SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(MARK ONE)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
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: 39040
ENDO PHARMACEUTICALS HOLDINGS INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 13-4022871
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
223 WILMINGTON-WEST CHESTER PIKE
CHADDS FORD, PENNSYLVANIA 19317
(Address of Principal Executive Offices)
(610) 558-9800
(Registrant's Telephone Number, Including Area Code)
Indicate by check |X| whether the registrant: (1) has filed all reports
required to be filed by Sections 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 |X| NO |_|
The aggregate number of shares of the Registrant's common stock
outstanding as of November 13, 2000 was 89,138,950.
ENDO PHARMACEUTICALS HOLDINGS INC.
REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited)
September 30, 2000 and December 31, 1999..................... 1
Consolidated Statements of Operations (Unaudited)
Three and Nine Months Ended September 30, 2000 and 1999...... 2
Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended September 30, 2000 and 1999................ 3
Notes to Consolidated Financial Statements (Unaudited)......... 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................... 7
Overview....................................................... 7
General........................................................ 8
Three Months Ended September 30, 2000 Compared to
the Three Months Ended September 30, 1999.................... 8
Nine Months Ended September 30, 2000 Compared to
the Nine Months Ended September 30, 1999..................... 9
Liquidity and Capital Resources................................ 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk..... 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.............................................. 12
Item 2. Changes in Securities and Use of Proceeds...................... 12
Item 3. Defaults Upon Senior Securities................................ 12
Item 4. Submission of Matters to a Vote of Security Holders............ 12
Item 5. Other Information.............................................. 12
Item 6. Exhibits and Reports on Form 8-K............................... 12
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ENDO PHARMACEUTICALS HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share data)
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................ $ 48,915 $ 22,028
Accounts receivable, net......................... 59,225 62,254
Inventories...................................... 31,048 21,269
Prepaid expenses................................. 2,777 3,356
Deferred income taxes............................ 1,266 9,520
--------- ---------
Total current assets.......................... 143,231 118,427
--------- ---------
PROPERTY AND EQUIPMENT, Net........................ 5,604 5,712
GOODWILL AND OTHER INTANGIBLES, Net................ 298,348 192,081
DEFERRED INCOME TAXES.............................. 1,491 8,636
RESTRICTED CASH.................................... 150
OTHER ASSETS....................................... 3,918 4,580
--------- ---------
TOTAL ASSETS....................................... $ 452,742 $ 329,436
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................................. $ 22,599 $ 19,185
Accrued expenses................................. 41,539 33,641
Income taxes payable............................. 75
Current portion of long-term debt................ 15,538 15,985
--------- ---------
Total current liabilities..................... 79,676 68,886
--------- ---------
LONG-TERM DEBT, Less current portion............... 185,247 175,218
OTHER LIABILITIES.................................. 1,640 6,745
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred Stock, $.01 par value; 40,000,000
shares authorized; none issued
Common Stock, $.01 par value; 175,000,000
shares authorized; and 89,138,950 and
71,323,644 issued and outstanding at
September 30, 2000 and December 31, 1999,
respectively................................... 891 713
Additional paid-in capital....................... 370,655 109,707
Accumulated deficit.............................. (185,367) (31,833)
--------- ---------
Total Stockholders' Equity.................... 186,179 78,587
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY......... $ 452,742 $ 329,436
========= =========
See Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
ENDO PHARMACEUTICALS HOLDINGS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except share and per share data)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES............................. $ 50,902 $ 32,610 $ 119,836 $ 87,296
COST OF SALES......................... 15,254 14,678 43,587 40,804
----------- ----------- ----------- -----------
GROSS PROFIT.......................... 35,648 17,932 76,249 46,492
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Selling, general and
administrative.................... 14,564 9,882 40,702 29,743
Research and development............ 8,315 2,066 16,011 6,106
Depreciation and amortization....... 10,715 2,112 15,041 6,073
Purchased in-process research
and development................... 133,200 133,200
Merger and other related costs...... 1,583 1,583
Separation benefits................. 22,034
----------- ----------- ----------- -----------
OPERATING (LOSS) INCOME............... (132,729) 3,872 (152,322) 4,570
----------- ----------- ----------- -----------
INTEREST EXPENSE, Net................. 3,672 3,631 11,390 10,407
----------- ----------- ----------- -----------
(LOSS) INCOME BEFORE INCOME TAX
(BENEFIT)............................. (136,401) 241 (163,712) (5,837)
----------- ----------- ----------- -----------
INCOME TAX (BENEFIT).................. 147 146 (10,178) (2,215)
----------- ----------- ----------- -----------
NET (LOSS) INCOME..................... $ (136,548) $ 95 $ (153,534) $ (3,622)
=========== =========== =========== ===========
NET (LOSS) INCOME PER SHARE:
Basic and Diluted................... $ (1.59) $ .00 $ (2.01) $ (.05)
Weighted average shares
(Basic and Diluted)................ 85,847,875 71,333,558 76,202,417 71,334,717
See Notes to Consolidated Financial Statements.
</TABLE>
ENDO PHARMACEUTICALS HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
NINE MONTHS ENDED
SEPTEMBER 30,
-------------
2000 1999
----------- ---------
OPERATING ACTIVITIES:
Net Loss............................................ $ (153,534) $ (3,622)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization..................... 15,041 6,073
Purchased in-process research and development..... 133,200
Amortization of deferring financing costs......... 909 896
Accretion of promissory notes..................... 2,407 1,268
Deferred income taxes............................. (10,253) (2,214)
Compensation related to stock options............. 20,782
Changes in assets and liabilities which provided
(used) cash:
Accounts receivable............................... 3,127 (6,857)
Inventories....................................... (9,779) (5,381)
Other assets...................................... 560 1,113
Accounts payable.................................. (73) 820
Accrued expenses.................................. 3,685 4,355
Other liabilities................................. 14,898 14,063
--------- ---------
Net cash provided by operating activities...... 20,970 10,514
--------- ---------
INVESTING ACTIVITIES:
Purchase of property and equipment.................. (871) (1,648)
Acquisition of Licensing Rights..................... (5,950)
Net cash acquired in the Merger..................... 19,611
--------- ---------
Net cash provided by (used in) investing
activities 18,740 (7,598)
--------- ---------
FINANCING ACTIVITIES:
Repayments of long-term debt........................ (12,830)
Repurchase of Class A Common Stock.................. (25)
Issuance of Class A Common Stock on March 6, 2000... 7
--------- ---------
Net cash used in financing activities.......... (12,823) (25)
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS............. 26,887 2,891
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD........ 22,028 17,367
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD.............. $ 48,915 $ 20,258
========= =========
SUPPLEMENTAL INFORMATION:
Interest Paid....................................... $ 9,917 $ 8,888
Income Taxes Paid................................... $ 75
SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES
Promissory Note issued under Manufacturing
& Supply Agreement................................ $ 20,003 $ 18,655
Fair value of net assets acquired in the
Merger, net of cash............................... $ 228,941
See Notes to Consolidated Financial Statements.
ENDO PHARMACEUTICALS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
1. CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management, the accompanying condensed consolidated
financial statements of Endo Pharmaceuticals Holdings Inc. ("Endo" or the
"Company") and its subsidiaries, which are unaudited, include all normal
and recurring adjustments necessary to present fairly the Company's
financial position as of September 30, 2000 and the results of operations
and cash flows for the periods presented. The accompanying consolidated
balance sheet as of December 31, 1999 is derived from the Company's audited
financial statements. Certain information and footnote disclosure normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted as
promulgated by APB Opinion No. 28 and Rule 10.01 of Regulation S-X. These
condensed consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes thereto as of and for
the year ended December 31, 1999 contained in the Company's registration
statement on Form S-4 filed with the Securities and Exchange Commission on
June 9, 2000, as amended.
2. MERGER
On November 29, 1999, the Company and Algos Pharmaceutical Corporation
("Algos") announced that they had entered into a definitive merger
agreement providing for the merger (the "Merger") of Algos into Endo Inc.,
a newly formed, wholly owned subsidiary of the Company. The Merger, which
was completed on July 17, 2000, has been accounted for by the Company using
the purchase method of accounting. The assets acquired and liabilities
assumed of Algos will be recorded at their fair values based upon
completion of an independent appraisal. The Company has performed a
preliminary allocation of the purchase price which has been reflected in
the accompanying financial statements. Subsequent adjustments to the
preliminary allocation of the purchase price are not expected to materially
affect the financial condition or results of operations of the Company. The
assets acquired and liabilities assumed, results of operations and cash
flows of Algos have been included in the Company's financial statements
prospectively for reporting periods beginning July 17, 2000 based on the
preliminary allocation of purchase price.
The total purchase price of $248.6 million (including approximately
$7.0 million in transaction fees) was determined using an average closing
price of the Algos common stock for a reasonable period of time before and
after the April 17, 2000 measurement date of $13.54 and the 17,832,106
common shares and common share equivalents outstanding at the date of the
Merger (including 21,580 outstanding Series A Warrants). The preliminary
allocation of the fair value of the assets acquired and liabilities assumed
includes an allocation to workforce in place of $11.9 million which will be
amortized over its estimated useful life of two years, patents of $3.2
million which will be amortized over their estimated useful lives of 17
years and goodwill of $104.8 million which will be amortized over its
estimated useful life of three years. In addition, the Company recorded
estimated liabilities for exit costs of $3.1 million related to
non-cancelable lease payments and $1.1 million for employee relocation
costs. Also, as a result of the Merger, it was determined that the
utilization of the Company's federal deferred tax assets is uncertain.
Accordingly, a valuation allowance has been recorded to fully reserve its
federal deferred tax assets.
The Merger included various on-going projects to research and develop
innovative new products for pain management. As a result, the preliminary
allocation of the fair value of the assets acquired and liabilities assumed
includes an allocation to purchased in-process research and development
("IPRD") of $133.2 million which was immediately expensed in the
consolidated statement of operations on the acquisition date. The
methodology used by the Company on the acquisition date in determining the
value of IPRD was to: 1) identify the various on-going projects that the
Company will prioritize and continue; 2) project net future cash flows of
the identified projects based on current demand and pricing assumptions,
less the anticipated expenses to complete the development program, drug
application, and launch the products (significant net cash inflows from
MorphiDex(R) were projected in 2003); 3) discount these cash flows based on
a risk-adjusted discount rates ranging from 25% to 33% (weighted average
discount rate of 27%); and 4) apply the estimated percentage of completion
to the discounted cash flow for each individual project ranging from 4% to
81%. The discount rate was determined after considering various
uncertainties at the time of the Merger, primarily the stage of project
completion.
The Company preliminarily allocated fair value to the three opioid
analgesic projects: MorphiDex(R), HydrocoDex(TM) and OxycoDex(TM). The
development program for a new pharmaceutical substance involves several
different phases prior to drug application. Drug application must be
approved prior to marketing a new drug. Despite the Company's commitment to
completion of the research and development projects, many factors may arise
which could cause a project to be withdrawn or delayed, including the
inability to prove the safety and efficacy of a drug during the development
process. Upon withdrawal, it is unlikely that the development activities
will have alternative use. If these projects are not successfully
developed, the Company's results of operations and financial position in a
future period could be negatively impacted.
The following unaudited pro forma summary presents the net sales, net
loss and net loss per share as if the Merger occurred as of January 1,
1999. This unaudited pro forma summary has been prepared for comparative
purposes only and is not necessarily indicative of the operating results
that the Company would have achieved had the Merger been completed as of
January 1, 1999, or the operating results that the Company may achieve in
the future.
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
--------- --------- --------- ---------
(In thousands, except per share data)
Net sales $ 50,902 $ 32,610 $ 119,836 $ 87,296
Net loss $ (4,156) $ (13,433) $ (57,889) $ (184,925)
Net loss per share
(basic and diluted) $ (.05) $ (.15) $ (.65) $ (2.07)
3. RECAPITALIZATION
In connection with the Merger, the Company effected a recapitalization
of its common stock, par value $.01 per share ("Common Stock"), Class A
common stock, par value $.01 per share ("Class A Common Stock") and
preferred stock (the "Recapitalization"). The Recapitalization was effected
on July 17, 2000 through a stock dividend of approximately 64.59 shares of
Common Stock for each share of Common Stock and Class A Common Stock
outstanding immediately prior to the Merger. Immediately prior to the
Merger, the Company amended and restated its certificate of incorporation
to effect the Recapitalization and to eliminate its Class A Common Stock.
The effect of the Recapitalization has been reflected in the accompanying
financial statements.
4. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement of Financial Accounting
Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging
Activities. SFAS No. 133 establishes new accounting and reporting standards
for derivative financial instruments and for hedging activities. SFAS No.
133 requires the Company to measure all derivatives at fair value and to
recognize them in the balance sheet as an asset or liability, depending on
the Company's rights or obligations under the applicable derivative
contract. In June 1999, the FASB issued SFAS No. 137, which deferred the
effective date of adoption of SFAS No. 133 for one year. The Company will
adopt SFAS No. 133 no later than the first quarter of fiscal year 2001.
Adoption of the new method of accounting for derivatives and hedging
activities is not expected to have a material impact on the Company's
financial position.
5. COMMITMENTS AND CONTINGENCIES
The Company has entered into employment agreements with certain members
of management.
The Company is subject to various claims arising out of the normal
course of business with respect to commercial matters, including product
liabilities, patent infringement matters, governmental regulation and other
actions. In the opinion of management, the amount of ultimate liability
with respect to these actions will not materially affect the financial
position, results of operations or liquidity of the Company.
Prior to July 17, 2000, Kelso & Company provided financial advisory
services to the Company for an annual fee of $347,000 plus the
reimbursement of expenses. In connection with the Merger, which was
completed on July 17, 2000, the Company terminated this agreement by making
a one-time payment to Kelso of $1.5 million which is included in Merger and
other related costs.
6. SEPARATION BENEFITS
During the period ended March 31, 2000 and immediately thereafter, the
Company entered into separation and release agreements with two executives.
The agreements were accounted for during the period ended March 31, 2000 as
all material terms and conditions were known as of March 31, 2000.
Severance and other termination benefits provided by the agreements
amounting to $1,252,000 were accrued as of March 31, 2000.
The separation and release agreements provided that certain options
granted to the two executives under existing option plans became fully
vested on the effective dates of the agreements. The agreements also
provided that other options previously granted to the executives would
terminate. The agreements further provided terms and conditions for the
exercise of the vested options. Cost related to stock options resulting
from the agreements resulted in a charge of $20,782,000 during the period
ended March 31, 2000.
******
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Except for the historical information contained in this Report, this
Report, including the following discussion, contains forward-looking
statements that involve risks and uncertainties.
Overview
The Company, through its wholly owned subsidiaries, Endo
Pharmaceuticals Inc. and Endo Inc., is engaged in the research,
development, sales and marketing of branded and generic prescription
pharmaceuticals used primarily for the treatment and management of pain.
Branded products comprised approximately 69%, 68% and 74% of net sales for
the year ended December 31, 1998, the year ended December 31, 1999 and the
Nine Months ended September 30, 2000, respectively. Percocet(R) comprised
approximately 41%, 37% and 45% of the Company's net sales in the years
ended December 31, 1998 and 1999, and the Nine Months ended September 30,
2000, respectively. On August 26, 1997, an affiliate of Kelso & Company and
then members of management entered into an asset purchase agreement with
the then DuPont Merck Pharmaceutical Company to acquire certain branded and
generic pharmaceutical products and exclusive worldwide rights to a number
of new chemical entities in the DuPont research and development pipeline
from DuPont Merck through the newly-formed Endo Pharmaceuticals. On
November 19, 1999, the Company formed Endo Inc. as a wholly owned
subsidiary to effect the acquisition of Algos. The stock of Endo
Pharmaceuticals Inc. and the stock of Endo Inc. are the only assets of the
Company, and the Company has no other operations or business. The Company
was formed as a holding company and incorporated on November 18, 1997 under
the laws of the state of Delaware and has its principal executive offices
at 223 Wilmington-West Chester Pike, Chadds Ford, Pennsylvania 19317
(telephone number: (610) 558-9800).
On July 17, 2000, the Company completed the Merger with Algos. In the
Merger, the Company issued to the former Algos stockholders, in the
aggregate, 17,810,526 shares of Company common stock and 17,810,526
warrants to purchase in the aggregate up to 20,575,507 additional shares of
Company common stock in certain circumstances as more fully described in
the Company's Registration Statement on Form S-4 filed with the Securities
and Exchange Commission on June 9, 2000, as amended. In the Merger, the
Company also issued to the pre-Merger Endo stockholders, in the aggregate,
71,328,424 warrants to purchase in the aggregate up to 29,720,177
additional shares of common stock in certain other circumstances as more
fully described in the Company's Registration Statement on Form S-4 filed
with the Securities and Exchange Commission on June 9, 2000, as amended.
The assets acquired and liabilities assumed, results of operations and
cash flows of Algos have been included in the Company's financial
statements and Management's Discussion and Analysis of Financial Conditions
and Results of Operations prospectively for reporting periods beginning
July 17, 2000.
The Merger has been accounted for by the Company using the purchase
method of accounting. The assets acquired and liabilities assumed of Algos
will be recorded at their fair values upon completion of an independent
appraisal. The Company has performed a preliminary allocation of the
purchase price which has been reflected in the accompanying financial
statements. Subsequent adjustments to the preliminary allocation of the
purchase price are not expected to materially affect the financial
condition and results of operations of the Company.
The Merger included various on-going projects to research and develop
innovative new products for pain management. As a result, the preliminary
allocation of the fair value of the assets acquired and liabilities assumed
includes an allocation to purchased in-process research and development
("IPRD") of $133.2 million which was immediately expensed in the
consolidated statement of operations on the acquisition date. The
methodology used by the Company on the acquisition date in determining the
value of IPRD was to: 1) identify the various on-going projects that the
Company will prioritize and continue; 2) project net future cash flows of
the identified projects based on current demand and pricing assumptions,
less the anticipated expenses to complete the development program, drug
application, and launch the products (significant net cash inflows from
MorphiDex(R) were projected in 2003); 3) discount these cash
flows based on a risk-adjusted discount rates ranging from 25% to 33%
(weighted average discount rate of 27%); and 4) apply the estimated
percentage of completion to the discounted cash flow for each individual
project ranging from 4% to 81%. The discount rate was determined after
considering various uncertainties at the time of the Merger, primarily the
stage of project completion.
The Company preliminarily allocated fair value to the three opioid
analgesic projects: MorphiDex(R), HydrocoDexTM and OxycoDexTM. The
development program for a new pharmaceutical substance involves several
different phases prior to drug application. Drug application must be
approved prior to marketing a new drug. Despite the Company's commitment to
completion of the research and development projects, many factors may arise
which could cause a project to be withdrawn or delayed, including the
inability to prove the safety and efficacy of a drug during the development
process. Upon withdrawal, it is unlikely that the development activities
will have alternative use. If these projects are not successfully
developed, the Company's results of operations and financial position in a
future period could be negatively impacted.
The Company's quarterly results have fluctuated in the past, and may
continue to fluctuate. These fluctuations are primarily due to the timing
of new product launches, purchasing patterns of the Company's customers,
market acceptance of the Company's products and the impact of competitive
products and pricing.
RESULTS OF OPERATIONS
General
Goodwill and other intangibles represent a significant portion of the
assets and stockholders' equity of the Company. As of September 30, 2000,
goodwill and other intangibles comprise approximately 66% of total assets
and 160% of stockholders' equity. The Company assesses the recoverability
and the amortization period of goodwill by determining whether the amount
can be recovered through undiscounted net cash flows of the businesses
acquired over the remaining amortization period. The Company reviews for
the impairment of long-lived assets whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable, such as in the event of a significant adverse change in
business conditions or a significant change in the intended use of an
asset. An impairment loss would be recognized when estimated undiscounted
future cash flows expected to result from the use of the asset are less
than its carrying amount. Assets are grouped at the lowest level for which
there are identifiable cash flows that are largely independent from other
asset groups. The Company uses the discounted future expected net cash
flows, as its estimate of fair value, to determine the amount of impairment
loss. As a result of the significance of goodwill and other intangibles,
amortization of goodwill and other intangibles will significantly impact
the results of operations of the Company. In addition, the Company's
results of operations and financial position in a future period could be
negatively impacted should an impairment of goodwill and other intangible
assets occur.
Three Months Ended September 30, 2000 Compared to the Three Months
Ended September 30, 1999
Net sales for the three months ended September 30, 2000 increased by
56% to $50.9 million from $32.6 million in the comparable 1999 period. This
increase in net sales was primarily due to the increase in net sales from
several recently launched new products. In November 1999, the Company
launched Percocet(R) 2.5/325, Percocet(R) 7.5/500 and Percocet(R) 10.0/650
to complement the existing Percocet(R) 5.0/325 for the relief of
moderate-to-severe pain. In September 1999, the Company launched
Lidoderm(R), the first and only FDA-approved product for the treatment of
the pain of post-herpetic neuralgia. In November 1998, the Company launched
Morphine Sulfate Extended Release Tablets, the therapeutic equivalent
version of MS Contin(R), for moderate-to-severe pain.
Gross profit for the three months ended September 30, 2000 increased by
99% to $35.6 million from $17.9 million in the comparable 1999 period.
Gross profit margins increased to 70% from 55% due to the Company's
continued focus on a more favorable mix of higher margin products both
through product launches as discussed above, and the discontinuation of
some lower margin non-core products. In addition, the increase in gross
profit margins was also due to the fixed cost nature of the Company's most
significant contract manufacturing relationship with DuPont
Pharmaceuticals. If the Company achieves its forecast for revenue and
product mix, it expects the increase in gross profits to continue.
Selling, general and administrative expenses for the three months ended
September 30, 2000 increased by 47% to $14.6 million from $9.9 million in
the comparable 1999 period. This increase was due to a $2.4 million
increase in sales and promotional efforts in 2000 over the comparable 1999
period to support the recent launch of Lidoderm(R) and the launches of
Percocet(R) 2.5/325, Percocet(R) 7.5/500 and Percocet(R) 10.0/650 to
complement the existing Percocet(R) 5.0/325. In addition, the Company
experienced an increase in personnel-related costs in the general and
administrative functions in order to support its growth.
Research and development expenses for the three months ended September
30, 2000 increased by 295% to $8.3 million from $2.1 million in the
comparable 1999 period. This increase was due to the Company's increased
spending on products under development that are focused in pain management
including the products under development in the former Algos pipeline.
Depreciation and amortization for the three months ended September 30,
2000 increased to $10.7 million from $2.1 million in the comparable 1999
period. This increase was substantially due to the increase in amortization
of goodwill and other intangibles resulting from the preliminary estimate
of fair value of the intangible assets acquired as a result of the Merger.
Purchased in-process research and development for the three months
ended September 30, 2000 of $133.2 million resulted from the preliminary
estimate of fair value of the products under development acquired by the
Company in the Merger.
Merger and other related costs for the three months ended September 30,
2000 of $1.6 million resulted from fees incurred as a result of the Merger
that were not considered direct costs of the acquisition.
Interest expense, net for the three months ended September 30, 2000
increased by 3% to $3.7 million from $3.6 million in the comparable 1999
period. The increase was due to an increase in interest expense of $.3
million due to an increase in long-term debt outstanding and an increase in
interest expense of $.3 million due to an increase in interest rates. These
increases are offset by an increase in interest income of $.5 million due
to an increase in the average cash balance for the three months ended
September 30, 2000 compared to three months ended September 30, 1999. The
increase in the average cash balance was primarily the result of acquiring
$27.8 million in cash and cash equivalents in the Merger.
Income tax for both the three months ended September 30, 2000 and the
comparable 1999 period was $.1 million. In the three months ended September
30, 2000, the Company recorded a valuation allowance on its existing
deferred tax assets due to the uncertainty of the utilization of such
amounts subsequent to the Merger.
Nine Months Ended September 30, 2000 Compared to the Nine Months
Ended September 30, 1999
Net sales for the nine months ended September 30, 2000 increased by 37%
to $119.8 million from $87.3 million in the comparable 1999 period. This
increase in net sales was primarily due to the increase in net sales from
several recently launched new products. In November 1999, the Company
launched Percocet(R) 2.5/325, Percocet(R) 7.5/500 and Percocet(R) 10.0/650
to complement the existing Percocet(R) 5.0/325 for the relief of
moderate-to-severe pain. In September 1999, the Company launched
Lidoderm(R), the first and only FDA-approved product for the treatment of
the pain of post-herpetic neuralgia. In November 1998, the Company launched
Morphine Sulfate Extended Release Tablets, the therapeutic equivalent
version of MS Contin(R), for moderate-to-severe pain.
Gross profit for the nine months ended September 30, 2000 increased by
64% to $76.2 million from $46.5 million in the comparable 1999 period.
Gross profit margins increased to 64% from 53% due to the Company's
continued focus on a more favorable mix of higher margin products both
through product launches as discussed above, and the discontinuation of
some lower margin non-core products. In addition, the increase in gross
profit margins was also due to the fixed cost nature of the Company's most
significant contract manufacturing relationship with DuPont
Pharmaceuticals. If the Company achieves its forecast for revenue and
product mix, management expects the increase in gross profits to continue.
Selling, general and administrative expenses for the nine months ended
September 30, 2000 increased by 37% to $40.7 million from $29.7 million in
the comparable 1999 period. This increase was due to a $6.1 million
increase in sales and promotional efforts in 2000 over the comparable 1999
period to support the recent launches of Zydone(R), Lidoderm(R) and the
launches of Percocet(R) 2.5/325, Percocet(R) 7.5/500 and Percocet(R)
10.0/650 to complement the existing Percocet(R) 5.0/325. In February 1999,
the Company deployed a dedicated contract field force of approximately 300
sales representatives to promote these new products, which was an increase
from the prior field force of approximately 100 sales representatives. In
addition, the Company experienced an increase in personnel-related costs in
the general and administrative functions in order to support its growth and
the Company recorded a provision for doubtful accounts of $.8 million for a
customer who filed for bankruptcy.
Research and development expenses for the nine months ended September
30, 2000 increased by 162% to $16.0 million from $6.1 million in the
comparable 1999 period. This increase was due to the Company's increased
spending on products under development focused in pain management including
the products under development in the former Algos pipeline.
Depreciation and amortization for the nine months ended September 30,
2000 increased to $15.0 million from $6.1 million in the comparable 1999
period. This increase was substantially due to the increase in amortization
of goodwill and other intangibles resulting from the preliminary estimate
of fair value of the intangible assets acquired as a result of the Merger.
Purchased in-process research and development for the nine months ended
September 30, 2000 of $133.2 million resulted from the preliminary estimate
of fair value of the products under development acquired by the Company in
the Merger.
Merger and other related costs for the nine months ended September 30,
2000 of $1.6 million resulted from fees incurred as a result of the Merger
that were not considered direct costs of the acquisition.
Separation benefits of $22.0 million in the nine months ended September
30, 2000 resulted from a $20.8 million charge related to the acceleration
of vesting of stock options held by two former executives and a $1.2
million charge from compensation and other benefits pursuant to two
separation and release agreements entered into by the Company. The stock
compensation charge reflects the estimated difference in the fair value and
the exercise price of such options on the effective date of the separation
and release agreements.
Interest expense, net for the nine months ended September 30, 2000
increased by 10% to $11.4 million from $10.4 million in the comparable 1999
period. The increase was due to an increase in interest expense of $1.0
million due to an increase in long-term debt outstanding and an increase in
interest expense of $1.0 million due to an increase in interest rates.
These increases are offset by an increase in interest income of $1.0
million due to an increase in the average cash balance for the nine months
ended September 30, 2000 compared to the nine months ended September 30,
1999. The increase in the average cash balance was in part due to the
acquisition of $27.8 million in cash and cash equivalents in the Merger.
Income tax benefit for the nine months ended September 30, 2000
increased to $10.2 million from $2.2 million in the comparable 1999 period.
The increase in the income tax benefit was due to the increase in loss
before income tax benefit prior to the Merger. In connection with the
Merger, the Company recorded a valuation allowance on its existing deferred
tax assets due to the uncertainty of the utilization of such amounts
subsequent to the Merger.
Liquidity and Capital Resources
Net cash provided by operating activities increased by $10.5 million to
$21.0 million for the nine months ended September 30, 2000 from $10.5
million for the nine months ended September 30, 1999. This increase was
substantially due to a higher amount of cash provided by the change in
accounts receivable due to the growth in net sales versus the comparable
period in 1999.
Net cash provided by investing activities increased by $26.3 million to
$18.7 million for the nine months ended September 30, 2000 from $7.6
million of net cash utilized in investing activities for the nine months
ended September 30, 1999. This increase is substantially due to the net
cash acquired in the Merger of $19.6 million. In addition, this increase is
due to a $6.0 million decrease in license fees paid due to a payment for
the license of Lidoderm(R) made in 1999. The remaining increase in cash
provided by investing activities is due to a $.7 million decrease in
capital expenditures due to the completion of an enterprise software system
implementation during 1999.
Net cash utilized in financing activities increased by $12.8 million
due to repayments made on the Company's credit facility.
The Company's cash and cash equivalents totaled $48.9 million at
September 30, 2000. The Company believes that its (a) cash and cash
equivalents, (b) cash flow from operations and (c) existing credit
facility, which has an available unused line of credit of $25 million, will
be sufficient to meet its normal operating, investing and financing
requirements in the foreseeable future. In the event that the Company makes
any significant acquisitions or other strategic investments, it may be
required to raise additional funds, through the issuance of additional debt
or equity securities.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company's primary market risk exposure is to changes in interest
rates (LIBOR) on its variable rate borrowings. The Company does not utilize
financial instruments for trading purposes and holds no derivative
financial instruments that could expose it to significant market risk. The
Company monitors interest rates and enters into interest rate agreements as
considered appropriate. To manage a portion of its exposure to fluctuations
in interest rates, the Company had entered into an interest rate cap
agreement with a notional amount of $82.5 million that sets a maximum LIBOR
rate of 8% that it will pay on the related notional amount. This interest
rate cap agreement expired on August 27, 2000. Effective August 27, 2000,
the Company has entered into a new interest rate cap agreement with a
notional amount of $70.0 million that sets a maximum LIBOR rate of 8% that
the Company will pay on the related notional amount through August 27,
2003.
FORWARD LOOKING STATEMENTS
This Report contains forward-looking statements, within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, as amended, that are based on management's beliefs
and assumptions, current expectations, estimates and projections.
Statements that are not historical facts, including statements which are
preceded by, followed by, or that include, the words "believes,"
"anticipates," "plans," "expects" or similar expressions and statements.
Endo's estimated or anticipated future results, product performance or
other non-historical facts are forward-looking and reflect Endo's current
perspective on existing trends and information. Many of the factors that
will determine the Company's future results are beyond the ability of the
Company to control or predict. These statements are subject to risks and
uncertainties and, therefore, actual results may differ materially from
those expressed or implied by these forward-looking statements. The reader
should not rely on any forward-looking statement. The Company undertakes no
obligations to update any forward-looking statements whether as a result of
new information, future events or otherwise. Several important factors, in
addition to the specific factors discussed in connection with these
forward-looking statements individually, could affect the future results of
the Endo and could cause those results to differ materially from those
expressed in the forward-looking statements contained herein. Important
factors that may affect future results include, but are not limited to:
market acceptance of the Company's products and the impact of competitive
products and pricing; dependence on sole source suppliers; the success of
the Company's product development activities and the timeliness with which
regulatory authorizations and product launches may be achieved; successful
compliance with extensive, costly, complex and evolving governmental
regulations and restrictions; the availability on commercially reasonable
terms of raw materials and other third party manufactured products;
exposure to product liability and other lawsuits and contingencies; the
ability to timely and cost effectively integrate acquisitions; uncertainty
associated with pre-clinical studies and clinical trials and regulatory
approval; uncertainty of market acceptance of new products; the difficulty
of predicting FDA approvals; risks with respect to technology and product
development; the effect of competing products and prices; uncertainties
regarding intellectual property protection; uncertainties as to the outcome
of litigation; changes in operating results; impact of competitive products
and pricing; product development; changes in laws and regulations; customer
demand; possible future litigation; availability of future financing and
reimbursement policies of government and private health insurers and
others; and other risks and uncertainties detailed in Endo's Registration
Statement on Form S-4 filed with the Securities and Exchange Commission on
June 9, 2000, as amended. Readers should evaluate any statement in light of
these important factors.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On October 20, 2000, The Purdue Frederick Company (and related
companies) filed suit against Endo in the U.S. District Court for the
Southern District of New York. The United States Food and Drug
Administration (FDA) accepted Endo's Abbreviated New Drug Application
(ANDA) submission for a bioequivalent version of Purdue Frederick's
OxyContin(R), 40 mg strength. OxyContin(R) is used for the management of
moderate-to-severe pain. Endo believes that its formulation of oxycodone
hydrochloride extended-release tablets, 40 mg does not infringe the patents
that have been listed in the FDA's Orange Book as covering this product and
made the required Paragraph IV Certification to the FDA. No assurance can
be given as to the outcome of the patent challenge process.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
Exhibit No. Title
----------- -----
2.1 Amended and Restated Agreement and Plan of Merger, dated
as of March 3, 2000 (the "Merger Agreement"), by and
among Endo Pharmaceuticals Holdings Inc. ("Endo"), Endo
Inc. and Algos Pharmaceutical Corporation ("Algos")
(incorporated herein by reference to Exhibit 2.1 of the
Registration Statement on Form S-4 of the Registrant
(Registration No. 333-39040) (the "Registration
Statement"), filed with the Securities and Exchange
Commission (the "Commission") on June 9, 2000)
2.2 Amendment, dated as of April 17, 2000, to the Merger
Agreement, by and between Endo, Endo Inc. and Algos
(incorporated herein by reference to Exhibit 2.2 of
the Registration Statement filed with the Commission
on June 9, 2000)
2.3 Asset Purchase Agreement, dated as of August 27, 1997, by
and between Endo Pharmaceuticals Inc. ("Endo
Pharmaceuticals") and The DuPont Merck Pharmaceutical
Company ("DuPont Merck Pharmaceutical") (incorporated
herein by reference to Exhibit 2.3 of the Registration
Statement filed with the Commission on June 9, 2000)
3.1 Amended and Restated Certificate of Incorporation of Endo
(incorporated herein by reference to Exhibit 3.1 of the
Form 10-Q for the Quarter ended June 30, 2000 filed with
the Commission on August 15, 2000)
3.2 Amended and Restated By-laws of Endo (incorporated herein
by reference to Exhibit 3.2 of the Form 10-Q for the
Quarter ended June 30, 2000 filed with the Commission on
August 15, 2000)
4.1 Amended and Restated Executive Stockholders
Agreement, dated as of July 14, 2000, by and among
Endo, Endo Pharma LLC ("Endo LLC"), Kelso Investment
Associates V, L.P. ("KIA V"), Kelso Equity Partners
V, L.P. ("KEP V") and the Management Stockholders (as
defined therein) (incorporated herein by reference to
Exhibit 4.1 of the Form 10-Q for the Quarter ended
June 30, 2000 filed with the Commission on August 15,
2000)
4.2 Amended and Restated Employee Stockholders Agreement,
dated as of July 14, 2000, by and among Endo, Endo
LLC, KIA V, KEP V and the Employee Stockholders (as
defined therein) (incorporated herein by reference to
Exhibit 4.2 of the Form 10-Q for the Quarter ended
June 30, 2000 filed with the Commission on August 15,
2000)
4.3 Form of Stock Certificate of Endo Common Stock
(incorporated herein by reference to Exhibit 4.3 of the
Form 10-Q for the Quarter ended June 30, 2000 filed with
the Commission on August 15, 2000)
4.4 Registration Rights Agreement, dated as of July 17, 2000,
by and between Endo and Endo LLC (incorporated herein by
reference to Exhibit 4.4 of the Form 10-Q for the Quarter
ended June 30, 2000 filed with the Commission on August
15, 2000)
10.1 Endo Warrant Agreement, dated as of July 17, 2000, by and
between Endo and United States Trust Company of New York
(incorporated herein by reference to Exhibit 10.1 of the
Form 10-Q for the Quarter ended June 30, 2000 filed with
the Commission on August 15, 2000)
10.2 Algos Warrant Agreement, dated as of July 17, 2000, by
and between Endo and United States Trust Company of New
York (incorporated herein by reference to Exhibit 10.2 of
the Form 10-Q for the Quarter ended June 30, 2000 filed
with the Commission on August 15, 2000)
10.3 Form of Series A Warrant to Purchase Shares of Common
Stock and Warrants of Endo (incorporated herein by re
ference to Exhibit 10.3 of the Registration Statement
filed with the Commission on June 9, 2000)
10.4 Letter Agreement, dated as of November 26, 1999, by and
among Algos, Endo, KIA V and KEP V (incorporated herein
by reference to Exhibit 10.4 of the Registration
Statement filed with the Commission on June 9, 2000)
10.5 Tax Sharing Agreement, dated as of July 17, 2000, by and
among Endo, Endo Inc. and Endo LLC (incorporated herein
by reference to Exhibit 10.5 of the Form 10-Q for the
Quarter ended June 30, 2000 filed with the Commission on
August 15, 2000)
10.6 Agreement, dated as of July 17, 2000, by and between Endo
and Endo LLC (incorporated herein by reference to Exhibit
10.6 of the Form 10-Q for the Quarter ended June 30, 2000
filed with the Commission on August 15, 2000)
10.7 Credit Agreement, dated as of August 26, 1997, by and
between Endo Pharmaceuticals and The Chase Manhattan Bank
(incorporated herein by reference to Exhibit 10.7 of the
Registration Statement filed with the
Commission on June 9, 2000)
10.8 Co-Promotion Agreement, dated as of March 1, 2000, by
and between Endo Pharmaceuticals and Elan
Pharmaceuticals, Inc. (incorporated herein by
reference to Exhibit 10.8 of the Registration
Statement filed with the Commission on June 9, 2000)
10.9 [Intentionally Omitted]
10.10 Sole and Exclusive License Agreement, dated as of
November 23, 1998, by and between Endo Pharmaceuticals
and Hind Health Care, Inc. (incorporated herein by
reference to Exhibit 10.10 of the Registration Statement
filed with the Commission on June 9, 2000)
10.11 Analgesic License Agreement, dated as of October 27,
1997, by and among Endo Pharmaceuticals, Endo
Laboratories, LLC and DuPont Merck Pharmaceutical
(incorporated herein by reference to Exhibit 10.11 of the
Registration Statement filed with the Commission on June
9, 2000)
10.12 Anti-Epileptic License Agreement, dated as of October 27,
1997, by and among Endo Pharmaceuticals, Endo
Laboratories, LLC and DuPont Merck Pharmaceutical
(incorporated herein by reference to Exhibit 10.12 of the
Registration Statement filed with the Commission on June
9, 2000)
10.13 Product Development, Manufacturing and Supply Agreement,
dated as of October 29, 1999, by and between Endo
Pharmaceuticals and Lavipharm Laboratories Inc.
(incorporated herein by reference to Exhibit 10.13 of the
Registration Statement filed with the Commission on June
9, 2000)
10.14 Supply and Manufacturing Agreement, dated as of November
23, 1998, by and between Endo Pharmaceuticals and Teikoku
Seiyaku Co., Ltd (incorporated herein by reference to
Exhibit 10.14 of the Registration Statement filed with
the Commission on June 9, 2000)
10.15 Supply Agreement, dated as of July 1, 1998, by and
between Endo Pharmaceuticals and Mallinckrodt Inc.
("Mallinckrodt") (incorporated herein by reference to
Exhibit 10.15 of the Registration Statement filed with
the Commission on June 9, 2000)
10.16 Supply Agreement for Bulk Narcotics Raw Materials, dated
as of July 1, 1998, by and between Endo Pharmaceuticals
and Mallinckrodt (incorporated herein by reference to
Exhibit 10.16 of the Registration Statement filed with
the Commission on June 9, 2000)
10.17 Manufacture and Supply Agreement, dated as of August 26,
1997, by and among Endo Pharmaceuticals, DuPont Merck
Pharmaceutical and DuPont Merck Pharma (incorporated
herein by reference to Exhibit 10.17 of the Registration
Statement filed with the Commission on June 9, 2000)
10.18 Strategic Alliance Agreement, dated as of September 17,
1997, by and between Endo Pharmaceuticals and Penwest
Pharmaceuticals Group (incorporated herein by reference
to Exhibit 10.18 of the Registration Statement filed with
the Commission on June 9, 2000)
10.19 Agreement, dated as of February 1, 2000, by and
between Endo Pharmaceuticals and Livingston
Healthcare Services Inc. (incorporated herein by
reference to Exhibit 10.19 of the Registration
Statement filed with the Commission on June 9, 2000)
10.20 Medical Affairs Support Services Agreement, dated as of
June 1, 1999, by and between Endo Pharmaceuticals and
Kunitz and Associates, Inc. (incorporated herein by
reference to Exhibit 10.20 of the Registration Statement
filed with the Commission on June 9, 2000)
10.21 Endo Pharmaceuticals Holdings Inc. 2000 Stock Incentive
Plan
10.22 Endo LLC Amended and Restated 1997 Employee Stock
Option Plan
10.23 Endo LLC Amended and Restated 1997 Executive Stock Option
Plan
10.24 Endo LLC 2000 Amended and Restated Supplemental Employee
Stock Option Plan
10.25 Endo LLC 2000 Amended and Restated Supplemental Executive
Stock Option Plan
10.26 Employment Agreement, dated as of July 17, 2000, by and
between Endo and John W. Lyle (incorporated herein by
reference to Exhibit 10.26 of the Form 10-Q for the
Quarter ended June 30, 2000 filed with the Commission on
Registration Statement filed with the Commission on
August 15, 2000)
10.27 Amended and Restated Employment Agreement, dated as of
April 26, 2000, by and between Endo Pharmaceuticals and
Carol A. Ammon
10.28 Amended and Restated Employment Agreement, dated as of
April 26, 2000, by and between Endo Pharmaceuticals and
Jeffrey R. Black
10.29 Amended and Restated Employment Agreement, dated as of
April 26, 2000, by and between Endo Pharmaceuticals and
David Allen Harvey Lee, MD, Ph.D.
10.30 Amended and Restated Employment Agreement, dated as
April 26, 2000, by and between Endo Pharmaceuticals
and Mariann T. MacDonald
10.31 Separation and Release Agreement, dated as of March 22,
2000, by and between Endo Pharmaceuticals, Endo and
Osagie O. Imasogie (incorporated herein by reference to
Exhibit 10.31 of the Registration Statement filed with
the Commission on June 9, 2000)
10.32 Separation and Release Agreement, dated as of April 20,
2000, by and between Endo Pharmaceuticals, Endo and Louis
J. Vollmer (incorporated herein by reference to Exhibit
10.32 of the Registration Statement filed with the
Commission on June 9, 2000)
10.33 Office Lease, dated as of August 26, 1997, by and between
Endo Pharmaceuticals and Northstar Development Company
(incorporated herein by reference to Exhibit 10.33 of the
Registration Statement filed with the Commission on June
9, 2000)
10.34 Lease Agreement, dated as of May 5, 2000, by and between
Endo Pharmaceuticals and Painters' Crossing One
Associates, L.P. (incorporated herein by reference to
Exhibit 10.34 of the Registration Statement filed with
the Commission on June 9, 2000)
10.35 Employment Agreement, dated as of September 5, 2000,
by and between Endo and Caroline E. Berry
10.36 Employment Agreement, dated as of August 11, 2000, by
and between Endo and Peter A. Lankau
11 Statement Regarding Computation of per Share Earnings
27 Financial Data Schedule
(b) Reports on Form 8-K.
During the quarter for which this Report is being filed, reports on
Form 8-K were filed with the Securities and Exchange Commission on July 19,
2000, October 11, 2000 and October 25, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ENDO PHARMACEUTICALS HOLDINGS INC.
(Registrant)
/s/ Carol A. Ammon
----------------------------
Name: Carol A. Ammon
Title: President and Chief
Executive Officer
/s/ Jeffrey R. Black
----------------------------
Name: Jeffrey R. Black
Title: Senior Vice President and
Chief Financial Officer
Date: November 13, 2000
Exhibit Index
Exhibit No. Title
----------- -----
2.1 Amended and Restated Agreement and Plan of Merger, dated
as of March 3, 2000 (the "Merger Agreement"), by and
among Endo Pharmaceuticals Holdings Inc. ("Endo"), Endo
Inc. and Algos Pharmaceutical Corporation ("Algos")
(incorporated herein by reference to Exhibit 2.1 of the
Registration Statement on Form S-4 of the Registrant
(Registration No. 333-39040) (the "Registration
Statement"), filed with the Securities and Exchange
Commission (the "Commission") on June 9, 2000)
2.2 Amendment, dated as of April 17, 2000, to the Merger
Agreement, by and between Endo, Endo Inc. and Algos
(incorporated herein by reference to Exhibit 2.2 of
the Registration Statement filed with the Commission
on June 9, 2000)
2.3 Asset Purchase Agreement, dated as of August 27, 1997, by
and between Endo Pharmaceuticals Inc. ("Endo
Pharmaceuticals") and The DuPont Merck Pharmaceutical
Company ("DuPont Merck Pharmaceutical") (incorporated
herein by reference to Exhibit 2.3 of the Registration
Statement filed with the Commission on June 9, 2000)
3.1 Amended and Restated Certificate of Incorporation of Endo
(incorporated herein by reference to Exhibit 3.1 of the
Form 10-Q for the Quarter ended June 30, 2000 filed with
the Commission on August 15, 2000)
3.2 Amended and Restated By-laws of Endo (incorporated herein
by reference to Exhibit 3.2 of the Form 10-Q for the
Quarter ended June 30, 2000 filed with the Commission on
August 15, 2000)
4.1 Amended and Restated Executive Stockholders
Agreement, dated as of July 14, 2000, by and among
Endo, Endo Pharma LLC ("Endo LLC"), Kelso Investment
Associates V, L.P. ("KIA V"), Kelso Equity Partners
V, L.P. ("KEP V") and the Management Stockholders (as
defined therein) (incorporated herein by reference to
Exhibit 4.1 of the Form 10-Q for the Quarter ended
June 30, 2000 filed with the Commission on August 15,
2000)
4.2 Amended and Restated Employee Stockholders Agreement,
dated as of July 14, 2000, by and among Endo, Endo
LLC, KIA V, KEP V and the Employee Stockholders (as
defined therein) (incorporated herein by reference to
Exhibit 4.2 of the Form 10-Q for the Quarter ended
June 30, 2000 filed with the Commission on August 15,
2000)
4.3 Form of Stock Certificate of Endo Common Stock
(incorporated herein by reference to Exhibit 4.3 of the
Form 10-Q for the Quarter ended June 30, 2000 filed with
the Commission on August 15, 2000)
4.4 Registration Rights Agreement, dated as of July 17, 2000,
by and between Endo and Endo LLC (incorporated herein by
reference to Exhibit 4.4 of the Form 10-Q for the Quarter
ended June 30, 2000 filed with the Commission on August
15, 2000)
10.1 Endo Warrant Agreement, dated as of July 17, 2000, by and
between Endo and United States Trust Company of New York
(incorporated herein by reference to Exhibit 10.1 of the
Form 10-Q for the Quarter ended June 30, 2000 filed with
the Commission on August 15, 2000)
10.2 Algos Warrant Agreement, dated as of July 17, 2000, by
and between Endo and United States Trust Company of New
York (incorporated herein by reference to Exhibit 10.2 of
the Form 10-Q for the Quarter ended June 30, 2000 filed
with the Commission on August 15, 2000)
10.3 Form of Series A Warrant to Purchase Shares of Common
Stock and Warrants of Endo (incorporated herein by re
ference to Exhibit 10.3 of the Registration Statement
filed with the Commission on June 9, 2000)
10.4 Letter Agreement, dated as of November 26, 1999, by and
among Algos, Endo, KIA V and KEP V (incorporated herein
by reference to Exhibit 10.4 of the Registration
Statement filed with the Commission on June 9, 2000)
10.5 Tax Sharing Agreement, dated as of July 17, 2000, by and
among Endo, Endo Inc. and Endo LLC (incorporated herein
by reference to Exhibit 10.5 of the Form 10-Q for the
Quarter ended June 30, 2000 filed with the Commission on
August 15, 2000)
10.6 Agreement, dated as of July 17, 2000, by and between Endo
and Endo LLC (incorporated herein by reference to Exhibit
10.6 of the Form 10-Q for the Quarter ended June 30, 2000
filed with the Commission on August 15, 2000)
10.7 Credit Agreement, dated as of August 26, 1997, by and
between Endo Pharmaceuticals and The Chase Manhattan Bank
(incorporated herein by reference to Exhibit 10.7 of the
Registration Statement filed with the
Commission on June 9, 2000)
10.8 Co-Promotion Agreement, dated as of March 1, 2000, by
and between Endo Pharmaceuticals and Elan
Pharmaceuticals, Inc. (incorporated herein by
reference to Exhibit 10.8 of the Registration
Statement filed with the Commission on June 9, 2000)
10.9 [Intentionally Omitted]
10.10 Sole and Exclusive License Agreement, dated as of
November 23, 1998, by and between Endo Pharmaceuticals
and Hind Health Care, Inc. (incorporated herein by
reference to Exhibit 10.10 of the Registration Statement
filed with the Commission on June 9, 2000)
10.11 Analgesic License Agreement, dated as of October 27,
1997, by and among Endo Pharmaceuticals, Endo
Laboratories, LLC and DuPont Merck Pharmaceutical
(incorporated herein by reference to Exhibit 10.11 of the
Registration Statement filed with the Commission on June
9, 2000)
10.12 Anti-Epileptic License Agreement, dated as of October 27,
1997, by and among Endo Pharmaceuticals, Endo
Laboratories, LLC and DuPont Merck Pharmaceutical
(incorporated herein by reference to Exhibit 10.12 of the
Registration Statement filed with the Commission on June
9, 2000)
10.13 Product Development, Manufacturing and Supply Agreement,
dated as of October 29, 1999, by and between Endo
Pharmaceuticals and Lavipharm Laboratories Inc.
(incorporated herein by reference to Exhibit 10.13 of the
Registration Statement filed with the Commission on June
9, 2000)
10.14 Supply and Manufacturing Agreement, dated as of November
23, 1998, by and between Endo Pharmaceuticals and Teikoku
Seiyaku Co., Ltd (incorporated herein by reference to
Exhibit 10.14 of the Registration Statement filed with
the Commission on June 9, 2000)
10.15 Supply Agreement, dated as of July 1, 1998, by and
between Endo Pharmaceuticals and Mallinckrodt Inc.
("Mallinckrodt") (incorporated herein by reference to
Exhibit 10.15 of the Registration Statement filed with
the Commission on June 9, 2000)
10.16 Supply Agreement for Bulk Narcotics Raw Materials, dated
as of July 1, 1998, by and between Endo Pharmaceuticals
and Mallinckrodt (incorporated herein by reference to
Exhibit 10.16 of the Registration Statement filed with
the Commission on June 9, 2000)
10.17 Manufacture and Supply Agreement, dated as of August 26,
1997, by and among Endo Pharmaceuticals, DuPont Merck
Pharmaceutical and DuPont Merck Pharma (incorporated
herein by reference to Exhibit 10.17 of the Registration
Statement filed with the Commission on June 9, 2000)
10.18 Strategic Alliance Agreement, dated as of September 17,
1997, by and between Endo Pharmaceuticals and Penwest
Pharmaceuticals Group (incorporated herein by reference
to Exhibit 10.18 of the Registration Statement filed with
the Commission on June 9, 2000)
10.19 Agreement, dated as of February 1, 2000, by and
between Endo Pharmaceuticals and Livingston
Healthcare Services Inc. (incorporated herein by
reference to Exhibit 10.19 of the Registration
Statement filed with the Commission on June 9, 2000)
10.20 Medical Affairs Support Services Agreement, dated as of
June 1, 1999, by and between Endo Pharmaceuticals and
Kunitz and Associates, Inc. (incorporated herein by
reference to Exhibit 10.20 of the Registration Statement
filed with the Commission on June 9, 2000)
10.21 Endo Pharmaceuticals Holdings Inc. 2000 Stock Incentive
Plan
10.22 Endo LLC Amended and Restated 1997 Employee Stock Option
Plan
10.23 Endo LLC Amended and Restated 1997 Executive Stock Option
Plan
10.24 Endo LLC 2000 Amended and Restated Supplemental Employee
Stock Option Plan
10.25 Endo LLC 2000 Amended and Restated Supplemental Executive
Stock Option Plan
10.26 Employment Agreement, dated as of July 17, 2000, by and
between Endo and John W. Lyle (incorporated herein by
reference to Exhibit 10.26 of the Form 10-Q for the
Quarter ended June 30, 2000 filed with the Commission on
Registration Statement filed with the Commission on
August 15, 2000)
10.27 Amended and Restated Employment Agreement, dated as of
April 26, 2000, by and between Endo Pharmaceuticals and
Carol A. Ammon
10.28 Amended and Restated Employment Agreement, dated as of
April 26, 2000, by and between Endo Pharmaceuticals and
Jeffrey R. Black
10.29 Amended and Restated Employment Agreement, dated as of
April 26, 2000, by and between Endo Pharmaceuticals and
David Allen Harvey Lee, MD, Ph.D.
10.30 Amended and Restated Employment Agreement, dated as
April 26, 2000, by and between Endo Pharmaceuticals
and Mariann T. MacDonald
10.31 Separation and Release Agreement, dated as of March 22,
2000, by and between Endo Pharmaceuticals, Endo and
Osagie O. Imasogie (incorporated herein by reference to
Exhibit 10.31 of the Registration Statement filed with
the Commission on June 9, 2000)
10.32 Separation and Release Agreement, dated as of April 20,
2000, by and between Endo Pharmaceuticals, Endo and Louis
J. Vollmer (incorporated herein by reference to Exhibit
10.32 of the Registration Statement filed with the
Commission on June 9, 2000)
10.33 Office Lease, dated as of August 26, 1997, by and between
Endo Pharmaceuticals and Northstar Development Company
(incorporated herein by reference to Exhibit 10.33 of the
Registration Statement filed with the Commission on June
9, 2000)
10.34 Lease Agreement, dated as of May 5, 2000, by and between
Endo Pharmaceuticals and Painters' Crossing One
Associates, L.P. (incorporated herein by reference to
Exhibit 10.34 of the Registration Statement filed with
the Commission on June 9, 2000)
10.35 Employment Agreement, dated as of September 5, 2000,
by and between Endo and Caroline E. Berry
10.36 Employment Agreement, dated as of August 11, 2000, by
and between Endo and Peter A. Lankau
11 Statement Regarding Computation of per Share Earnings
27 Financial Data Schedule
