect on our business,
financial condition, results of operations and cash flows. The
potential impact of changes in tax laws in such jurisdictions could
have a material impact on the Company.
The IRS may not agree with the conclusion that we should be treated
as a non-U.S. corporation for U.S. federal income tax
purposes.
Although Endo International plc is incorporated in Ireland, the IRS
may assert that it should be treated as a U.S. corporation (and,
therefore, a U.S. tax resident) for U.S. federal income tax
purposes pursuant to Section 7874 of the Code. A corporation is
generally considered a tax resident in the jurisdiction of its
organization or incorporation for U.S. federal income tax purposes.
Because we are an Irish incorporated entity, we would generally be
classified as a non-U.S. corporation (and, therefore, a non-U.S.
tax resident) under these rules. Section 7874 provides an exception
pursuant to which a non-U.S. incorporated entity may, in certain
circumstances, be treated as a U.S. corporation for U.S. federal
income tax purposes.
Under Section 7874, we would be treated as a non-U.S. corporation
for U.S. federal income tax purposes if the former shareholders of
EHSI owned, immediately after the Paladin transactions (within the
meaning of Section 7874), less than 80% (by both vote and value) of
Endo shares by reason of holding shares in EHSI (the ownership
test). The former EHSI shareholders owned less than 80% (by both
vote and value) of the shares in Endo after the Paladin merger by
reason of their ownership of shares in EHSI. As a result, under
current law, we expect Endo International plc to be treated as a
non-U.S. corporation for U.S. federal income tax purposes. There is
limited guidance regarding the application of Section 7874,
including with respect to the provisions regarding the application
of the ownership test. Our obligation to complete the Paladin
transactions was conditional upon receipt of a Section 7874 opinion
from our counsel, Skadden, Arps, Slate, Meagher & Flom LLP
(Skadden), dated as of the closing date of the Paladin transactions
and subject to certain qualifications and limitations set forth
therein, to the effect that Section 7874 and the regulations
promulgated thereunder should not apply in such a manner so as to
cause Endo to be treated as a U.S. corporation for U.S. federal
income tax purposes from and after the closing date. However, an
opinion of tax counsel is not binding on the IRS or a court.
Therefore, there can be no assurance that the IRS will not take a
position contrary to Skadden’s Section 7874 opinion or that a court
will not agree with the IRS in the event of
litigation.
The effective rate of taxation upon our results of operations is
dependent on multi-national tax considerations.
Our effective income tax rate in the future could be adversely
affected by a number of factors, including changes in the
geographic mix of pre-tax earnings among jurisdictions with
differing statutory tax rates, changes in the valuation of deferred
tax assets and liabilities, changes in tax laws, the outcome of
income tax audits and the repatriation of earnings from our
subsidiaries for which we have not provided for taxes. Cash
repatriations are subject to restrictions in certain jurisdictions
and may be subject to withholding and other taxes. We periodically
assess our tax positions to determine the adequacy of our tax
provisions, which are subject to significant discretion. Although
we believe our tax provisions are adequate, the final determination
of tax audits and any related disputes could be materially
different from our historical income tax provisions and accruals.
The results of audits and disputes could have a material adverse
effect on our business, financial condition, results of operations
and cash flows for the period or periods for which the applicable
final determinations are made.
The IRS and other taxing authorities may continue to challenge our
tax positions and we may not be able to successfully maintain such
positions.
We are incorporated in Ireland and also maintain subsidiaries in,
among other jurisdictions, the U.S., Canada, India, the United
Kingdom and Luxembourg. The IRS and other taxing authorities may
continue to challenge our tax positions. The IRS presently is
examining certain of our subsidiaries’ U.S. income tax returns for
fiscal years ended between December 31, 2011 and December
31,
2015 and, in connection with those examinations, is reviewing our
tax positions related to, among other things, certain intercompany
arrangements, including the level of profit earned by our U.S.
subsidiaries pursuant to such arrangements, and a product liability
loss carryback claim.
During the third quarter of 2020, the IRS opened an examination
into certain of our subsidiaries’ U.S. income tax returns for
fiscal years ended between December 31, 2016 and December 31, 2018.
The IRS will likely examine our tax returns for other fiscal years
and/or for other tax positions. Similarly, other tax authorities
are currently examining our non-U.S. tax returns. Additionally,
other jurisdictions where we are not currently under audit remain
subject to potential future examinations. Such examinations may
lead to proposed or actual adjustments to our taxes that may be
material, individually or in the aggregate.
For additional information, including a discussion of related
recent developments and their potential impact on us, refer to Note
21. Income Taxes in the Consolidated Financial Statements included
in Part IV, Item 15 of this report.
Responding to or defending any challenge or proposed adjustment to
our tax positions is expensive, consumes time and other resources
and diverts management’s attention. We cannot predict whether
taxing authorities will conduct an audit challenging any of our tax
positions, the cost involved in responding to and defending any
such audit and resulting litigation, or the outcome. If we are
unsuccessful in any of these matters, we may be required to pay
taxes for prior periods, interest, fines or penalties, and may be
obligated to pay increased taxes in the future or repay certain tax
refunds, any of which could require us to reduce our operating
costs, decrease efforts in support of our products or seek to raise
additional funds, all of which could have a material adverse effect
on our business, financial condition, results of operations and
cash flows.
Our ability to use tax attributes to offset U.S. taxable income may
be limited.
Existing and future tax laws and regulations may limit our ability
to use U.S. tax attributes including, but not limited to, net
operating losses (NOLs) and excess interest expense, to offset U.S.
taxable income. For a period of time following the 2014 Paladin
transactions, Section 7874 of the Code precludes our U.S.
affiliates from utilizing U.S. tax attributes to offset taxable
income if we complete certain transactions with related non-U.S.
subsidiaries.
In addition, our tax attributes and future tax deductions may be
reduced or significantly limited as a result of our voluntary
petitions for relief under the Bankruptcy Code. Generally, any
discharge of our external or internal debt obligations as a result
of our chapter 11 filing for an amount less than the adjusted issue
price may give rise to cancellation of indebtedness income, which
must either be included in our taxable income or result in a
reduction to our tax attributes. Certain tax attributes otherwise
available and of value to the Company may be reduced, in most cases
by the principal amount of the indebtedness forgiven. U.S. and non
U.S. tax attributes subject to reduction include: (i) NOLs and NOL
carryforwards; (ii) credit carryforwards; (iii) capital losses and
capital loss carryforwards; and (iv) the tax basis of the Company’s
depreciable, amortizable and other assets.
To the extent, if any, that U.S. NOL carryforwards, other losses
and credits generated by us during or prior to our bankruptcy
proceedings are available as deductions following our bankruptcy
proceedings, our ability to utilize such deductions may be limited
by Section 382 of the Code. Section 382 provides rules limiting the
utilization of a corporation’s NOLs and other losses, deductions
and credits following a more than 50% change in ownership of a
corporation’s equity (an “ownership change”). An ownership change
may occur with respect to the Company in connection with
bankruptcy, unless the Section 382(l)(5) exception applies. This
exception is not easily met as it requires a majority of the
holders of the Company’s stock after bankruptcy to meet certain
specific and narrow conditions. Therefore, the Company’s U.S. NOLs
may be significantly limited by Section 382 of the Code. The amount
of the Company’s post-ownership-change annual U.S. taxable income
that can be offset by the pre-ownership-change U.S. NOLs generally
cannot exceed an amount equal to the product of: (i) the applicable
federal long-term tax exempt rate in effect on the date of the
ownership change and (ii) the value of the Company’s U.S. affiliate
stock (the Annual Limitation). However, if the value of the
Company’s U.S. affiliate stock is zero, if the Company does not
continue its historic business or use a significant portion of its
assets in a new business for two years after the ownership change,
the Annual Limitation resulting from the ownership change is zero
and the Company may be significantly limited in its ability to use
any of its U.S. NOLs that originated during or prior to its
bankruptcy proceedings. In addition, if the Company has a net
unrealized built-in loss at the time of an ownership change, future
deductions for items such as amortization, depreciation and
settlement liabilities may also be significantly
limited.
Further, if we or any of our affiliates undertake sales of any of
our assets in connection with the bankruptcy, such sales may result
in: (i) a reduction in our available tax attributes; (ii) an
inability for us to proactively use our tax attributes; and (iii)
us incurring a material amount of tax.
Any loss of or limitations on our ability to use any of the tax
attributes described above or any other tax attributes could have a
material adverse effect on our business, financial condition,
results of operations and cash flows.
Structural and Organizational Risks
We are incorporated in Ireland and Irish law differs from the laws
in effect in the U.S. and may afford less protection to, or
otherwise adversely affect, our shareholders.
Our shareholders may have more difficulty protecting their
interests than would shareholders of a corporation incorporated in
a jurisdiction of the U.S. As an Irish company, we are governed by
Irish Companies Act 2014 (the Companies Act). The Companies Act and
other relevant aspects of Irish law differ in some material
respects from laws generally applicable to U.S. corporations and
shareholders, including, among others, the provisions relating to
interested director and officer transactions, acquisitions,
takeovers, shareholder lawsuits and indemnification of directors.
For example, under Irish law, the duties of directors and officers
of a company are generally owed to the company only. As a result,
shareholders of Irish companies generally do not have a personal
right of action against the directors or officers of a company and
may pursue a right of action on behalf of the company only in
limited circumstances. In addition, depending on the circumstances,
the acquisition, ownership and/or disposition of our ordinary
shares may subject individuals to different or additional tax
consequences under Irish law including, but not limited to, Irish
stamp duty, dividend withholding tax and capital acquisitions
tax.
Any attempts to take us over will be subject to Irish Takeover
Rules and subject to review by the Irish Takeover
Panel.
We are subject to Irish Takeover Rules, under which the Board will
not be permitted to take any action which might frustrate an offer
for our ordinary shares once it has received an approach which may
lead to an offer or has reason to believe an offer is
imminent.
We are an Irish company and it may be difficult to enforce
judgments against us or certain of our officers and
directors.
We are incorporated in Ireland and a substantial portion of our
assets are located in jurisdictions outside the U.S. In addition,
some of our officers and directors reside outside the U.S., and
some or all of their respective assets are or may be located in
jurisdictions outside of the U.S. It may be difficult for investors
to effect service of process against us or such officers or
directors or to enforce, against us or them, judgments of U.S.
courts predicated upon civil liability provisions of the U.S.
federal securities laws.
There is no treaty between Ireland and the U.S. providing for the
reciprocal enforcement of foreign judgments. The following
requirements must be met before a foreign judgment will be deemed
to be enforceable in Ireland:
•
the judgment must be for a definite sum;
•
the judgment must be final and conclusive; and
•
the judgment must be provided by a court of competent
jurisdiction.
An Irish court will also exercise its right to refuse judgment if
the foreign judgment was obtained by fraud, if the judgment
violated Irish public policy, if the judgment is in breach of
natural justice or if it is irreconcilable with an earlier
judgment. Further, an Irish court may stay proceedings if
concurrent proceedings are being brought elsewhere. Judgments of
U.S. courts of liabilities predicated upon U.S. federal securities
laws may not be enforced by Irish courts if deemed to be contrary
to public policy in Ireland.
Item 1B. Unresolved
Staff Comments
None.
Item
2. Properties
This section provides information about the location and general
character of the Company’s principal physical properties at
December 31, 2022.
The Company’s global headquarters is located in Dublin, Ireland.
The Company also conducts certain corporate functions at its
Malvern, Pennsylvania location. Both properties are leased. The
Malvern lease is described in more detail in Note 9. Leases in the
Consolidated Financial Statements included in Part IV, Item 15 of
this report. These locations support each of our reportable
segments. For example, our global quality, supply chain and
clinical development functions are run from our global
headquarters. The Company’s segments conduct certain additional
business functions, including manufacturing, distribution, quality
assurance, R&D and administration, at locations throughout the
U.S. and select global markets. Additional information about the
properties of the Company’s reportable segments is set forth
below:
•Branded
Pharmaceuticals: This segment also conducts certain operations in
the U.S. through leased and owned manufacturing properties in
Pennsylvania, New Jersey and Michigan, as well as certain
administrative and R&D functions through leased properties in
Pennsylvania.
•Sterile
Injectables: This segment also conducts certain manufacturing,
quality assurance, R&D and administrative functions in the U.S.
through owned and leased properties in Michigan, as well as certain
R&D and administrative functions in New Jersey and India in the
same facilities as our Generic Pharmaceuticals segment, as
discussed below.
•Generic
Pharmaceuticals: This segment also conducts certain administrative
functions through a leased property in New Jersey, as well as
significant R&D operations and manufacturing and administrative
functions in India through owned and leased facilities in Chennai,
Indore and Mumbai.
•International
Pharmaceuticals: This segment’s operations are currently conducted
through Paladin’s leased headquarters in Montreal,
Canada.
As of December 31, 2022, our owned and leased properties consist of
approximately 1.0 million and 1.1 million square feet,
respectively. We believe our properties are suitable and adequate
to support our current and projected operations in all material
respects.
Item
3. Legal
Proceedings
The disclosures under Note 16. Commitments and Contingencies in the
Consolidated Financial Statements included in Part IV, Item 15 of
this report are incorporated into this Part I, Item 3 by
reference.
Item
4. Mine
Safety Disclosures
Not applicable.
PART II
Item
5. Market
for Registrant’s Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
Market Information.
On August 17, 2022, we received a letter (the Notice) from The
Nasdaq Stock Market LLC (Nasdaq) stating that, in accordance with
Nasdaq Listing Rules 5101, 5110(b) and IM-5101-1, Nasdaq had
determined that Endo’s ordinary shares would be delisted. In
accordance with the Notice, trading of Endo’s ordinary shares was
suspended at the opening of business on August 26, 2022. As a
result, Endo’s ordinary shares began trading exclusively on the
over-the-counter market on August 26, 2022. On the over-the-counter
market, Endo’s ordinary shares, which previously traded on the
Nasdaq Global Select Market under the symbol ENDP, began to trade
under the symbol ENDPQ. On September 14, 2022, Nasdaq filed a Form
25-NSE with the SEC and Endo’s ordinary shares were subsequently
delisted from the Nasdaq Global Select Market. On December 13,
2022, Endo’s ordinary shares were deregistered under Section 12(b)
of the Exchange Act.
Over-the-counter market quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not
necessarily represent actual transactions.
Holders.
As of February 27, 2023, we estimate that there were
approximately 190 holders of record of our ordinary
shares.
Dividends.
We have never declared or paid any cash dividends on our ordinary
shares and we currently have no plans to declare a dividend. We are
permitted to pay dividends subject to limitations imposed by Irish
law, the Bankruptcy Code and related rules during the pendency of
the Chapter 11 Cases, the various agreements and indentures
governing our indebtedness and the existence of sufficient
distributable reserves. For example, the Companies Act requires
Irish companies to have distributable reserves equal to or greater
than the amount of any proposed dividend. Unless we are able to
generate sufficient distributable reserves or create distributable
reserves by reducing our share premium account, we will not be able
to pay dividends.
Recent sales of unregistered securities; Use of proceeds from
registered securities.
There were no unregistered sales of equity securities by the
Company during the three years ended December 31,
2022.
Purchase of Equity Securities by the issuer and affiliated
purchasers.
The following table reflects purchases of Endo International plc
ordinary shares by the Company during the three months ended
December 31, 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period |
|
Total Number of Shares Purchased |
|
Average Price Paid per Share |
|
Total Number of Shares Purchased as Part of Publicly Announced
Plan |
|
Approximate Dollar Value of Shares that May Yet be Purchased Under
the Plan (1) |
October 1, 2022 to October 31, 2022 |
|
— |
|
|
— |
|
|
— |
|
|
$ |
2,250,000,000 |
|
November 1, 2022 to November 30, 2022 |
|
— |
|
|
— |
|
|
— |
|
|
$ |
2,250,000,000 |
|
December 1, 2022 to December 31, 2022 |
|
— |
|
|
— |
|
|
— |
|
|
$ |
2,250,000,000 |
|
Three months ended December 31, 2022 |
|
— |
|
|
— |
|
|
— |
|
|
|
__________
(1)Pursuant
to Article 11 of the Company’s Articles of Association, the Company
has broad shareholder authority to conduct ordinary share
repurchases by way of redemptions. As permitted by Irish Law and
the Company’s Articles of Association, any ordinary shares redeemed
shall be cancelled upon redemption. Although the Board has approved
the 2015 Share Buyback Program that authorizes the Company to
redeem, in the aggregate, $2.5 billion of its outstanding ordinary
shares, of which there is approximately $2.3 billion available as
of December 31, 2022, we currently do not intend to conduct
ordinary share repurchases in the foreseeable future and our
ability to do so is restricted during the pendency of the Chapter
11 Cases. Redemptions under this program may be made from time to
time in open market or negotiated transactions or otherwise, as
determined by the Board. This program does not obligate the Company
to redeem any particular amount of ordinary shares and any
repurchase of our ordinary shares under the 2015 Share Buyback
Program will be at the sole discretion of the Board and will depend
on many factors, including our financial condition, earnings,
capital requirements, level of indebtedness, statutory and
contractual restrictions applying to the payment of both cash and
property dividends or share repurchases (including restrictions
imposed by the Bankruptcy Code and related rules and guidelines
during the pendency of the Chapter 11 Cases) and other
considerations that the Board deems relevant. For example, the
Companies Act requires Irish companies to have distributable
reserves equal to or greater than the amount of any proposed
ordinary share repurchase amount. In addition, our existing debt
instruments restrict or prevent us from paying dividends on our
ordinary shares and conducting ordinary share repurchases.
Agreements governing any future indebtedness, in addition to those
governing our current indebtedness, may not permit us to pay
dividends on our ordinary shares or conduct ordinary share
repurchases. Unless we are able to generate sufficient
distributable reserves or create distributable reserves by reducing
our share premium account, we will not be able to repurchase our
ordinary shares. To date, the Company has redeemed and cancelled
approximately 4.4 million of its ordinary shares under the 2015
Share Buyback Program for $250.0 million, not including related
fees. The 2015 Share Buyback Program may be suspended, modified or
discontinued at any time.
Item 6. Reserved
Item
7. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
The following Management’s Discussion and Analysis of Financial
Condition and Results of Operations describes the principal factors
affecting the results of operations, liquidity and capital
resources and critical accounting estimates of Endo International
plc.
This section omits discussions about 2020 items and comparisons
between 2021 and 2020. Such discussions can be found in Item 7.
Management’s Discussion and Analysis of Financial Condition and
Results of Operations in our Annual Report on Form 10-K for the
year ended December 31, 2021.
The discussions in this Management’s Discussion and Analysis of
Financial Condition and Results of Operations should be read in
conjunction with our audited Consolidated Financial Statements and
the related Notes thereto. Except for the historical information
contained in this report, including the following discussion, this
report contains forward-looking statements that involve risks and
uncertainties. See “Forward-Looking Statements” beginning on page i
of this report.
Unless otherwise indicated or required by the context, references
throughout to “Endo,” the “Company,” “we,” “our” or “us” refer to
Endo International plc and its subsidiaries.
The operating results of the Company’s Astora business are reported
as Discontinued operations, net of tax in the Consolidated
Statements of Operations for all periods presented. For additional
information, see Note 4. Discontinued Operations and Asset Sales in
the Consolidated Financial Statements included in Part IV, Item 15
of this report.
EXECUTIVE SUMMARY
This executive summary provides 2022 highlights from the results of
operations that follow:
•Total
revenues in 2022 were $2,318.9 million compared to $2,993.2 million
in 2021 as revenue decreases related to
VASOSTRICT®
and certain other products in our Sterile Injectables segment, as
well as our Branded Pharmaceuticals and International
Pharmaceuticals segments, were partially offset by increased
revenues from our Generic Pharmaceuticals segment.
•Gross
margin percentage in 2022 decreased to 52.9% from 59.2% in 2021,
reflecting unfavorable changes in product mix resulting primarily
from decreased VASOSTRICT®
revenues.
•Asset
impairment charges in 2022 increased to $2,142.7 million from
$415.0 million in 2021.
•We
reported Loss from continuing operations of $2,909.6 million in
2022 compared to Loss from continuing operations of $569.1 million
in 2021.
Additionally, the following summary highlights certain recent
developments that have resulted in and/or could in the future
result in fluctuations in our results of operations and/or changes
in our liquidity and capital resources:
•Since
2019, developments related to COVID-19 have continued to evolve
rapidly and are likely to continue to do so. The duration and
severity of the direct and indirect effects of COVID-19 on our
results remain difficult to anticipate and, in many instances,
outside of our control. As such, the impacts from COVID-19 on our
consolidated results and the results of our business segments to
date may not be directly comparable to any historical period and
are not necessarily indicative of its impact on our results for any
future periods, and the evolving nature of the COVID-19 pandemic
could increase the degree to which our results, including the
results of our business segments, fluctuate in the future.
Additionally, the numerous uncertainties related to COVID-19 have
impacted our ability to forecast our future operations; however,
any future impact could be material.
•In
November 2020, we announced the initiation of several strategic
actions, collectively referred to herein as the 2020 Restructuring
Initiative, to further optimize operations and increase overall
efficiency. We recorded certain charges to complete these actions
in anticipation of realizing annualized cost savings. For further
discussion of these actions, including a discussion of amounts
recognized, refer to Note 5. Restructuring in the Consolidated
Financial Statements included in Part IV, Item 15 of this
report.
•In
March 2021, we completed a series of financing transactions,
collectively referred to herein as the March 2021 Refinancing
Transactions, which are further discussed in Note 15. Debt in the
Consolidated Financial Statements included in Part IV, Item 15 of
this report.
•In
November 2021, our PSP LLC
subsidiary entered into
the U.S. Government Agreement (as defined below), which is
a cooperative agreement with the U.S. government to expand our
Sterile Injectables segment’s fill-finish manufacturing production
capacity and capabilities at our Rochester, Michigan plant to
support the U.S. government’s national defense efforts regarding
production of critical medicines advancing pandemic
preparation.
For further discussion, refer to Note 16. Commitments and
Contingencies in the Consolidated Financial Statements included in
Part IV, Item 15 of this report.
•During
the first quarter of 2022, multiple competitive generic
alternatives to VASOSTRICT®
were launched, beginning with a
generic that was launched at risk and began shipping toward the end
of January 2022. Since then, additional competitive alternatives
entered the market, including authorized generics. These launches
began to significantly impact both Endo’s market share and product
price toward the middle of the first quarter of 2022, and the
effects of competition have since increased. Additionally,
beginning late in the first quarter of 2022, COVID-19-related
hospital utilization levels began to decline, resulting in
significantly decreased market volumes for both branded and
competing generic alternatives to VASOSTRICT®.
•In
February 2022, we launched VASOSTRICT®
in an RTU bottle, representing the first and only RTU formulation
of the drug. The bottle formulation now represents a meaningful
portion of the overall vasopressin market. Nevertheless, the
factors described in the preceding bullet point could have a
material adverse effect on our business, financial condition,
results of operations and cash flows.
•In
April 2022, we communicated the initiation of certain actions to
streamline and simplify certain functions, including our commercial
organization, to increase our overall organizational effectiveness
and better align with current and future needs. In December 2022,
we announced we would be taking certain additional actions to cease
the production and sale of QWO®
in light of market concerns about the extent and variability of
bruising following initial treatment as well as the potential for
prolonged skin discoloration. QWO®
had been launched for the treatment of moderate to severe cellulite
in the buttocks of adult women in March 2021. These actions are
collectively referred to herein as the 2022 Restructuring
Initiative. We have recorded and may continue to record certain
charges to complete these actions in anticipation of realizing
annualized cost savings. For further discussion of these actions,
including a discussion of amounts recognized and information about
any expected future charges, refer to Note 5. Restructuring in the
Consolidated Financial Statements included in Part IV, Item 15 of
this report.
•In
May 2022, we announced that our EVL subsidiary had entered into an
agreement to acquire six development-stage RTU injectable product
candidates from Nevakar Injectables, Inc., a subsidiary of Nevakar,
Inc., for an upfront cash payment of $35.0 million, which was
recorded as an Acquired in-process research and development charge
in the Consolidated Statements of Operations in the second quarter
of 2022. For further discussion of this agreement, as well as a
discussion of subsequent legal proceedings with Nevakar (as defined
below) that affected both this agreement and a prior 2018 agreement
with Nevakar, see Note 12. License, Collaboration and Asset
Acquisition Agreements in the Consolidated Financial Statements
included in Part IV, Item 15 of this report.
•In
June 2022, we announced that our EVL subsidiary had entered into an
agreement with TLC to commercialize TLC599. During the second
quarter of 2022, we made an upfront cash payment of
$30.0 million to TLC, which was recorded as an Acquired
in-process research and development charge in the Consolidated
Statements of Operations in the second quarter of 2022. For further
discussion of this agreement, see Note 12. License, Collaboration
and Asset Acquisition Agreements in the Consolidated Financial
Statements included in Part IV, Item 15 of this
report.
•Beginning
in June 2022, we elected to enter certain 30-day grace periods
related to senior notes interest payments that were originally due
to be paid between June 30, 2022 and August 1, 2022. Certain of
these payments were subsequently paid prior to the expiration of
the applicable grace periods; others were not. Refer to Note 1.
Description of Business and Note 15. Debt in the Consolidated
Financial Statements included in Part IV, Item 15 of this report
for further discussion.
•On
the Petition Date, the Debtors filed voluntary petitions for relief
under the Bankruptcy Code, which constituted an event of default
that accelerated our obligations under substantially all of our
then-outstanding debt instruments. However, section 362 of the
Bankruptcy Code stays creditors from taking any action to enforce
the related financial obligations and creditors’ rights of
enforcement in respect of the debt instruments are subject to the
applicable provisions of the Bankruptcy Code. We are subject to
risks and uncertainties associated with our ongoing bankruptcy
proceedings, which could have a material adverse effect on our
business, financial condition, results of operations and cash
flows. Refer to Note 1. Description of Business, Note 2. Bankruptcy
Proceedings and Note 15. Debt in the Consolidated Financial
Statements included in Part IV, Item 15 of this report for further
discussion.
•During
the first quarter of 2023, a competitor launched an alternative
generic version of varenicline tablets. This launch began to impact
both Endo’s market share and product price toward the middle of the
first quarter of 2023, resulting in a decline in revenue for our
Generic Pharmaceuticals segment. The effects of competition are
likely to increase in future periods.
•In
addition to our other legal proceedings, we, along with others, are
the subject of various legal proceedings regarding the sale,
marketing and/or distribution of prescription opioid medications,
which are further discussed herein. Notwithstanding any relief that
may be available as a result of our bankruptcy proceedings, it is
possible that our legal proceedings, including those relating to
opioid claims, could have a material adverse effect on our
business, financial condition, results of operations and cash
flows, including in the short term. For further discussion, refer
to Note 1. Description of Business, Note 2. Bankruptcy Proceedings
and Note 16. Commitments and Contingencies in the Consolidated
Financial Statements included in Part IV, Item 15 of this report,
as well as Part I, Item 1A. “Risk Factors.”
CRITICAL ACCOUNTING ESTIMATES
The preparation of our Consolidated Financial Statements in
conformity with U.S. generally accepted accounting principles (U.S.
GAAP) requires us to make estimates and assumptions that affect the
amounts and disclosures in our Consolidated Financial Statements,
including the Notes thereto, and elsewhere in this report. For
example, we are required to make significant estimates and
assumptions related to revenue recognition, including sales
deductions, long-lived assets, goodwill, other intangible assets,
income taxes, contingencies, financial instruments, share-based
compensation, liabilities subject to compromise and reorganization
items, net, among others. Some of these estimates can be subjective
and complex. Uncertainties related to the continued magnitude and
duration of the COVID-19 pandemic, the extent to which it will
impact our estimated future financial results, worldwide
macroeconomic conditions including interest rates, employment
rates, consumer spending, health insurance coverage, the speed of
the anticipated recovery and governmental and business reactions to
the pandemic, including any possible re-initiation of shutdowns or
renewed restrictions, have increased the complexity of developing
these estimates, including the allowance for expected credit losses
and the carrying amounts of long-lived assets, goodwill and other
intangible assets. Additionally, as a result of our ongoing
bankruptcy proceedings, we may sell or otherwise dispose of or
liquidate assets or settle liabilities for amounts other than those
reflected in the accompanying Consolidated Financial Statements.
The possibility or occurrence of any such actions could materially
impact the amounts and classifications of such assets and
liabilities reported in our Consolidated Balance Sheets.
Furthermore, our ongoing bankruptcy proceedings and planned sale
process have resulted in and are likely to continue to result in
significant changes to our business, which could ultimately result
in, among other things, asset impairment charges that may be
material. Although we believe that our estimates and assumptions
are reasonable, there may be other reasonable estimates or
assumptions that differ significantly from ours. Further, our
estimates and assumptions are based upon information available at
the time they were made. Actual results may differ significantly
from our estimates, including as a result of the uncertainties
described in this report, those described in our other reports
filed with the SEC or other uncertainties.
Accordingly, in order to understand our Consolidated Financial
Statements, it is important to understand our critical accounting
estimates. We consider an accounting estimate to be critical if
both: (i) the accounting estimate requires us to make assumptions
about matters that were highly uncertain at the time the accounting
estimate was made and (ii) changes in the estimate that are
reasonably likely to occur from period to period, or use of
different estimates that we reasonably could have used in the
current period, would have a material impact on our financial
condition, results of operations or cash flows. Our most critical
accounting estimates are described below.
Revenue recognition
With respect to contracts with commercial substance that establish
payment terms and each party’s rights regarding goods or services
to be transferred, we recognize revenue when (or as) we satisfy our
performance obligations for such contracts by transferring control
of the underlying promised goods or services to our customers, to
the extent collection of substantially all of the related
consideration is probable. The amount of revenue we recognize
reflects our estimate of the consideration we expect to be entitled
to receive, subject to certain constraints, in exchange for such
goods or services. This amount is referred to as the transaction
price.
Our revenue consists almost entirely of sales of our products to
customers, whereby we ship products to a customer pursuant to a
purchase order. For contracts such as these, revenue is recognized
when our contractual performance obligations have been fulfilled
and control has been transferred to the customer pursuant to the
contract’s terms, which is generally upon delivery to the customer.
The amount of revenue we recognize is equal to the fixed amount of
the transaction price, adjusted for our estimates of a number of
significant variable components including, but not limited to,
estimates for chargebacks, rebates, sales incentives and
allowances, DSA and other fees for services, returns and
allowances, which we collectively refer to as sales
deductions.
The Company utilizes the expected value method when estimating the
amount of variable consideration to include in the transaction
price with respect to each of the foregoing variable components and
the most likely amount method when estimating the amount of
variable consideration to include in the transaction price with
respect to future potential milestone payments that do not qualify
for the sales- and usage-based royalty exception. Variable
consideration is included in the transaction price only to the
extent it is probable that a significant revenue reversal will not
occur when the uncertainty associated with the variable
consideration is resolved. The variable component of the
transaction price is estimated based on factors such as our direct
and indirect customers’ buying patterns and the estimated resulting
contractual deduction rates, historical experience, specific known
market events and estimated future trends, current contractual and
statutory requirements, industry data, estimated customer inventory
levels, current contract sales terms with our direct and indirect
customers and other competitive factors. We subsequently review our
estimates for sales deductions based on new or revised information
that becomes available to us and make revisions to our estimates if
and when appropriate. Refer to “Sales deductions” section below for
additional information.
We believe that speculative buying of product, particularly in
anticipation of possible price increases, has been the historical
practice of certain of our customers. The timing of purchasing
decisions made by wholesaler and large retail chain customers can
materially affect the level of our sales in any particular period.
Accordingly, our sales may not correlate to the number of
prescriptions written for our products based on external
third-party data.
We have entered into DSAs with certain of our significant
wholesaler customers that obligate the wholesalers, in exchange for
fees paid by us, to: (i) manage the variability of their purchases
and inventory levels within specified limits based on product
demand and (ii) provide us with specific services, including the
provision of periodic retail demand information and current
inventory levels for our pharmaceutical products held at their
warehouse locations.
Sales deductions
As described above, the amount of revenue we recognize is equal to
the fixed amount of the transaction price, adjusted for our
estimates of variable consideration, including sales deductions. If
the assumptions we use to calculate our estimates for sales
deductions do not appropriately reflect future activity, our
financial position, results of operations and cash flows could be
materially impacted. The following table presents the activity and
ending balances, excluding Discontinued operations, for our product
sales provisions for the years ended December 31, 2022 and 2021 (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Returns and Allowances |
|
Rebates |
|
Chargebacks |
|
Other Sales Deductions |
|
Total |
Balance, December 31, 2020 |
$ |
207,916 |
|
|
$ |
179,445 |
|
|
$ |
190,528 |
|
|
$ |
27,726 |
|
|
$ |
605,615 |
|
Current year provision |
81,944 |
|
|
619,279 |
|
|
2,265,277 |
|
|
126,080 |
|
|
3,092,580 |
|
Prior year provision |
(16,313) |
|
|
(6,481) |
|
|
(153) |
|
|
(911) |
|
|
(23,858) |
|
Payments or credits |
(90,431) |
|
|
(595,775) |
|
|
(2,270,469) |
|
|
(128,939) |
|
|
(3,085,614) |
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2021 |
$ |
183,116 |
|
|
$ |
196,468 |
|
|
$ |
185,183 |
|
|
$ |
23,956 |
|
|
$ |
588,723 |
|
Current year provision |
77,698 |
|
|
634,439 |
|
|
2,229,131 |
|
|
137,758 |
|
|
3,079,026 |
|
Prior year provision |
(5,614) |
|
|
(5,031) |
|
|
(965) |
|
|
(272) |
|
|
(11,882) |
|
Payments or credits |
(88,034) |
|
|
(612,600) |
|
|
(2,238,647) |
|
|
(116,429) |
|
|
(3,055,710) |
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2022 |
$ |
167,166 |
|
|
$ |
213,276 |
|
|
$ |
174,702 |
|
|
$ |
45,013 |
|
|
$ |
600,157 |
|
Returns and Allowances
Consistent with industry practice, we maintain a return policy that
allows our customers to return products within a specified period
of time both subsequent to and, in certain cases, prior to the
products’ expiration dates. Our return policy generally allows
customers to receive credit for expired products within six months
prior to expiration and within between six months and one year
after expiration. Our provision for returns and allowances consists
of our estimates for future product returns, pricing adjustments
and delivery errors. The primary factors we consider in estimating
our potential product returns include:
•the
shelf life or expiration date of each product;
•historical
levels of expired product returns;
•external
data with respect to inventory levels in the wholesale distribution
channel;
•external
data with respect to prescription demand for our products;
and
•the
estimated returns liability to be processed by year of sale based
on analysis of lot information related to actual historical
returns.
In determining our estimates for returns and allowances, we are
required to make certain assumptions regarding the timing of the
introduction of new products and the potential of these products to
capture market share. In addition, we make certain assumptions with
respect to the extent and pattern of decline associated with
generic competition. To make these assessments, we utilize market
data for similar products as analogs for our estimations. We use
our best judgment to formulate these assumptions based on past
experience and information available to us at the time. We
continually reassess and make appropriate changes to our estimates
and assumptions as new information becomes available to
us.
Our estimate for returns and allowances may be impacted by a number
of factors, but the principal factor relates to the level of
inventory in the distribution channel. Where available, we utilize
information received from our wholesaler customers about the
quantities of inventory held, including the information received
pursuant to DSAs, which we have not independently verified. For
other customers, we have estimated inventory held based on buying
patterns. In addition, we evaluate market conditions for products
primarily through the analysis of wholesaler and other third-party
sell-through data, as well as internally-generated information, to
assess factors that could impact expected product demand at the
estimate date. As of December 31, 2022, we believe that our
estimates of the level of inventory held by our customers is within
a reasonable range as compared to both historical amounts and
expected demand for each respective product.
When we are aware of an increase in the level of inventory of our
products in the distribution channel, we consider the reasons for
the increase to determine whether we believe the increase is
temporary or other-than-temporary. Increases in inventory levels
assessed as temporary will not result in an adjustment to our
provision for returns and allowances. Some of the factors that may
be an indication that an increase in inventory levels will be
temporary include:
•recently
implemented or announced price increases for our products;
and
•new
product launches or expanded indications for our existing
products.
Conversely, other-than-temporary increases in inventory levels may
be an indication that future product returns could be higher than
originally anticipated and, accordingly, we may need to adjust our
provision for returns and allowances. Some of the factors that may
be an indication that an increase in inventory levels will be
other-than-temporary include:
•declining
sales trends based on prescription demand;
•recent
regulatory approvals to shorten the shelf life of our products,
which could result in a period of higher returns related to older
product still in the distribution channel;
•introduction
of generic, OTC or other competing products;
•increasing
price competition from competitors; and
•changes
to the National Drug Codes (NDCs) of our products, which could
result in a period of higher returns related to product with the
old NDC, as our customers generally permit only one NDC per product
for identification and tracking within their inventory
systems.
Rebates
Our provision for rebates, sales incentives and other allowances
can generally be categorized into the following four
types:
•direct
rebates;
•indirect
rebates;
•governmental
rebates, including those for Medicaid, Medicare and TRICARE, among
others; and
•managed-care
rebates.
We establish contracts with wholesalers, chain stores and indirect
customers that provide for rebates, sales incentives, DSA fees and
other allowances. Some customers receive rebates upon attaining
established sales volumes. Direct rebates are generally rebates
paid to direct purchasing customers based on a percentage applied
to a direct customer’s purchases from us, including fees paid to
wholesalers under our DSAs, as described above. Indirect rebates
are rebates paid to indirect customers that have purchased our
products from a wholesaler or distributor under a contract with
us.
We are subject to rebates on sales made under governmental and
managed-care pricing programs based on relevant statutes with
respect to governmental pricing programs and contractual sales
terms with respect to managed-care providers and GPOs. For example,
we are required to provide a discount on certain of our products to
patients who fall within the Medicare Part D coverage gap, also
referred to as the donut hole.
We participate in various federal and state government-managed
programs whereby discounts and rebates are provided to
participating government entities. For example, Medicaid rebates
are amounts owed based upon contractual agreements or legal
requirements with public sector (Medicaid) benefit providers after
the final dispensing of the product by a pharmacy to a benefit plan
participant. Medicaid reserves are based on expected payments,
which are driven by patient usage, contract performance and field
inventory that will be subject to a Medicaid rebate. Medicaid
rebates are typically billed up to 180 days after the product is
shipped, but can be as much as 270 days after the quarter in which
the product is dispensed to the Medicaid participant. Periodically,
we adjust the Medicaid rebate provision based on actual claims
paid. Due to the delay in billing, adjustments to actual claims
paid may incorporate revisions of this provision for several
periods. Because Medicaid pricing programs involve particularly
difficult interpretations of complex statutes and regulatory
guidance, our estimates could differ from actual
experience.
In determining our estimates for rebates, we consider the terms of
our contracts and relevant statutes, together with information
about sales mix (to determine which sales are subject to rebates
and the amount of such rebates), historical relationships of
rebates to revenues, past payment experience, estimated inventory
levels of our customers and estimated future trends. Our provisions
for rebates include estimates for both unbilled claims for
end-customer sales that have already occurred and future claims
that will be made when inventory in the distribution channel is
sold through to end-customer plan participants. Changes in the
level of utilization of our products through private or public
benefit plans and GPOs will affect the amount of rebates that we
owe.
Chargebacks
We market and sell products to both: (i) direct customers including
wholesalers, distributors, warehousing pharmacy chains and other
direct purchasing entities and (ii) indirect customers including
independent pharmacies, non-warehousing chains, MCOs, GPOs,
hospitals and other healthcare institutions and government
entities. We enter into agreements with certain of our indirect
customers to establish contract pricing for certain products. These
indirect customers then independently select a wholesaler from
which to purchase the products at these contracted prices.
Alternatively, we may pre-authorize wholesalers to offer specified
contract pricing to other indirect customers. Under either
arrangement, we provide credit to the wholesaler for any difference
between the contracted price with the indirect customer and the
wholesaler’s invoice price. Such credit is called a
chargeback.
Our provision for chargebacks consists of our estimates for the
credits described above. The primary factors we consider in
developing and evaluating our provision for chargebacks
include:
•the
average historical chargeback credits;
•estimated
future sales trends; and
•an
estimate of the inventory held by our wholesalers, based on
internal analysis of a wholesaler’s historical purchases and
contract sales.
Other sales deductions
We offer prompt-pay cash discounts to certain of our customers.
Provisions for such discounts are estimated and recorded at the
time of sale. We estimate provisions for cash discounts based on
contractual sales terms with customers, an analysis of unpaid
invoices and historical payment experience. Estimated cash
discounts have historically been predictable and less subjective
due to the limited number of assumptions involved, the consistency
of historical experience and the fact that we generally settle
these amounts upon receipt of payment by the customer.
Shelf-stock adjustments are credits issued to our customers to
reflect decreases in the selling prices of our products. These
credits are customary in the industry and are intended to reduce a
customer’s inventory cost to better reflect current market prices.
The primary factors we consider when deciding whether to record a
reserve for a shelf-stock adjustment include:
•the
estimated number of competing products being launched as well as
the expected launch date, which we determine based on market
intelligence;
•the
estimated decline in the market price of our product, which we
determine based on historical experience and customer input;
and
•the
estimated levels of inventory held by our customers at the time of
the anticipated decrease in market price, which we determine based
upon historical experience and customer input.
Valuation of long-lived assets
As of December 31, 2022, our combined long-lived assets
balance, including property, plant and equipment and finite-lived
intangible assets, is approximately $2.2 billion. Our finite-lived
intangible assets consist of license rights and developed
technology.
Long-lived assets are generally initially recorded at fair value if
acquired in a business combination, or at cost if otherwise. To the
extent any such asset is deemed to have a finite life and to be
held and used, it is amortized over its estimated useful life using
either the straight-line method or, in the case of certain
developed technology assets, an accelerated amortization model. The
values of these various assets are subject to continuing
scientific, medical and marketplace uncertainty. Factors giving
rise to our initial estimate of useful lives are subject to change.
Significant changes to any of these factors may result in
adjustments to the useful life of the asset and an acceleration of
related amortization expense, which could cause our net income and
net income per share to decrease. Amortization expense is not
recorded on assets held for sale.
Long-lived assets are assessed for impairment whenever events or
changes in circumstances indicate the assets may not be
recoverable. Recoverability of an asset that will continue to be
used in our operations is measured by comparing the carrying amount
of the asset to the forecasted undiscounted future cash flows
related to the asset. In the event the carrying amount of the asset
exceeds its undiscounted future cash flows and the carrying amount
is not considered recoverable, impairment may exist. An impairment
loss, if any, is measured as the excess of the asset’s carrying
amount over its fair value, generally based on a discounted future
cash flow method, independent appraisals or offers from prospective
buyers. An impairment loss would be recognized in the Consolidated
Statements of Operations in the period that the impairment
occurs.
In the case of long-lived assets to be disposed of by sale or
otherwise, including assets held for sale, the assets and the
associated liabilities to be disposed of together as a group in a
single transaction (the disposal group) are measured at the lower
of their carrying amount or fair value less cost to sell. Prior to
disposal, losses are recognized for any initial or subsequent
write-down to fair value less cost to sell, while gains are
recognized for any subsequent increase in fair value less cost to
sell, but not in excess of any cumulative losses previously
recognized. Any gains or losses not previously recognized that
result from the sale of a disposal group shall be recognized at the
date of sale.
As a result of the significance of our long-lived assets, any
recognized losses could have a material adverse impact on our
financial position and results of operations.
Our reviews of long-lived assets during the two years ended
December 31, 2022 resulted in certain impairment charges. The
majority of these charges related to finite-lived intangible assets
and certain assets associated with disposal groups, which are
further described in Note 11. Goodwill and Other Intangibles and
Note 4. Discontinued Operations and Asset Sales, respectively, in
the Consolidated Financial Statements included in Part IV, Item 15
of this report. Our impairment charges relating to long-lived
assets were generally based on fair value estimates determined
using discounted cash flow models or, in the case of disposal
groups, a market approach. When testing a long-lived asset using a
discounted cash flow model, we utilize assumptions related to the
future operating performance of the corresponding product based on
management’s annual and ongoing budgeting, forecasting and planning
processes, which represent our best estimate of future cash flows.
These estimates are subject to many assumptions, such as the
economic environment in which our segments operate, demand for our
products, competitor actions and factors which could affect our tax
rate. Estimated future pre-tax cash flows are adjusted for taxes
using a market participant tax rate and discounted to present value
using a market participant weighted average cost of capital.
Financial and credit market volatility directly impacts certain
inputs and assumptions used to develop the weighted average cost of
capital such as the risk-free interest rate, industry beta, debt
interest rate and certain capital structure considerations. These
assumptions are based on significant inputs and judgments not
observable in the market, and thus represent Level 3 measurements
within the fair value hierarchy. The use of different inputs and
assumptions would increase or decrease our estimated discounted
future cash flows, the resulting estimated fair values and the
amounts of our related impairments, if any. The discount rates
applied to intangible long-lived assets impaired in 2022 ranged
from 9.5% to 12.0%.
Events giving rise to impairment are an inherent risk in the
pharmaceutical industry and cannot be predicted with certainty.
Factors that we consider in deciding when to perform an impairment
review include significant under-performance of a product line in
relation to expectations, competitive events affecting the expected
future performance of a product line, significant negative industry
or economic trends and significant changes or planned changes in
our use of the assets.
Each category of long-lived intangible assets is described further
below.
Developed Technology.
Our developed technology assets subject to amortization have useful
lives ranging from 6 years to 16 years, with a weighted average
useful life of approximately 12 years. We determine amortization
periods and methods of amortization for developed technology assets
based on our assessment of various factors impacting estimated
useful lives and the timing and extent of estimated cash flows of
the acquired assets, including the strength of the intellectual
property protection of the product (if applicable), contractual
terms and various other competitive and regulatory
issues.
License Rights.
Our license rights subject to amortization have useful lives
ranging from 7 years to 15 years, with a weighted average useful
life of approximately 14 years. We determine amortization periods
for licenses based on our assessment of various factors including
the expected launch date of the product, the strength of the
intellectual property protection of the product (if applicable),
contractual terms and various other competitive, developmental and
regulatory issues.
As of December 31, 2022, the carrying amount of our intangible
assets associated with developed technology and license rights
totaled approximately $1.7 billion. As a result, if the assumptions
used in our impairment tests change, it is possible that material
impairment charges could be recorded in future
periods.
Goodwill and indefinite-lived intangible assets
As of December 31, 2022, our goodwill balance is approximately
$1.4 billion and we have no indefinite-lived intangible
assets.
Goodwill and, if applicable, indefinite-lived intangible assets are
tested for impairment annually, as of October 1, and when events or
changes in circumstances indicate that the asset might be
impaired.
We perform the goodwill impairment test by estimating the fair
value of the reporting units using an income approach that utilizes
a discounted cash flow model or, where appropriate, a market
approach. Any goodwill impairment charge we recognize for a
reporting unit is equal to the lesser of: (i) the total goodwill
allocated to that reporting unit and (ii) the amount by which that
reporting unit’s carrying amount exceeds its fair
value.
Similarly, if applicable, we perform our indefinite-lived
intangible asset impairment tests by comparing the fair value of
each intangible asset with its carrying amount. We estimate the
fair values of our indefinite-lived intangible assets using an
income approach that utilizes a discounted cash flow model. If the
carrying amount of an indefinite-lived intangible asset exceeds its
fair value, an impairment loss is recognized in an amount equal to
that excess.
The discounted cash flow models reflect our estimates of future
cash flows and other factors including estimates of: (i) future
operating performance, including future sales, long-term growth
rates, gross margins, operating expenses, discount rates and the
probability of achieving the estimated cash flows, and (ii) future
economic conditions, all of which may differ from actual future
cash flows.
Assumptions related to future operating performance are based on
management’s annual and ongoing budgeting, forecasting and planning
processes, which represent our best estimate of future cash flows.
These estimates are subject to many assumptions, such as the
economic environment in which our segments operate, demand for our
products, competitor actions and factors which could affect our tax
rate. Estimated future pre-tax cash flows are adjusted for taxes
using a market participant tax rate and discounted to present value
using a market participant weighted average cost of capital.
Financial and credit market volatility directly impacts certain
inputs and assumptions used to develop the weighted average cost of
capital such as the risk-free interest rate, industry beta, debt
interest rate and certain capital structure considerations. Where
appropriate, the weighted average cost of capital may also
incorporate certain risk premiums, such as a company-specific risk
premium (CSRP), which represents the incremental return that
investors may require to compensate for the risks, uncertainties
and variability in our estimated future cash flows. These
assumptions are based on significant inputs and judgments not
observable in the market, and thus represent Level 3 measurements
within the fair value hierarchy. The use of different inputs and
assumptions would increase or decrease our estimated discounted
future cash flows, the resulting estimated fair values and the
amounts of our related impairments, if any.
In order to assess the reasonableness of the calculated fair values
of our reporting units, we also compare the sum of the reporting
units’ fair values to Endo’s market capitalization, together with
the aggregate estimated fair value of its debt, and/or observable
bids for the Company, such as the Stalking Horse Bid (as defined
and further described in Note 2. Bankruptcy Proceedings in the
Consolidated Financial Statements included in Part IV, Item 15 of
this report). We use this comparison to calculate an implied
control premium (the excess sum of the reporting units’ fair values
over Endo’s market capitalization, together with the aggregate
estimated fair value of its debt, and/or observable bids) or an
implied control discount (the excess of Endo’s market
capitalization, together with the aggregate estimated fair value of
its debt, and/or observable bids over the sum of the reporting
units’ fair values). The Company evaluates the implied control
premium or discount by comparing it to control premiums or
discounts of recent comparable market transactions, as applicable.
If the control premium or discount is not reasonable in light of
comparable recent transactions, or recent movements in the
Company’s share price and/or the aggregate estimated fair value of
its debt, we reevaluate the fair value estimates of the reporting
units to determine whether it is appropriate to adjust discount
rates and/or other assumptions. This re-evaluation could correlate
to different implied fair values for certain or all of the
Company’s reporting units.
As further described in Note 11. Goodwill and Other Intangibles in
the Consolidated Financial Statements included in Part IV, Item 15
of this report, Endo performed its annual impairment tests as of
October 1, 2022. For the purposes of the 2022 annual tests, the
Company had two reporting units with goodwill: Branded
Pharmaceuticals and Sterile Injectables; the Company did not have
any indefinite-lived intangible assets.
The discount rates used in the October 1, 2022 goodwill tests were
15.0% and 19.5% for the Branded Pharmaceuticals and Sterile
Injectables reporting units, respectively, compared to: (i) 15.0%
and 19.5%, respectively, used in the interim goodwill tests
performed in the third quarter of 2022; (ii) 13.5% and 18.5%,
respectively, used in the interim goodwill tests performed in the
second quarter of 2022; and (iii) 14.5% and 11.0%, respectively,
used in the October 1, 2021 goodwill tests. The discount rates used
in these 2022 goodwill tests reflect certain increases in the CSRP
compared to the October 1, 2021 tests, representing increased risks
and uncertainties in the underlying cash flows, including those
related to: (i) our ability to identify, develop and launch new
product candidates, particularly in our Sterile Injectables
reporting unit and (ii) risks and uncertainties associated with our
ongoing bankruptcy proceedings. We believe the discount rates and
other inputs and assumptions used in these various tests were
consistent with those that a market participant would have
used.
We recorded goodwill impairment charges of $1,748.0 million
and $97.0 million, respectively, in connection with our
second- and third-quarter 2022 interim impairment tests of our
Sterile Injectables reporting unit. No impairment charges were
recorded for our Branded Pharmaceuticals reporting unit as a result
of these tests.
We completed our annual goodwill impairment tests on October 1,
2022; no additional impairments were recorded in connection with
these tests. A 50 basis point increase in the assumed discount rate
utilized in the Branded Pharmaceuticals test would not have changed
the outcome of that test; however, a 50 basis point increase in the
assumed discount rate utilized in the Sterile Injectables test
would have resulted in a goodwill impairment charge for this
reporting unit of approximately $45 million.
We performed an additional interim goodwill impairment test for our
Sterile Injectables reporting unit as of December 31, 2022 based,
in part, on updates made to our estimates of future cash flows
following the completion of our annual enterprise-wide long-term
strategic planning process beginning in late fourth-quarter 2022
and concluding in February 2023, which is further described in Note
11. Goodwill and Other Intangibles in the Consolidated Financial
Statements included in Part IV, Item 15 of this report. The
discount rate used in this test was 14.5%. We believe this discount
rate and the other inputs and assumptions used to estimate fair
value were consistent with those that a market participant would
have used in light of the degree of risk associated with the
updated estimated future cash flows used in this impairment test as
compared to the October 1, 2022 tests. As a result of the December
31, 2022 test, we determined that there was no impairment of
goodwill. A 50 basis point increase in the assumed discount rate
utilized in this test would have resulted in a goodwill impairment
charge for this reporting unit of approximately
$15 million.
Additional information about our impairment tests is provided in
Note 11. Goodwill and Other Intangibles in the Consolidated
Financial Statements included in Part IV, Item 15 of this
report.
As of December 31, 2022, our Branded Pharmaceuticals and
Sterile Injectables reporting units had remaining goodwill of
approximately $0.8 billion and $0.5 billion, respectively. As a
result, if the assumptions used in our impairment tests change, it
is possible that additional impairment charges could be recorded in
future periods and that these charges could be
material.
Each of our reporting units is subject to various risks and
uncertainties, including those described above and in Note 11.
Goodwill and Other Intangibles in the Consolidated Financial
Statements included in Part IV, Item 15 of this report. If actual
results for our reporting units differ from our expectations, as a
result of these or other risks and uncertainties, and/or if we make
related changes to our assumptions for these reporting units, the
estimated future revenues and cash flows could be significantly
reduced, which could ultimately result in goodwill impairment
charges that may be material.
Income taxes
Our income tax expense, deferred tax assets and liabilities, income
tax payable and reserves for unrecognized tax benefits reflect our
best assessment of estimated current and future taxes to be paid.
We are subject to income taxes in the U.S. and numerous other
jurisdictions in which we operate. Significant judgments and
estimates are required in determining the consolidated income tax
expense or benefit for financial statement purposes. Deferred
income taxes arise from temporary differences, which result in
future taxable or deductible amounts, between the tax basis of
assets and liabilities and the corresponding amounts reported in
our Consolidated Financial Statements. In assessing the ability to
realize deferred tax assets, we consider, when appropriate, future
taxable income by tax jurisdiction and tax planning strategies.
Where appropriate, we record a valuation allowance to reduce our
net deferred tax assets to equal an amount that is more likely than
not to be realized. In projecting future taxable income, we
consider historical results, adjusted in certain cases for the
results of discontinued operations, changes in tax laws or
nonrecurring transactions. We incorporate assumptions about the
amount of future earnings within a specific jurisdiction’s pretax
income, adjusted for material changes included in business
operations. The assumptions about future taxable income require
significant judgment and, while these assumptions rely heavily on
estimates, such estimates are consistent with the plans we are
using to manage the underlying business. Future changes in tax laws
and rates, including administrative or regulatory guidance, could
affect recorded deferred tax assets and liabilities. Any
adjustments to these estimates will generally be recorded as an
income tax expense or benefit in the period the adjustment is
determined.
The calculation of our tax liabilities often involves dealing with
uncertainties in the application of complex tax laws and
regulations in a multitude of jurisdictions across our global
operations. A benefit from an uncertain tax position may be
recognized when it is more likely than not that the position will
be sustained on the basis of the technical merits upon examination,
including resolutions of any related appeals or litigation
processes. We first record unrecognized tax benefits as liabilities
and then adjust these liabilities when our judgment changes as a
result of the evaluation of new information not previously
available at the time of establishing the liability. Because of the
complexity of some of these uncertainties, the ultimate resolution
may result in a payment, potentially including interest and
penalties, that is materially different from our current estimate
of the unrecognized tax benefit liabilities. These differences,
along with any related interest and penalties, will generally be
reflected as increases or decreases to income tax expense in the
period in which new information becomes available.
We make an evaluation at the end of each reporting period as to
whether or not some or all of the undistributed earnings of our
subsidiaries are indefinitely reinvested. Refer to Note 21. Income
Taxes in the Consolidated Financial Statements included in Part IV,
Item 15 of this report for information about our evaluation for the
current reporting period and certain associated risks and
uncertainties.
Contingencies
Material legal proceedings involving the Company are discussed in
Note 16. Commitments and Contingencies in the Consolidated
Financial Statements included in Part IV, Item 15 of this report.
Contingent accruals and legal settlements are recorded in the
Consolidated Statements of Operations as Litigation-related and
other contingencies, net (or as Discontinued operations, net of tax
in the case of vaginal mesh matters) when the Company determines
that a loss is both probable and reasonably estimable. Legal fees
and other expenses related to litigation are expensed as incurred
and are generally included in Selling, general and administrative
expenses in the Consolidated Statements of Operations (or as
Discontinued operations, net of tax in the case of vaginal mesh
matters).
Due to the fact that legal proceedings and other contingencies are
inherently unpredictable, our estimates of the probability and
amount of any such liabilities involve significant judgment
regarding future events. The factors we consider in developing our
liabilities for legal proceedings include the merits and
jurisdiction of the proceeding, the nature and the number of other
similar current and past proceedings, the nature of the product and
the current assessment of the science subject to the proceeding, if
applicable, and the likelihood of the conditions of settlement
being met.
In order to evaluate whether a claim is probable of loss, we may
rely on certain information about the claim. Without access to and
review of such information, we may not be in a position to
determine whether a loss is probable. Further, the timing and
extent to which we obtain any such information, and our evaluation
thereof, is often impacted by items outside of our control
including, without limitation, the normal cadence of the litigation
process and the provision of claim information to us by plaintiff’s
counsel. The amount of our liabilities for legal proceedings may
change as we receive additional information and/or become aware of
additional asserted or unasserted claims. Additionally, there is a
possibility that we will suffer adverse decisions or verdicts of
substantial amounts or that we will enter into additional monetary
settlements, either of which could be in excess of amounts
previously accrued for. Any changes to our liabilities for legal
proceedings could have a material adverse effect on our business,
financial condition, results of operations and cash
flows.
As of December 31, 2022, our accrual for loss contingencies
totaled $820.8 million, the most significant components of
which relate to: (i) various opioid-related matters as further
described herein and (ii) product liability and related matters
associated with transvaginal surgical mesh products, which we have
not sold since March 2016. Although we believe there is a
possibility that a loss in excess of the amount recognized exists,
we are unable to estimate the possible loss or range of loss in
excess of the amount recognized at this time. As of
December 31, 2022, our entire accrual for loss contingencies
is classified as Liabilities subject to compromise in the
Consolidated Balance Sheets. As a result of the automatic stay
under the Bankruptcy Code and the uncertain treatment of these
liabilities pursuant to a chapter 11 plan or otherwise, the timing
and amount of payment, if any, related to the amounts accrued for
loss contingencies is uncertain.
Liabilities subject to compromise
For periods beginning with the third quarter of 2022, pre-petition
unsecured and undersecured claims related to the Debtors that may
be impacted by the bankruptcy reorganization process have been
classified as Liabilities subject to compromise in the Consolidated
Balance Sheets. Liabilities subject to compromise include
pre-petition liabilities for which there is uncertainty about
whether such pre-petition liabilities could be impaired as a result
of the Chapter 11 Cases. Liabilities subject to compromise are
recorded at the expected amount of the total allowed claim, even if
they may ultimately be settled for different amounts.
The determination of how liabilities will ultimately be settled or
treated cannot be made until approved by the Bankruptcy Court.
Therefore, the amounts classified as Liabilities subject to
compromise are preliminary and may be subject to future adjustments
as a result of, among other things, the possibility or occurrence
of certain Bankruptcy Court actions, further developments with
respect to disputed claims, any rejection by us of executory
contracts and/or any payments by us of amounts classified as
Liabilities subject to compromise, which may be allowed in certain
limited circumstances. Amounts are also subject to adjustments if
we make changes to our assumptions or estimates related to claims
as additional information becomes available to us including,
without limitation, those related to the expected amounts of
allowed claims, the value of any collateral securing claims and the
secured status of claims. Such adjustments may be
material.
RESULTS OF OPERATIONS
Consolidated Results Review
The following table displays our revenue, gross margin, gross
margin percentage and other pre-tax expense or income for the years
ended December 31, 2022 and 2021 (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change |
|
2022 |
|
2021 |
|
2022 vs. 2021 |
Total revenues, net |
$ |
2,318,875 |
|
|
$ |
2,993,206 |
|
|
(23) |
% |
Cost of revenues |
1,092,499 |
|
|
1,221,064 |
|
|
(11) |
% |
Gross margin |
$ |
1,226,376 |
|
|
$ |
1,772,142 |
|
|
(31) |
% |
Gross margin percentage |
52.9 |
% |
|
59.2 |
% |
|
|
Selling, general and administrative |
777,169 |
|
|
861,760 |
|
|
(10) |
% |
Research and development |
128,033 |
|
|
123,440 |
|
|
4 |
% |
Acquired in-process research and development |
68,700 |
|
|
25,120 |
|
|
NM |
Litigation-related and other contingencies, net |
478,722 |
|
|
345,495 |
|
|
39 |
% |
Asset impairment charges |
2,142,746 |
|
|
414,977 |
|
|
NM |
Acquisition-related and integration items, net |
408 |
|
|
(8,379) |
|
|
NM |
Interest expense, net |
349,776 |
|
|
562,353 |
|
|
(38) |
% |
Loss on extinguishment of debt |
— |
|
|
13,753 |
|
|
(100) |
% |
Reorganization items, net |
202,978 |
|
|
— |
|
|
NM |
Other income, net |
(34,054) |
|
|
(19,774) |
|
|
72 |
% |
Loss from continuing operations before income tax |
$ |
(2,888,102) |
|
|
$ |
(546,603) |
|
|
NM |
__________
NM indicates that the percentage change is not meaningful or is
greater than 100%.
Total revenues, net.
Total revenues in 2022 were $2,318.9 million compared to $2,993.2
million in 2021 as revenue decreases related to
VASOSTRICT®
and certain other products in our Sterile Injectables segment, as
well as our Branded Pharmaceuticals and International
Pharmaceuticals segments, were partially offset by increased
revenues from our Generic Pharmaceuticals segment. Our revenues are
further disaggregated and described below under the heading
“Business Segment Results Review.”
Cost of revenues and gross margin percentage.
During the years ended December 31, 2022 and 2021, Cost of revenues
includes certain amounts that impact its comparability among
periods, as well as the comparability of gross margin percentage,
including amortization expense and amounts related to continuity
and separation benefits, cost reductions and strategic review
initiatives. The following table summarizes such amounts (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
2021 |
Amortization of intangible assets (1) |
$ |
337,311 |
|
|
$ |
372,907 |
|
|
|
|
|
Amounts related to continuity and separation benefits, cost
reductions and strategic review initiatives (2) |
$ |
61,806 |
|
|
$ |
9,058 |
|
__________
(1)Amortization
expense fluctuates based on changes in the total amount of
amortizable intangible assets and the rate of amortization in
effect for each intangible asset, both of which can vary based on
factors such as the amount and timing of acquisitions,
dispositions, asset impairment charges, transfers between
indefinite- and finite-lived intangibles assets, changes in foreign
currency rates and changes in the composition of our intangible
assets impacting the weighted average useful lives and amortization
methodologies being utilized. The decrease in 2022 was primarily
driven by prior asset impairment charges and decreases in the rate
of amortization expense for certain assets.
(2)Amounts
include, among other things, certain accelerated depreciation
charges, inventory adjustments and net employee separation,
continuity and other benefit-related costs, including amounts
related to restructurings. For further discussion of our
restructuring initiatives, including a discussion of amounts
recognized and information about any expected future charges, refer
to Note 4. Discontinued Operations and Asset Sales and Note 5.
Restructuring in the Consolidated Financial Statements included in
Part IV, Item 15 of this report.
The decrease in Cost of revenues in 2022 was primarily due to
decreased revenues and decreased amortization expense, partially
offset by unfavorable changes in product mix resulting primarily
from decreased VASOSTRICT®
revenues, as well as increased costs for amounts related to
continuity and separation benefits, cost reductions and strategic
review initiatives.
The decrease in gross margin percentage in 2022 was primarily due
to unfavorable changes in product mix resulting primarily from
decreased VASOSTRICT®
revenues.
Selling, general and administrative expenses.
The decrease in 2022 was primarily due to decreased costs
associated with our commercial investment in QWO®
and certain legal matters. Additionally, in 2022, Selling, general
and administrative expenses reflected the recovery of certain
previously-incurred opioid-related legal expenses. These decreases
were partially offset by increased Selling, general and
administrative expenses associated with our investment in consumer
marketing efforts supporting XIAFLEX®
and certain strategic review initiatives, restructuring and/or
other cost reduction initiatives, including costs incurred in
connection with our bankruptcy proceedings, which are included in
Selling, general and administrative expenses until the Petition
Date and in Reorganization items, net thereafter. Refer to Note 5.
Restructuring in the Consolidated Financial Statements included in
Part IV, Item 15 of this report for further discussion of certain
restructuring initiatives, including a discussion of amounts
recognized and information about any expected future
charges.
R&D expenses.
Our R&D efforts are focused on the development of a diversified
portfolio of innovative and clinically differentiated product
candidates. The amount of R&D expense we record in any period
varies depending on the nature and stage of development of our
R&D programs, certain of which are further described
below.
We continue to invest in our Branded Pharmaceuticals segment. In
early 2020, we announced that we had initiated our
XIAFLEX®
development program for the treatment of plantar fibromatosis, for
which we anticipate Phase 2 top-line data by the end of the first
quarter of 2023. We also initiated a proof-of-concept study in
plantar fasciitis during the fourth quarter of 2022. Additionally,
until late 2022, we had been advancing our development programs for
QWO®,
which was launched in March 2021 for the treatment of moderate to
severe cellulite in the buttocks of adult women. However, as
further discussed in Note 5. Restructuring in the Consolidated
Financial Statements included in Part IV, Item 15 of this report,
in December 2022, we announced we would be ceasing the production
and sale of QWO®
in light of market concerns about the extent and variability of
bruising following initial treatment as well as the potential for
prolonged skin discoloration.
We expect to continue to focus investments in RTU and other product
candidates in our Sterile Injectables segment, potentially
including acquisitions and/or license and commercialization
agreements such as the 2022 Nevakar Agreement that is further
described in Note 12. License, Collaboration and Asset Acquisition
Agreements in the Consolidated Financial Statements included in
Part IV, Item 15 of this report.
The increase in R&D expense in 2022 was primarily driven by
increased costs associated with our XIAFLEX®
development programs, certain restructuring and other cost
reduction initiatives and certain post-marketing commitments. These
increases were partially offset by decreased costs associated with
QWO®,
including as a result of actions taken in connection with the
discontinuation of QWO®
discussed above. Refer to Note 5. Restructuring in the Consolidated
Financial Statements included in Part IV, Item 15 of this report
for further discussion of certain restructuring initiatives,
including a discussion of amounts recognized and information about
any expected future charges.
As our development programs progress, it is possible that our
R&D expenses could increase.
Acquired in-process research and development.
Acquired in-process research and development charges are generally
recognized in periods in which in-process research and development
assets (with no alternative future use in other research and
development projects) are acquired from third parties in connection
with an asset acquisition, or when costs are incurred (up to the
point of regulatory approval) for upfront or milestone payments to
third parties associated with in-process research and development.
The increase in Acquired in-process research and development
charges in 2022 was primarily driven by the incurrence, during the
second quarter of 2022, of expenses related to upfront payments
associated with the 2022 Nevakar Agreement and the TLC Agreement of
$35.0 million and $30.0 million, respectively, which are
further described in Note 12. License, Collaboration and Asset
Acquisition Agreements in the Consolidated Financial Statements
included in Part IV, Item 15 of this report. This increase was
partially offset by the incurrence, during 2021, of approximately
$25.1 million of expenses, which primarily related to upfront
payments associated with various license agreements. To the extent
we enter into agreements to acquire in-process research and
development in the future and/or incur expenses related to upfront
or milestone payments to third parties associated with existing or
potential future agreements, Acquired in-process research and
development charges could increase in the future, and the amounts
of any increases could be material.
Litigation-related and other contingencies, net.
Included within Litigation-related and other contingencies, net are
changes to our accruals for litigation-related charges. Our
material legal proceedings and other contingent matters are
described in more detail in Note 16. Commitments and Contingencies
in the Consolidated Financial Statements included in Part IV, Item
15 of this report. Notwithstanding any relief that may be available
as a result of our bankruptcy proceedings, it is possible that our
legal proceedings, including those relating to opioid claims, could
have a material adverse effect on our business, financial
condition, results of operations and cash flows, including in the
short term. For further discussion, refer to Note 1. Description of
Business, Note 2. Bankruptcy Proceedings and Note 16. Commitments
and Contingencies in the Consolidated Financial Statements included
in Part IV, Item 15 of this report.
Asset impairment charges.
The following table presents the components of our total Asset
impairment charges for the years ended December 31, 2022 and 2021
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
2021 |
Goodwill impairment charges |
$ |
1,845,000 |
|
|
$ |
363,000 |
|
Other intangible asset impairment charges |
288,701 |
|
|
7,811 |
|
Property, plant and equipment impairment charges |
9,045 |
|
|
2,011 |
|
|
|
|
|
Disposal group impairment charges |
— |
|
|
42,155 |
|
Total asset impairment charges |
$ |
2,142,746 |
|
|
$ |
414,977 |
|
For additional information, refer to Note 4. Discontinued
Operations and Asset Sales, Note 5. Restructuring, Note 7. Fair
Value Measurements, Note 9. Leases, Note 10. Property, Plant and
Equipment and Note 11. Goodwill and Other Intangibles in the
Consolidated Financial Statements included in Part IV, Item 15 of
this report, as well as the “CRITICAL ACCOUNTING ESTIMATES” section
herein.
Acquisition-related and integration items, net.
Acquisition-related and integration items, net primarily consist of
the net expense (benefit) from changes in the fair value of
acquisition-related contingent consideration liabilities resulting
from changes to our estimates regarding the timing and amount of
the future revenues of the underlying products and changes in other
assumptions impacting the probability of incurring, and extent to
which we could incur, related contingent obligations. See Note 7.
Fair Value Measurements in the Consolidated Financial Statements
included in Part IV, Item 15 of this report for further discussion
of our acquisition-related contingent consideration.
Interest expense, net.
The components of Interest expense, net for the years ended
December 31, 2022 and 2021 are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
2021 |
Interest expense |
$ |
350,740 |
|
|
$ |
562,937 |
|
Interest income |
(964) |
|
|
(584) |
|
Interest expense, net |
$ |
349,776 |
|
|
$ |
562,353 |
|
The decrease in interest expense in 2022 was primarily attributable
to the fact that we ceased the recognition of interest expense
related to our indebtedness beginning on the Petition Date as a
result of the Chapter 11 Cases. Additionally, when compared to the
prior year period, there have been decreases to interest expense
resulting from reductions in the aggregate principal amount of our
indebtedness, which were primarily attributable to the partial
repayment of the Revolving Credit Facility in October 2021, the
January 2022 Senior Notes Repayments and certain quarterly payments
made on the Term Loan Facility. These decreases in interest expense
were partially offset by increases in the weighted average interest
rate applicable to our total indebtedness through the Petition
Date. Beginning during the third quarter of 2022, we also became
obligated to make certain adequate protection payments as a result
of the Chapter 11 Cases, which are currently being accounted for as
a reduction of the carrying amount of the related debt instruments.
Some or all of the adequate protection payments may later be
recharacterized as interest expense depending upon certain
developments in the Chapter 11 Cases, which could result in
increases in interest expense in future periods that may be
material. Refer to Note 15. Debt in the Consolidated Financial
Statements included in Part IV, Item 15 of this report for further
discussion.
Interest income varies primarily based on the amounts of our
interest-bearing investments, such as money market funds, as well
as changes in the corresponding interest rates.
Loss on extinguishment of debt.
The amount in 2021 relates to the March 2021 Refinancing
Transactions. Refer to Note 15. Debt in the Consolidated Financial
Statements included in Part IV, Item 15 of this report for further
discussion.
Reorganization items, net.
Amounts relate to the net expense or income recognized during our
bankruptcy proceedings required to be presented as Reorganization
items, net under
Accounting Standards Codification Topic 852, Reorganizations
(ASC 852). Refer to Note 2. Bankruptcy Proceedings in the
Consolidated Financial Statements included in Part IV, Item 15 of
this report for further details. Costs related to our bankruptcy
proceedings that were incurred prior to the Petition Date are
generally reflected as Selling, general and administrative expenses
in our Consolidated Statements of Operations. We expect to continue
to incur significant expenses in connection with our ongoing
bankruptcy proceedings and certain related transactions and it is
possible that such costs will increase over time, particularly if
we incur certain associated success-related and/or other contingent
fees, which could be significant. In addition, the longer the
Chapter 11 Cases continue, the higher our expenses for these
matters could be.
Other income, net.
The components of Other income, net for the years ended December
31, 2022 and 2021 are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
2021 |
Net gain on sale of business and other assets |
$ |
(26,183) |
|
|
$ |
(4,516) |
|
Foreign currency (gain) loss, net |
(2,087) |
|
|
1,253 |
|
Net loss from our investments in the equity of other
companies |
378 |
|
|
453 |
|
Other miscellaneous, net |
(6,162) |
|
|
(16,964) |
|
Other income, net |
$ |
(34,054) |
|
|
$ |
(19,774) |
|
For additional information on the components of Other income, net,
refer to Note 20. Other Income, Net in the Consolidated Financial
Statements included in Part IV, Item 15 of this
report.
Income tax expense (benefit).
The following table displays our Loss from continuing operations
before income tax, Income tax expense and Effective tax rate for
the years ended December 31, 2022 and 2021 (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
2021 |
Loss from continuing operations before income tax |
$ |
(2,888,102) |
|
|
$ |
(546,603) |
|
Income tax expense |
$ |
21,516 |
|
|
$ |
22,478 |
|
Effective tax rate |
(0.7) |
% |
|
(4.1) |
% |
Our tax rate is affected by recurring items, such as tax rates in
non-U.S. jurisdictions as compared to the notional U.S. federal
statutory tax rate, and the relative amount of income or loss in
those various jurisdictions. It is also impacted by certain items
that may occur in any given period, but are not consistent from
period to period.
The change in income tax expense in 2022 compared to the 2021
income tax expense primarily relates to an increase in accrued
interest on uncertain tax positions and changes in the geographic
mix of pre-tax earnings. For additional discussion of the effective
tax rate, see Note 21. Income Taxes in the Consolidated Financial
Statements included in Part IV, Item 15 of this
report.
As previously disclosed, the Company concluded that there was
substantial doubt about its ability to continue as a going concern
within one year after the date of issuance of the Condensed
Consolidated Financial Statements included in the Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 2022 filed
with the SEC on August 9, 2022 (the Second-Quarter 2022 Form 10-Q).
The Company considered this in determining that certain net
deferred tax assets were no longer more likely than not realizable.
As a result, an immaterial increase in valuation allowance on the
Company’s net deferred tax assets was recorded in various
jurisdictions during the second quarter of 2022.
The Company maintains a full valuation allowance against the net
deferred tax assets in the U.S., Luxembourg, Ireland and certain
other foreign tax jurisdictions as of December 31, 2022. It is
possible that within the next 12 months there may be sufficient
positive evidence to release a portion or all of the valuation
allowance. Release of these valuation allowances would result in a
benefit to income tax expense for the period the release is
recorded, which could have a material impact on net earnings. The
timing and amount of the potential valuation allowance release are
subject to significant management judgment and prospective
earnings.
We are incorporated in Ireland and also maintain subsidiaries in,
among other jurisdictions, the U.S., Canada, India, the United
Kingdom and Luxembourg. The IRS and other taxing authorities may
continue to challenge our tax positions. The IRS presently is
examining certain of our subsidiaries’ U.S. income tax returns for
fiscal years ended between December 31, 2011 and December 31, 2015
and, in connection with those examinations, is reviewing our tax
positions related to, among other things, certain intercompany
arrangements, including the level of profit earned by our U.S.
subsidiaries pursuant to such arrangements, and a product liability
loss carryback claim. For additional information, including a
discussion of related recent developments and their potential
impact on us, refer to Note 21. Income Taxes in the Consolidated
Financial Statements included in Part IV, Item 15 of this
report.
During the third quarter of 2020, the IRS opened an examination
into certain of our subsidiaries’ U.S. income tax returns for
fiscal years ended between December 31, 2016 and December 31, 2018.
The IRS will likely examine our tax returns for other fiscal years
and/or for other tax positions. Similarly, other tax authorities
are currently examining our non-U.S. tax returns. Additionally,
other jurisdictions where we are not currently under audit remain
subject to potential future examinations. Such examinations may
lead to proposed or actual adjustments to our taxes that may be
material, individually or in the aggregate. See the risk factor
“The IRS and other taxing authorities may continue to challenge our
tax positions and we may not be able to successfully maintain such
positions” in Part I, Item 1A of this report for more
information.
Additionally, as further discussed in Note 21. Income Taxes in the
Consolidated Financial Statements included in Part IV, Item 15 of
this report, the IRS has filed multiple proofs of claim against
several of the Debtors in connection with our ongoing bankruptcy
proceedings.
For additional information on our income taxes, see Note 21. Income
Taxes in the Consolidated Financial Statements included in Part IV,
Item 15 of this report.
Discontinued operations, net of tax.
The operating results of the Company’s Astora business, which the
Board resolved to wind down in 2016, are reported as Discontinued
operations, net of tax in the Consolidated Statements of Operations
for all periods presented. The following table provides the
operating results of Astora Discontinued operations, net of tax,
for the years ended December 31, 2022 and 2021 (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
2021 |
Litigation-related and other contingencies, net |
$ |
— |
|
|
$ |
25,000 |
|
Loss from discontinued operations before income taxes |
$ |
(15,543) |
|
|
$ |
(49,594) |
|
Income tax benefit |
$ |
(2,056) |
|
|
$ |
(5,430) |
|
Discontinued operations, net of tax |
$ |
(13,487) |
|
|
$ |
(44,164) |
|
Amounts included in the Litigation-related and other contingencies,
net line of the table above are for mesh-related litigation. The
remaining pre-tax amounts in 2022 and 2021 were primarily related
to mesh-related legal defense costs and certain other items. For
additional discussion of mesh-related matters, refer to Note 16.
Commitments and Contingencies in the Consolidated Financial
Statements included in Part IV, Item 15 of this
report.
Business Segment Results Review
Revenues, net.
The following table displays our revenue by reportable segment for
the years ended December 31, 2022 and 2021 (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change |
|
2022 |
|
2021 |
|
2022 vs. 2021 |
Branded Pharmaceuticals |
$ |
851,142 |
|
|
$ |
893,617 |
|
|
(5) |
% |
Sterile Injectables |
589,633 |
|
|
1,266,097 |
|
|
(53) |
% |
Generic Pharmaceuticals |
795,457 |
|
|
740,586 |
|
|
7 |
% |
International Pharmaceuticals (1) |
82,643 |
|
|
92,906 |
|
|
(11) |
% |
Total net revenues from external customers |
$ |
2,318,875 |
|
|
$ |
2,993,206 |
|
|
(23) |
% |
__________
(1)Revenues
generated by our International Pharmaceuticals segment are
primarily attributable to external customers located in
Canada.
Branded Pharmaceuticals.
The following table displays the significant components of our
Branded Pharmaceuticals revenues from external customers for the
years ended December 31, 2022 and 2021 (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change |
|
2022 |
|
2021 |
|
2022 vs. 2021 |
Specialty Products: |
|
|
|
|
|
XIAFLEX® |
$ |
438,680 |
|
|
$ |
432,344 |
|
|
1 |
% |
SUPPRELIN® LA |
113,011 |
|
|
114,374 |
|
|
(1) |
% |
Other Specialty (1) |
70,009 |
|
|
86,432 |
|
|
(19) |
% |
Total Specialty Products |
$ |
621,700 |
|
|
$ |
633,150 |
|
|
(2) |
% |
Established Products: |
|
|
|
|
|
PERCOCET® |
$ |
103,943 |
|
|
$ |
103,788 |
|
|
— |
% |
TESTOPEL® |
38,727 |
|
|
43,636 |
|
|
(11) |
% |
Other Established (2) |
86,772 |
|
|
113,043 |
|
|
(23) |
% |
Total Established Products |
$ |
229,442 |
|
|
$ |
260,467 |
|
|
(12) |
% |
Total Branded Pharmaceuticals (3) |
$ |
851,142 |
|
|
$ |
893,617 |
|
|
(5) |
% |
__________
(1)Products
included within Other Specialty include AVEED®,
NASCOBAL®
Nasal Spray and QWO®.
(2)Products
included within Other Established include, but are not limited to,
EDEX®.
(3)Individual
products presented above represent the top two performing products
in each product category for the year ended December 31, 2022
and/or any product having revenues in excess of $25 million during
any completed quarterly period in 2022 or 2021.
Specialty Products
Certain of our products that are physician administered, including
XIAFLEX®,
generally experienced decreased sales volumes during the COVID-19
pandemic due to reduced physician office activity and patient
office visits because of the COVID-19 pandemic. While these
products have generally been recovering since early 2020, they have
at times continued to be impacted by COVID-19-related and, more
recently, other market conditions for specialty product
office-based procedures, including medical and administrative staff
shortages in physicians’ offices, reduced physician office activity
and lower numbers of in-person patient office visits. The pandemic
and other market conditions also created a high backlog of demand
for non-elective urology procedures, which has in certain cases
reduced the utilization of XIAFLEX®
by healthcare providers. Additionally, we believe that concerns by
healthcare providers regarding economic uncertainty have impacted
purchasing patterns of XIAFLEX®.
Changes in market conditions and certain other factors could result
in revenue decreases or otherwise impact future periods, which
could have a material adverse effect on our business, financial
condition, results of operations and cash flows.
The increase in XIAFLEX®
revenues in 2022 was primarily attributable to increased net price,
partially offset by lower volumes. The decrease in volumes was
primarily driven by continued challenging market conditions as
further described above and the ongoing impact from a disruption
experienced by our third-party specialty pharmacy provider during
the third quarter of 2022. While we have since seen some recovery
in volumes related to this disruption, volumes have not yet
returned to pre-disruption levels.
The decrease in SUPPRELIN®
LA revenues in 2022 was primarily attributable to decreased
volumes, partially offset by increased net price.
The decrease in Other Specialty revenues in 2022 was primarily
attributable to decreased NASCOBAL®
Nasal Spray revenues, partially offset by increased
AVEED®
revenues.
Established Products
The decrease in TESTOPEL®
revenues in 2022 was primarily attributable to decreased
volumes.
The decrease in Other Established revenues in 2022 was primarily
attributable to ongoing competitive pressures impacting this
product portfolio and certain other factors.
Our Established Products portfolio is likely to continue to be
affected by ongoing competitive pressures. This could result in
revenue decreases or otherwise impact future periods, which could
have a material adverse effect on our business, financial
condition, results of operations and cash flows.
Sterile Injectables.
The following table displays the significant components of our
Sterile Injectables revenues from external customers for the years
ended December 31, 2022 and 2021 (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change |
|
2022 |
|
2021 |
|
2022 vs. 2021 |
VASOSTRICT®
|
$ |
253,696 |
|
|
$ |
901,735 |
|
|
(72) |
% |
ADRENALIN®
|
114,304 |
|
|
124,630 |
|
|
(8) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Other Sterile Injectables (1)
|
221,633 |
|
|
239,732 |
|
|
(8) |
% |
Total Sterile Injectables (2) |
$ |
589,633 |
|
|
$ |
1,266,097 |
|
|
(53) |
% |
__________
(1)Products
included within Other Sterile Injectables include
APLISOL®,
ertapenem for injection and others.
(2)Individual
products presented above represent the top two performing products
within the Sterile Injectables segment for the year ended December
31, 2022 and/or any product having revenues in excess of $25
million during any completed quarterly period in 2022 or
2021.
The decrease in VASOSTRICT®
revenues in 2022 was primarily driven by decreases to both net
price and volumes, which were primarily attributable to the impact
of generic competition as well as lower overall market demand as
COVID-19-related hospital utilization levels declined. During the
first quarter of 2022, multiple competitive generic alternatives to
VASOSTRICT®
were launched, beginning with a generic that was launched at risk
and began shipping toward the end of January 2022. Since then,
additional competitive alternatives entered the market, including
authorized generics. These launches began to significantly impact
both Endo’s market share and product price toward the middle of the
first quarter of 2022, and the effects of competition have since
increased. Additionally, beginning late in the first quarter of
2022, COVID-19-related hospital utilization levels began to
decline, resulting in significantly decreased market volumes for
both branded and competing generic alternatives to
VASOSTRICT®.
In February 2022, we launched VASOSTRICT®
in an RTU bottle, representing the first and only RTU formulation
of the drug. The bottle formulation now represents a meaningful
portion of the overall vasopressin market. Nevertheless, the
factors described above could have a material adverse effect on our
business, financial condition, results of operations and cash
flows. For additional information, refer to Note 16. Commitments
and Contingencies in the Consolidated Financial Statements included
in Part IV, Item 15 of this report under the heading “Patent
Matters.”
The decrease in ADRENALIN®
revenues in 2022 was primarily attributable to decreased net price
and volumes.
The decrease in Other Sterile Injectables revenues in 2022 was
primarily attributable to decreased price, partially offset by
increased volumes.
Our Sterile Injectables segment is likely to continue to be
affected by ongoing competitive pressures. This could result in
revenue decreases or otherwise impact future periods, which could
have a material adverse effect on our business, financial
condition, results of operations and cash flows.
Generic Pharmaceuticals.
The increase in Generic Pharmaceuticals
revenues in 2022 was primarily attributable to revenues from
varenicline tablets (our generic version of Pfizer Inc.’s
Chantix®),
which launched in September 2021, partially offset by competitive
pressures on certain generic products.
During the first quarter of 2023, a competitor launched an
alternative generic version of varenicline tablets. This launch
began to impact both Endo’s market share and product price toward
the middle of the first quarter of 2023, resulting in a decline in
revenue for our Generic Pharmaceuticals segment. The effects of
competition are likely to increase in future periods. Other
products in our Generic Pharmaceuticals segment are also likely to
continue to be affected by ongoing competitive pressures. These
factors could result in revenue decreases or otherwise impact
future periods, which could have a material adverse effect on our
business, financial condition, results of operations and cash
flows.
International Pharmaceuticals.
The decrease in International Pharmaceuticals revenues in 2022 was
primarily attributable to competitive pressures and the expiration
of a product agreement. This segment is likely to continue to be
affected by ongoing competitive pressures. This could result in
revenue decreases or otherwise impact future periods, which could
have a material adverse effect on our business, financial
condition, results of operations and cash flows.
Segment adjusted income from continuing operations before income
tax.
The following table displays our Segment adjusted income from
continuing operations before income tax (the measure we use to
evaluate segment performance) by reportable segment for the years
ended December 31, 2022 and 2021 (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change |
|
2022 |
|
2021 |
|
|
|
2022 vs. 2021 |
|
|
Branded Pharmaceuticals |
$ |
366,554 |
|
|
$ |
384,186 |
|
|
|
|
(5) |
% |
|
|
Sterile Injectables |
|