Endo Records Second-Quarter Loss of Nearly $1.4 BillionBy
Endo International, a specialty pharmaceutical and generic-drug company, reported a second-quarter loss of $1.4 billion due to recording impairment charges of $725 million relating to its US generic and branded pharmaceutical business. The company also increased its product liability reserves by $775 million to settle claims on its vaginal mesh products.
The company reported second-quarter 2017 revenues of $876 million, which was a 5% decrease from the year-ago period. The company reported net loss from continuing operations of $696 million compared to second-quarter 2016 reported net income from continuing operations of $390 million. This decrease was primarily attributable to the following: charges associated with the company’s previously announced manufacturing network restructuring; after-tax impairment charges associated with market and competitive factors impacting certain products’ revenues; the pending divestiture of Mexico City, Mexico-based Grupo Farmacéutico Somar, a generic-drug company; the market removal of its opioid, Opana ER (oxymorphone hydrochloride extended-release); and second-quarter 2016 recognition of certain net tax benefits.
Specifically, during second-quarter 2017, the company recorded total combined pretax, non-cash asset impairment charges of $725 million, which primarily consisted of intangible asset impairment charges of $477 million and goodwill impairment charges of $206 million, which included $501 million of non-restructuring goodwill and intangible asset impairments related to its US generic and branded pharmaceuticals segments. This included the market withdrawal of Opana ER and $115 million of goodwill and other intangible assets related to the company’s planned Somar sale.
Additionally, as part of its recently announced manufacturing network restructuring initiative, the company will be ceasing operations and closing its manufacturing and distribution facilities in Huntsville, Alabama. The company recorded an impairment charge of $90 million related to intangible assets and property, plant, and equipment associated with the planned closure. The company expects to pay approximately $60 million in cash related to the manufacturing network restructuring over the next 12 to 18 months. As a result of these restructuring actions, Endo expects to redeploy as an investment into its core growth areas approximately $55 million to $65 million in annual net run rate pretax cost savings that it expects to realize by the fourth quarter of 2018
The company recently announced that it has reached agreements to resolve virtually all known US mesh product liability claims. Endo agreed to make installment payments beginning in the fourth-quarter of 2017 and continuing through the fourth-quarter of 2019. The company increased its mesh product liability accrual by $775 million which is expected to cover approximately 22,000 US mesh claims as well as all known international mesh product liability claims and other mesh-related matters. As of June 30, 2017, the company has made total mesh liability payments of approximately $2.8 billion, according to Endo’s second-quarter 2017 filing with the US Securities and Exchange Commission.
Source: Endo International(second-quarter earnings) , Endo International (mesh product liability)