Endo International PLC (ENDP) 2003 Q2 法說會逐字稿

Good morning and welcome to Endo Pharmaceuticals Second Quarter 2003 Teleconference. This call is being recorded.

Before we begin today, I would like to remind you that during the course of this call, Carrol or Jeff may make forward-looking statements concerning such topics as future results, product performance and anticipated timing of FDA approval of certain of the company's drugs as well as other non-historical facts that reflect Endo's current perspective on existing trends and information. As you would expect, these statements will be made with appropriate qualifying language such as, we believe, expect, plan, anticipate, predict or similar expressions. By their nature, these forward-looking statements involve known and unknown risks and uncertainties that may cause the company's actual results to be materially different from any future results expressed or implied by these forward-looking statements.

Listeners should not rely on any forward-looking statement. The company undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

Important factors that may affect Endo's future results include but are not limited to, those factors discussed under the heading, "Forward-looking Statements" in Endo's SEC filings, and under the heading, "Risk Factors" in Endo's recent registration statements on Form F-3. We urge you review these factors.

In addition, during the course of this call, Carrol or Jeff may refer to non-GAAP financial measures such as consolidated EBITDA, adjusted net income and adjusted diluted earnings per share.

These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles in the United States and may be different from non-GAAP financial measures used by other companies. Investors are encouraged to review Endo's earnings press release issued this morning for Endo's reasons for including these non-GAAP financial measures in their earnings announcement and to see the reconciliation of these non-GAAP financial measures to their most recently directed compatible GAAP financial measures.

I would now like to turn the call over to Ms. Carrol Ammon, Chairman and CEO. Ms. Ammon, you may begin.

Thank you and good morning. Earlier today, we reported our financial results for the 2003 second quarter and year to date. We are pleased and excited to have this opportunity to discuss those results as well other developments in detail with you.

Joining me on the call this morning is our Chief Financial Officer, Jeff Black. I'd like to take a few minutes right now to review the highlights of the second quarter and six months financial results. I'm pleased to report that the outstanding performance we achieved in the first quarter of 2003 has continued through the second quarter.

Net sales were up 41% to $152m compared with a year ago second quarter. Most of the increase was generated by the continued strength of Percocet and Lidoderm, reflecting the broad market acceptance for our lead branded products.

Diluted earnings per share for the second quarter of 2003 was 34 cents, compared with 22 cents in the comparable 2002 period. Adjusted diluted earnings per share were 35 cents, compared with 22 cents in the comparable 2002 period. Year-to-date in 2003, net sales grew 74% to $304.3m - versus the comparable 2002 period.

Diluted earnings per share for the first half of 2003 were 46 cents, compared with 27 cents in the first half of 2002. Adjusted diluted earnings per share for the first half of 2003 increased to 71 cents per diluted share, compared to 28 cents in the comparable 2002 period. As detailed in our press release earlier today, we are revising our guidance for 2003. We now believe we are well positioned to achieve net sales of approximately $535m; up from our previous guidance of $520m. Consolidated EBITDA is projected to be approximately $238m; up from our previous guidance of $220m. Diluted earnings per share is estimated to be approximately 77 cents; up from our previous guidance of 70 cents per share and adjusted diluted earnings per share is estimated to be approximately $1.08; up from our previous guidance of $1.01 per share.

Our revised 2003 guidance reflects our continued assumption of generic Percocet competition by late third quarter 2003 and -our assumption of competition on our extended release morphine sulfate product early in the third quarter of 2003. On July 3rd, 2003, the FDA approved two strains of another company's version of generic extended release Morphine Sulfate, both the 100mg and the 200mg. There are currently 5 marketed strains of generic extended release Morphine Sulfate. As of today, none of these competitive strains are on the market. We expect Lidoderm net sales to be approximately $175m to $180m in 2003. I would like to caution everyone that there can be no assurance of the company achieving these results.

Before I turn it over to Jeff for a more detailed discussions for the quarter, I'd like to talk about two noteworthy recent developments. First, on July 8, we successfully completed a secondary offering of a total of 16,619,000 shares of common stock including the over-allotment option. The significant majority of these shares were sold by Endo's controlling stockholder Endo Pharma, LLC, an affiliate of [Kelto] and Company in which certain members of management have an interest. With the completion of the sale, Endo Pharma, LLC now holds approximately 63% of Endo's outstanding common stock down from approximately 75%. No new shares were issued in the offering. Endo, which had approximately 131.8 million shares outstanding, did not receive any other proceeds from this offering. And second, I'd like to mention to you that earlier this week we did announce that our development partner, Sky Pharma (ph) submitted an NDA to the Food & Drug Administration for declormorphine (ph). We are very excited about the prospect of marketing this sustained released injectable formulation of epidural morphine (ph), which was studied in clinical trails of 48 hour control of moderate to severe pain relief, following major surgery. As a hospital-based, critical care product declormorphine (ph) will give us the opportunity to expand our footprint in pain management where we can leverage our existing relationship within the anesthesiology community.

Now, before we take your questions I'm going to go ahead and turn the call over to Jeff first for a more detailed discussion of the second quarter. Jeff?

Thanks Carrol and good morning everyone. I would like to take a few minutes to review with you our financial results in detail. As Carrol mentioned, net sales for the second quarter of 2003 grew 41% to $152m. For the six months, net sales were up 74% to $304.3m. Net sales of Percocet, our largest selling product, rose 29% to $52.4m for the quarter and 68% to $107.9m in the first half.

Most of the growth can be attributed to the new strength of Percocet 7.5mg with 325mg of acetaminophen and 10mg with 325mg of acetaminophen that we launched in the fourth quarter of 2001. These dosage forms allow physicians the flexibility of increasing the dose of narcotics with a reduced level of acetaminophen. According to IMS data, these new dosage strengths now represent approximately 74% of all Percocet dispensed units. Percocet as a family according to IMS' data now represents approximately 19% of the Oxycodone acetaminophen dispensed units market, compared to approximately 12% of that market at the time of the launch of these new strengths. During the second quarter of 2003, we took a price increase on Percocet. As of the end of the second quarter, customer inventory levels on Percocet were at their normal levels of a little over a month.

Lidoderm also continued its strong growth. Net sales were up 96% to $50.6m for the quarter and rose a 157% to $92.1m for the year-to-date. Market acceptance of Lididerm, which has orphan status through March 2006 and is also protected by certain patents, continues to grow as evidenced by its favorable prescription trends. According to IMS data, Lididerm prescriptions were up 94% and dispensed unit growth was a 106% for the second quarter of 2003, versus the second quarter of 2002. Lididerm prescriptions have grown 95%; and dispensed units have grown a 107% for the first half of 2003, compared to the first half of 2002. Based on IMS data, the run rate on Lididerm sales now is approximately $162m. At the end of the second quarter due to the speculative buying by our customers based on their anticipation of a price increase, customer inventory levels grew to over a month and a half, which is a couple weeks more than normal. In July 2003, we did take a price increase on Lididerm. We expect our customer's inventories to return to their normal levels of a little over a month over the remainder of 2003. We expect net sales of Lididerm to be approximately $175m to $180m in 2003.

Net sales of Endo's generic products were up 10% to $40.9m for the second quarter. For the first half, generic sales were $88.8m in 2003; up 36% from 2002. The increase is primarily due to our extended release morphine sulphate product and Endocet (ph). Generic competition with our products may have a material impact on our results of operations and cash flows in the future. We are assuming in our guidance, generic competition to our most recently introduced strengths of Percocet, late in the third quarter of 2003. We are also assuming competition to our generic morphine sulphate extended release early in the third quarter of 2003. As Carrol said on July 3rd 2003, the FDA approved two strengths of another company's version of generic extended release morphine sulphate, both the 100mg and the 200mg strength.

There are currently five marketed strengths of generic extended release morphine sulphate. As of today, none of these competitive strengths are on the market.

Gross profit for the second quarter of 2003 increased 57% to $125.8m and was $250.5m for the first half, up 95% from the same period a year ago.

Gross profit margins increased to nearly 83% for the quarter and 82% for the six months in 2003, versus 74% and 73% in the respective periods of 2002. The increase in gross profit margin is due to our continued focus on brand products and difficult to develop generic products that have the ability to generate brand-like margins. It should be noted that from time to time, there may be fluctuations in gross margins due to product mix.

Selling, general and administrative expenses for the second quarter of 2003 rose 51% to $41.8m, primarily reflecting promotional efforts and support provided to Lidoderm and Percocet. For the six months, SG&A expenses were $77.9m in 2003, compared with $51.1m in 2002; a 52% increase. We continue to invest in new product promotion for our own market products as well as pre-market activities for those products that we anticipate introducing in 2004.

Research and development expenses for the quarter decreased to $9.4m from $15.1m in the second quarter of 2002. For the first half, R&D expenses were down to $21.5m from $28.5m in the same period a year ago. The decline in R&D spending reflects the significant Phase III clinical trials we were performing during 2002, including those trials for Oximorphone ER and IR.

With the MBA's for both Oximorphone ER & IR now at the FDA, as well as the NDA filed by our partner, [Sky Pharma] just days ago, we will continue to invest in R&D for the long-term growth of the company; and during 2003, we are focusing our efforts on our Phase III oral rinse product for oral mucusitis.

Net income for the second quarter of 2003, grew to $45.2m, or 34 cents per diluted share from $22m, or 22 cents per diluted share in the comparable 2002 period; a 105% increase. As detailed in the supplemental financial information in today's press release, net income for the 2003 second quarter was $46.1m or 35 cents per diluted share on an adjusted basis, excluding the cost to transfer our products from DMS to other manufacturers, which we expect to no longer incur after 2003.

Net income for the six months was $61.5m or 46 cents per diluted share in 2003, versus $27.4m, or 27 cents per diluted share in 2002. Excluding a non-cash compensation charge related to the exercise of non-diluted performance-based stock options in the first quarter and manufacturing transfer costs as detailed in the supplemental financial information in today's press release, net income for the first half of 2003 was $93.4m or 71 cents per diluted share.

We generated cash flow from operating activities of approximately $74m in the second quarter and $139.1m for the first six months in 2003. Our cash and cash equivalents total $168.5m at June 30th, 2003. We feel our strong financial position, with great cash flow and no debt, provides us an opportunity to pursue acquisitions in licensing opportunities and other strategic alliances both within pain management as well as other complimentary areas, which would, we believe, accelerate our growth as a premier specialty pharmaceutical company.

I would now like to turn the call back to Carrol for some final comments before we take your questions.

Thanks Jeff, and before we do go on to the questions, I'd like to just take a moment and review some of our upcoming key milestones and the significant events for Endo with you.

First, in our litigation against [Perdue Frederick] on our extended release [oxycodon tablets] the district court trial on patent claims began on June 2nd. Post-trial briefing is currently underway, and a decision on the patent claims is expected in due course. We anticipate being in a position to launch Oxymorphone extended release and immediate release during the first quarter of 2004.

Assuming the ongoing clinical trial is successful, we are on track to file our NDA for our prescription oral rinse for oral mucusitis, by the end of this year or early next year. With fast track review designation by the Food & Administration, we may be in a position to market this product by late in 2004.

We look forward to the acceptance by the FDA in coming months of our partner Sky Pharma's (ph) NDA submission on declomorphine (ph). We expect [Dichlomet] to enter Phase III [Inaudible] by the end of 2003.

We will continue to advance other development products through our pipeline and, finally, we intend to remain active on the business development front by pursuing additional in-licensing (ph) and acquisition activities in pain management and in complementary therapy.

As you can see, Endo has positioned itself extremely well to sustain our growth in the face of a competitive market. With the NDA's -- Oxymorphone extended release, Oxymorphone immediate release and declomrphine (ph) now submitted to the Food & Drug Administration, plus another product in Phase III clinical development, Endo may potentially be in a position to launch four new products in 2004.

On behalf of our entire organization, we're very pleased to have shared our second quarter 2003 results with you; and we'd now like to open up the call for any questions that you might have. Thank you.

Thank you. At this time I would like to remind the participants, if you wish to ask a question please press star, then the number one on your telephone keypad. If you wish to withdraw your question, press the pound key. Your first question will come from Angela Larson (ph).

Great. Thank you for taking the questions and a good quarter. Carrol, if I could ask you real quick, when you say that the (Oxyconten) case has been heard and that it will continue in the process, are you expecting an answer in a few weeks or a couple months?

Angela, there is no way to tell. Certainly I'd like these answers sooner than later; but it's really up to the courts, and we just have to wait for that opinion to come down and really don't know when that might be.

Okay. And then just, when looking at the R&D expenditures, it did pull back a little bit this quarter because of Doxymorphone (ph) wrapping up. Should we be thinking of the expenditures going forward rising from here as you continue to invest in other products, or do we have a law that could take a couple of quarters?

I'm not sure how to answer that question. We don't believe necessarily in investing a certain percentage of sales in research and development. We invest in research and development based on the types of projects that we currently have and the phase of development of those projects. This year, as we mentioned the oral rinse for oral mucusitis (ph) is in a Phase III clinical trial, which enrollment has concluded. We also are working on Lidoderm in a Phase II trial as well for lower -- chronic lower back pain, and that Phase II trial has also finished enrollment. Most - some of our products are also being partnered by -- and such that the R&D expense doesn't show up on our books until we make milestone payments such as declomorphine (ph) and percothol(ph) IDDD, so I'm not sure how to answer that question other than that we'll continue to make those judgments and invest in R&D over the course because we believe that is one of our two engines for long-term growth.

Great. And then just one last question. As you continue to look for projects to invest in or products to acquire, what kind of environment are you seeing out there on the product front and on the development front?

We're - it's competitive environment. We're seeing a lot of products still and are still very aggressively pursuing acquisition opportunities, both of pipeline products as well as on-market products. Most of the stuff we're looking at is probably in the pipeline-type area versus the on-market area, but we do believe that we need to do both, not only to have on-market products for our sales force to continue to have products to sell as well as to expand into pain management and complimentary areas, but as well as give them new things, both from our development shop, as well as give ultimately upon approval to our sales and marketing group, both again in pain management and complimentary areas so, it's a combination of most -- The environment's very competitive and we'll continue to pursue those acquisition opportunities.

I would just add too, that as each year has gone by we've gained more and more credibility as a potential partner out there and do find ourselves with opportunity to sit down and talk to a lot of people about products, and we'll continue in that vein.

Very good. Thank you.

Your next question will come from Dave Windley.

Hi, good morning. Thanks for taking my question and congrats on another good quarter. I was wondering, given your state of timing for Oxymorphone ER, as part of your guidance, can you give a little [inaudible] Jeff on the timing and ramp of SG&A spending to prepare for that?

Sure. We have anticipated a launch in the first quarter of 2004, both in our earlier guidance as well as our current guidance. We are spending money this year in terms of some of the pre-market activities related to that product, both educational as well as development or product launch.

Our current sales force of 230 reps; boasts 70 internal and 160 through our contract sales force -- is what our current configuration is. We have indicated in the past that based on the launch of Oxymorphone maybe later this year or early part of '04, we may not only internalize, but also expand that force.

Our guidance this year does not include any expansion of the force. We've looked at the internalization of the 160-person inventive sales force and have concluded several times that it's about cost neutral to the SG&A line. There is a one-time payment that we would make if we internalize the entire force that could approach $750,000 but otherwise it's SG&A neutral. So, the anticipation of being able to launch Oxymorphone extended release and immediate release in the first quarter 2004 has been built in our guidance.

Ok, thanks. Next question, maybe Carrol could comment on the Oxycontin decision. Obviously you wish you knew and you don't, but can you give some color as to how you might react to varying options on the decision? For example, if it's a decision in your favor and strongly worded would you launch at risk?

Yes, I would prefer not to get into the hypothetical situations. I would just reemphasize that when we decided to begin the development of this product we went into it with a great deal of confidence. We're still confident about it. We have presented the case, and now it's a matter of waiting and seeing what type of opinion the judge renders and really based upon that opinion -- the strength the opinion we'll make our decision. But, I really would not want to get into a hypothetical situation if it's A, B or C. We'll just -- you can imagine we'll anxiously await that and go through it and repeat those as soon as it comes.

Ok. Thanks. It was worth a try. Jeff, with regards to inventory levels you commented that they are slightly above normal; and you expect that to come back down. From a product standpoint, and I don't expect you to go through each product, but can you comment, generally speaking, are all your products hovering around the same inventory level? Or, do you have certain ones that are meaningfully higher than the average and others that are lower?

Yes and I guess -- just to clarify. The only product that is a little bit above is Lidoderm. Again, during the quarter -- second quarter, there was some speculative buying by our customers based on - at least historically when we've raised prices, they were right and we raised prices in July, so it got -- there's probably about two weeks more inventory than what we historically see being carried by our customers, but that's not a dramatic shift in inventory by any stretch of the imagination.

On a product by product basis, Percocet is at a pretty normal level, and you'll see other products are at a pretty normal level. And they do vary product by product. We do have some seasonal products that tend to have high inventory levels in sort of the September-October time frame when we will sell them into the trade, and then they get pulled during cough/cold/flu season over the course of the winter. Generic products tend to vary based upon when customer trade shows are and things of that nature.

So, if there is a little bit of variability amongst the product lines, they're all, with the exception of Lidoderm, being about two weeks heavier than normal, or at normal levels.

And then with regard to MSER, given the ANDA approvals for the two strengths with Maloncrot (ph), are you beginning to see any pull back in buying patterns by the wholesalers?

There's no pull back in buying patterns by customers. We do pay very close attention to that, however, because we don't want to get caught in a situation where there is too much inventory out there once competition occurs. So, we're very conscious of it; but there hasn't been any slowdown in the ordering patterns of customers.

Okay, I'll ask one more and jump off. Update on Chronagesic (ph)?

Sure. Not a lot of update to give. Chronagesic (ph) -- there are currently -- directors currently addressing some of the questions from the FDA and from the design issues around the Chronagesic product. Still in process of doing, you know, going through that data collection, we should obviously have more clarity on that during the second half of this year but no real update.

Okay, thank you. Congratulations.

Thanks.

Your next question will come from Corey Davis.

Just want to ask a series of questions about the launch of Oxymorphone. Would I be right in assuming that the initial launch is just going to be targeted at pain specialists?

No, we believe -- although pain specialists are a significant part of the audience, we also are going to look at all the top prescribers of strong opiates for especially chronic pain settings, so that will encompass other areas such as neurology, anesthesiology, again, pain specialists. There'll also be some primary care calls in there to the extent they are high prescribers of those types of products, of the strong opiate market.

Do you know what percent of Oxycontin prescriptions are written by GP's right now?

I don't think I can answer that now.

And the -- how about manufacturing constraints? Are there any? Can you make plenty of this stuff?

Yeah, we have plenty of capacity at our manufacturing [inaudible] to - - both the launch as well as the successive years of that product.

And the way the deal is set up with Pen West, is there any change over time in the profitability of this product to you - - just as a function of that deal?

Yeah there is - - it starts out as a 50/50 profit split; and West had elected earlier this year to cease their funding, which means we effectively provide an interest free loan, and then in future profits reduce the amount that they are entitled to for a pro rata portion of that over time with the success of the product based on the contribution of that product, the economics actually become more favorable to us than the 50/50 profit split.

And, I guess - - level of conviction in a Q1 launch, is that contingent upon getting an outright approval on the Phadupha (ph) date or are you assuming either a two or six month lag in between approval letter and launch?

Yeah, we don't now as much as we dream about an approval on the [inaudible] date, we - - probably in more realistic cases, its going to be an approvable letter, we expect an approvable letter, with probably some negotiation on the labeling, not an approvable letter that requires additional, you know, significant clinical trials or time. So first quarter 2004, launch date, our expectation is approvable letter on the Phadupha (ph)] date, with some negotiation over a few weeks for our labeling, and being able to get to a final approval in the first quarter 2004.

And can you remind me, do you expect the indication to be a true chronic pain indication?

Yes, it will be from moderate to severe pain, where use of an opiate is appropriate for more than a few days, which is a chronic pain condition.

And then back to the SG&A question, with four launches, I can imagine that's a pretty heft year for SG&A. So is the 41 or 42 million this quarter a good base, and then on top of that run ratio we start adding the additional sales reps and promotional expense. I guess what I'm asking is how are you already spending for pre-launch activities?

You'll appreciate that I actually won't answer that question. We do expect to launch - if successful clinical trials and favorable FDA review - to launch four products in 2004 from the NDA pipeline, two of those products, declomorphine (ph) and the oral rinse for oral mucusitis will probably be later in '04, however; and we're even doing, you know, some pre market activities today on those products as well. We have talked about in the past that although we have a 230 person sales force and we are in a very concentrated market, we do expect to expand that sales force which could be in excess of 400, potentially 500, sales reps over time to address all four of those products; but again some of those products won't launch until later in 2004. We'll expand the sales force to the appropriate level to get the kind of market penetration that we anticipate and reach the sales potential of the product. We'll invest in the launch activities in the marketing for those products, but to quantify that is going to be difficult at this time.

And I don't know if you can answer my next question. I know you don't have guidance for 2004, but I guess what I'm trying to figure out is the - - if the spending comes before the revenue of these products, what earning is going to look like for 2004; and I guess are you prepared to skimp in SG&A or is 2004 clearly an investment year and could earnings actually be down over '03?

You're right, we probably can't really answer that question; but we do expect to invest in these products. We think these products have significant potential in the marketplace and will be well receive by doctors and patients. We'll invest the appropriate amount to make these very successful products as far as - - so we don't plan on skimping on the investment of these products and it will take some time for us to penetrate these markets because these are competitive market places.

Yeah, I would just add too, if we get the opportunity to launch more products next year those will be nice investment decisions to have to make; so we'll look forward to those.

Sure, thanks guys.

Your next question will come from Michael Tong.

Hi just a couple of follow-up questions on some of the previous questions. On the R&D line is your funding of Chronogesic going to be reflected on your R&D line or is that going to be a milestone? And maybe a different way to ask the R&D question was do you expect in absolute dollar terms R&D to start to trend up in the second half of '03? Second question has to do with Oxycontin (ph). I just wanted to make sure I understand, were you sued on all the patents that were listed for Oxycontin (ph) or there were some patents that you weren't sued on? And then finally, in previous conference calls you've talked about potential line extensions for Percocet. Is there some movement along those lines? Thanks.

Sure. The Chronogesic spending -- to take your questions in order, the Chronogesic spending -- it is a 50/50 co-development; so to the extent it enters back into the clinic, we will begin funding that 50/50. We have the option to elect out if we so choose. However, we believe this product has great potential to revolutionize pain management and want to start investing in the product and get it through the clinic into the marketplace; but it is an R&D expense. There are also a series of milestone payments - up to $52m on Chronogesic that we have paid to direct substantially weighted towards good happy checks in the future; and we are very happy to make those checks and make those payments in the future, both the milestones as well as -- our 50% of the development will be reflected in our R&D line. As far as the trending of R&D for 2003, I'm trying to skip around this one again. But we haven't provided guidance in 2004 or on a quarterly basis. The guidance we have provided in 2003 is that we expect R&D spending to be from that in 2002. Again, some of our projects are being funded by our partners; and we expense the milestone payments as they become due - payable, but this year the focus has been on the oral rinse for oral mucusitis product as well as the Phase II Lidoderm as well as some other projects that we haven't publicly disclosed. So, I can't really answer that question.

On the Oxycontin (ph) lawsuit we were sued on 6 -- I 'm sorry. There are 6 patents listed in the orange book. We were sued on 3 of those 6 patents, not all 6. And as far as line extensions for Percocet, we believe Percocet is an extremely important product for us. We have successfully gone through two iterations of line extensions, and we believe there is still significant market opportunity for this product, both from doctors' needs as well as patients' needs. We are working on projects for further line extensions of Percocet. However based on the fact that we don't currently have any sort of regulatory patent protection of Percocet, we have not been historically and probably won't be in the future in a position to talk about either what those are or the timing of them.

Great, thanks very much.

And your next question will come from Angela Larson.

Hey there, thanks for taking a follow-up question. Just wanted to ask a couple more specifics that you can try and dance around Jeff. But one is when thinking about adding additional sales reps, what is the cost per rep? Usually I like to use the modeling and estimate somewhere around $150,000 per rep per year?

Yeah all in we've heard ranges of 100 to 150, and those depending on the type of rep you are hiring, how experienced they are, are they specialists, what type of product you are trying to sell, all of those are sort of in the right range.

Okay. And then on the tax rate, it is kind of hanging in there around that 38% level? Should we be really looking at 38 for the full year?

We haven't given any direct guidance -- here goes the dance -- but we've historically been about 37%, 38%, and that's probably a reasonable marker to use.

Okay great. And on the depomorphine, when might we start seeing some public presentations of that data?

We expect later in the fall of this year -- there is a conference in, we believe, October for -- that we expect to see some depomorphine data to be presented at a scientific conference. There - Sky Pharma has made available some of the clinical data in an R&D day that they held both in London and New York back in June, I believe. And will continue to roll out data - as you are well aware and probably tired of hearing - our position on rolling out data is for the scientific community and in anticipation of a product launch. So we want to build momentum within the doctor community for these products by introducing data at those types of scientific meetings. And so October I think is the first one that's on the schedule, and there will be more over the course of the year during the launch of the product and even after the launch of the product.

Okay great thank you very much.

Jeffery Black; Okay thanks.

Your next question will come from Bob Yeddin (ph).

Thank you for taking my question. It's just a follow-up on Oxymorphone. Can you tell us what this Phadupha (ph)date is, Jeff?

Yeah the target date which the FDA tries to do 90% of the NDA is on the target date for Oxymorphone. ER is October 19th, the IR is October 20th. The 12 month Phadupha (ph) date, however, is December 19th for the ER, and December 20th for the IR.

Okay and has the -- I realiz Norvada is your contract manufacturer for the product. Have they - has the FDA gone in to do a pre-approval inspection at that facility yet?

We haven't announced that yet in terms of any of the specific filing.

but there are no manufacturing problems. We're ready for launch.

Okay great. And then on the oxy-cotton generic maybe you can help me understand is that a - how does that product position itself against other productsyou might have in your pipeline or products you may have in the future? Does it - effectually does it - will it potentially cannibalize sales? Or will you adjust your sales effort versus other products that are in your pipe line, that are in your product portfolio today?

Sure, Bob, maybe I can give a little bit of color on that. The extended release Oxyconol (ph), much like our extended release morphine sulphate, will be sold by our generic division. We basically rank our products pumped into the clinical products thatare sold through our proprietary sales force, and then our generic products which essentially are competing and being dispensed versus the brand product as it's written. So as Oxycontin (ph)or as MSContin (ph) is written, it's dispensed at the pharmacy level; and the decision is made there vis a vis the generic.

Okay, thank you very much.

You're welcome.

Your next question will come from Chris Tenaca (ph).

Hello. Thanks for taking my call. I just wanted to know if you could talk about what drug categories you view as complementary to the company's pain management focus and why?

Sure. Let me just answer that for a moment. With our strategy what we've been wanting to do and have now put in place -- the possibilities to do -- is to really extend into areas that we believe are complementary, where we can really leverage the relationships and the capabilities we've built in the market place. And we look at products in the area of anesthesia, critical care products, pain. We look at declomorphine (ph), and we look at provofol (ph ); and we can now leverage the relationships we have with the physicians. If we look at our oral mucusitis products, the ability to now be able to move out into supportive care oncology (ph). We are - with the products that we have already out talking with oncologists, it makes natural sense for us then to move into the supportive care side of oncology (ph). Our products also participate in the field of neurology. We've been building relationships in that area. It would make sense - it would not be surprising to see us with other neurology type products where we can again leverage those relationships that we've built.

So those just to name a few of our very natural complementary areas. That's what we're doing in pain management.

Okay very good. I also wanted to ask a question regarding your good will. I know that at this point you've consolidate all of the good will into a single reporting unit. But I wonder when you had first completed the August transaction if you could explain what was the impact at that time. How much good will did you assume?

If memory serves right - it's a few years ago-- but we've assume good will about $100m back then. We amortized or amortized in that goodwill under the old good will amortization roles when we were amortizing it over a 3 year period because of some adjustments to the purchase price because of us no longer having reserves for tax or the unitization -- I guess we had an uncertainty at the time whether we had utilized the NOL's that were generated when we changed that and decided yes in fact we are going to be able to utilize all this stuff. Based on that adjustment to the purchase price -- which didn't affect the income statement at all, the good will so to speak if you were to bifurcate, the olgos from the Endo is essentially zero any way.

Okay very good thank you very much.

Sure.

Your next question will come from Mr. Michael Tong (ph).

Hi thanks for taking the follow up. If I can take a stab at this one. Carrol, would you expect at this point to perhaps see a 12 hour duration of action on Oxymorphone extended release?

Yes [inaudible] studies we've demonstrated that it's what we believe, is true 12 hour profile on this product. So, yes, we've demonstrated that.

And I guess the question is would you try to get that onto the label; and, if so, how successful do you think that might be?

You know certainly we would try to get that on the label. And more studies certainly helped us to be able to demonstrate that. How successful we could be with is something that we would sit down with the FDA. I don't think that we could guess at that right now.

As far as the market potential for the product and whether we'd be able to sell it if it gets into the labeling, we think oxymorphone has a lot of benefits as it relates to current opiates on the marketplace. We believe it's, based on our clinical trials, twice as strong as Oxycontin (ph), which provides the market with an opportunity to provide equal analgesia with half the dose of the narcotic. It also, to our clinical studies as Carrol mentioned, did demonstrate to 12 hour dosing. So again although Oxycontin (ph) is labeled as a 12 hour drug, in practice it is used three times a day. And we believe, based on our clinical trials, oxymorphone will be twice a day; and therefore could be competitive from a compliance and convenient stand point versus Oxycontin (ph). And then finally oxymorphone has 4 dosage strengths both the suppository and the injection which are currently on the market, as well as immediate and extended release oxymorphone product. So we believe that combination of factors is going to be very effective in our ability to launch and market this product against a very competitive deal on the strong opiate market.

Great thanks.

At this time we have no further questions. I will turn the call over to Ms Ammon.

I'll just again like to say thank you very much for joining us on this conference call. And it really has been a pleasure to be able to share our results with you. And thank you.

Thank you for participating in today's teleconference. You may now disconnect.