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 March 31, 2001
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 May 14, 2001 was 89,138,950.
ENDO PHARMACEUTICALS HOLDINGS INC.
REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited)
March 31, 2001 and December 31, 2000.................................................
Consolidated Statements of Operations (Unaudited)
Three Months Ended March 31, 2001 and 2000...........................................
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31, 2001 and 2000...........................................
Notes to Consolidated Financial Statements (Unaudited).....................................
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations......
Overview...................................................................................
General ...................................................................................
Three Months Ended March 31, 2001 Compared to the Three Months Ended
March 31, 2000.......................................................................
Liquidity and Capital Resources............................................................
Item 3. Quantitative and Qualitative Disclosures About Market Risk.................................
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..........................................................................
Item 2. Changes in Securities and Use of Proceeds..................................................
Item 3. Defaults Upon Senior Securities............................................................
Item 4. Submission of Matters to a Vote of Security Holders........................................
Item 5. Other Information..........................................................................
Item 6. Exhibits and Reports on Form 8-K...........................................................
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;
dependence on third party suppliers, distributors and collaboration
partners; 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 I
FINANCIAL INFORMATION
Item 1. Financial Statements
ENDO PHARMACEUTICALS HOLDINGS INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share data)
March 31, December 31,
2001 2000
------ ----
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......................................................... $ 79,055 $ 59,196
Accounts receivable, net........................................................... 51,597 78,312
Inventories........................................................................ 29,920 29,746
Prepaid expenses................................................................... 2,957 3,496
Deferred income taxes.............................................................. 2,231 2,304
-------- --------
Total current assets.......................................................... 165,760 173,054
-------- ---------
PROPERTY AND EQUIPMENT, Net............................................................. 6,479 5,742
GOODWILL AND OTHER INTANGIBLES, Net..................................................... 272,663 284,560
DEFERRED INCOME TAXES................................................................... 844 736
RESTRICTED CASH......................................................................... 150 150
OTHER ASSETS............................................................................ 3,050 3,598
-------- --------
TOTAL ASSETS............................................................................ $448,946 $467,840
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................................................................... $ 16,719 $ 15,855
Accrued expenses................................................................... 40,057 45,520
Income taxes payable............................................................... 2,549
Current portion of long-term debt.................................................. 37,342 36,371
-------- --------
Total current liabilities..................................................... 94,118 100,295
-------- --------
LONG-TERM DEBT, Less current portion.................................................... 158,234 162,154
OTHER LIABILITIES....................................................................... 12,659 7,218
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 issued and outstanding at March 31, 2001 and December 31,
2000............................................................................ 891 891
Additional paid-in capital......................................................... 385,955 385,955
Accumulated deficit................................................................ (202,911) (188,673)
-------- ---------
Total Stockholders' Equity.................................................... 183,935 198,173
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.............................................. $448,946 $467,840
======== ========
See Notes to Consolidated Financial Statements
ENDO PHARMACEUTICALS HOLDINGS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except share and per share data)
Three Months Ended
March 31,
---------
2001 2000
---- ----
NET SALES............................................. $ 39,382 $ 27,000
COST OF SALES......................................... 12,649 12,062
-------- --------
GROSS PROFIT.......................................... 26,733 14,938
-------- --------
COSTS AND EXPENSES:
Selling, general and administrative.............. 15,890 12,073
Research and development......................... 9,174 3,028
Depreciation and amortization.................... 12,399 2,151
Separation benefits.............................. 22,034
-------- --------
OPERATING LOSS ....................................... (10,730) (24,348)
-------- --------
INTEREST EXPENSE, Net of interest income of $1,089 and $500,
respectively.......................................... 3,540 3,937
-------- --------
LOSS BEFORE INCOME TAX BENEFIT....................... (14,270) (28,285)
INCOME TAX BENEFIT.................................... 32 10,691
--------- ----------
NET LOSS $(14,238) $ (17,594)
========= ==========
NET LOSS PER SHARE:
Net Loss per Share (Basic and Diluted)........... $ (.16) $ (.25)
Weighted average shares (Basic and Diluted)...... 89,138,950 71,324,957
See Notes to Consolidated Financial Statements.
ENDO PHARMACEUTICALS HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
Three Months Ended
March 31,
---------
2001 2000
---- ----
OPERATING ACTIVITIES:
Net Loss......................................................................... $ (14,238) $(17,594)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization............................................... 12,399 2,150
Amortization of deferred financing costs.................................... 547 300
Accretion of promissory notes............................................... 1,178 745
Deferred income taxes....................................................... (35) (10,691)
Compensation related to stock options....................................... 20,782
Changes in assets and liabilities which provided (used) cash:
Accounts receivable......................................................... 26,715 25,611
Inventories................................................................. (174) (5,271)
Other assets................................................................ 541 462
Accounts payable............................................................ 864 (8,288)
Accrued expenses............................................................ (5,463) (2,527)
Income taxes payable........................................................ (2,549) (75)
Other liabilities........................................................... 5,441 5,013
-------- ---------
Net cash provided by operating activities.............................. 25,226 10,617
-------- ---------
INVESTING ACTIVITIES:
Purchase of property and equipment............................................... (1,240) (201)
--------- --------
Net cash used in investing activities.................................. (1,240) (201)
--------- ---------
FINANCING ACTIVITIES:
Repayments of long-term debt..................................................... (4,127) (2,250)
Issuance of Class A Common Stock................................................. 7
------- --------
Net cash used in financing activities.................................. (4,127) (2,243)
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS............................................. 19,859 8,173
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD........................................ 59,196 22,028
------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD.............................................. $79,055 $30,201
======= ========
SUPPLEMENTAL INFORMATION:
Interest Paid.................................................................... $ 2,861 $ 3,257
Income Taxes Paid................................................................ $ 2,786 $ 75
See Notes to Consolidated Financial Statements.
ENDO PHARMACEUTICALS HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2001
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 March 31, 2001 and the results of operations and
cash flows for the periods presented. The accompanying consolidated balance
sheet as of December 31, 2000 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, 2000 contained in the Company's Annual Report
on Form 10-K.
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 were recorded at their fair values at the date
of acquisition based on an independent appraisal. 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.
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 of Algos outstanding at the date
of the Merger (including 21,580 outstanding Series A Warrants). The
allocation of the fair value of the assets acquired and liabilities assumed
includes an allocation to workforce in place of $11.9 million which is
being amortized over its estimated useful life of two years, patents of
$3.2 million which is being amortized over their estimated useful lives of
17 years and goodwill of $104.8 million which is being 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. The balance of the estimated liabilities for exit costs is unchanged
as of March 31, 2001. 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 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 allocated fair value to the three opioid analgesic
projects of Algos: 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
that 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.
3. RECAPITALIZATION
In connection with the Merger, the Company effected a recapitalization
(the "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 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 Financial Accounting Standards Board (FASB) issued
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities,
which is effective for all fiscal years beginning after June 15, 1999. SFAS
133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts and for hedging activities. All derivatives, whether designated
in hedging relationships or not, are required to be recorded on the balance
sheet at fair value. If the derivative is designated in a fair value hedge,
the changes in the fair value of the derivative and the hedged item are
recognized in earnings. If the derivative is designated as a cash flow
hedge, changes in the fair value of the derivative are recorded in other
comprehensive income (OCI) and are recognized in the income statement when
the hedged item affects earnings. SFAS 133 defines new requirements for
designation and documentation of hedging relationships as well as on-going
effectiveness assessments in order to use hedge accounting. A derivative
that does not qualify as a hedge will be marked to fair value through
earnings.
Effective January 1, 2001, the Company recorded $228,000 as an
accumulated transition adjustment as a reduction to earnings relating to
derivative instruments that do not qualify for hedge accounting under SFAS
133. This amount is included in Interest Expense in the accompanying
financial statements.
In December 1999, the Securities and Exchange Commission (the "SEC")
issued Staff Accounting Bulletin, SAB 101, entitled "Revenue Recognition in
Financial Statements" as amended, effective as of October 1, 2000, which
summarizes the SEC's views in applying generally accepted accounting
principles to revenue recognition. The adoption of this guideline had no
effect on the Company's financial statements.
In March 2000, the FASB issued Financial Accounting Series
Interpretation No. 44 entitled "Accounting for Certain Transactions
involving Stock Compensation," which provides clarification to Accounting
Principles Board Opinion No. 25 (APB No. 25), "Accounting for Stock Issued
to Employees." The adoption of this interpretation had no effect on the
Company's financial statements.
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 was charged to expenses
as of July 17, 2000.
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 68%, 76% and 73% of net sales for
the year ended December 31, 1999, the year ended December 31, 2000 and the
three months ended March 31, 2001, 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 its 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 Merger has been accounted for by the Company using the purchase
method of accounting. The assets acquired and liabilities assumed of Algos
have been recorded at their fair values based on an independent appraisal.
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 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 allocated fair value to the three opioid analgesic
projects of Algos: 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
that 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 March 31, 2001,
goodwill and other intangibles comprised approximately 61% of total assets
and 148% 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 March 31, 2001 Compared to the Three Months Ended
March 31, 2000
Net sales for the three months ended March 31, 2001 increased by 46%
to $39.4 million from $27.0 million in the comparable 2000 period. This
increase in net sales was primarily due to the increase in net sales from
several 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 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. On January 3, 2001, Watson Pharmaceuticals, Inc.
announced that the Food and Drug Administration had approved Watson's
abbreviated new drug application (ANDA) for a generic equivalent to
Percocet(R) 7.5/500 and Percocet(R) 10.0/650. The launch of these generics
may have a material impact on the results of operations and cash flows of
the Company in the future.
Gross profit for the three months ended March 31, 2001 increased by
79% to $26.7 million from $14.9 million in the comparable 2000 period.
Gross profit margins increased to 68% 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 existing fixed cost nature of the
Company's manufacturing relationship with DuPont Pharmaceuticals, currently
the Company's most significant contract manufacturing relationship. If the
Company achieves its forecast for revenue and product mix, the Company's
management expects the increase in gross profits to continue.
Selling, general and administrative expenses for the three months
ended March 31, 2001 increased by 31% to $15.9 million from $12.1 million
in the comparable 2000 period. This increase was due to a $2.3 million
increase in sales and promotional efforts in 2001 over the comparable 2000
period to support Lidoderm(R) and Percocet(R). The increase in sales and
promotional efforts was primarily due to the first quarter 2001 deployment
of a dedicated contract sales force of 230 full-time representatives
comprised of 70 full-time specialty representatives and 160 full-time
primary care representatives compared to 300 part-time representatives in
the comparable 2000 period. 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 March 31,
2001 increased by 207% to $9.2 million from $3.0 million in the comparable
2000 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 that had been part of the former Algos
pipeline. The results of operations of Algos have been included in the
Company's financial statements prospectively for reporting periods
beginning July 17, 2000.
Depreciation and amortization for the three months ended March 31,
2001 increased to $12.4 million from $2.2 million in the comparable 2000
period. This increase was substantially due to the increase in amortization
of goodwill and other intangibles resulting from the intangible assets
acquired as a result of the Merger.
Separation benefits of $22.0 million for the three months ended March
31, 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 stock options on the effective date of each of
the separation and release agreements.
Interest expense, net for the three months ended March 31, 2001
decreased by 10% to $3.5 million from $3.9 million in the comparable 2000
period. The decrease was due to an increase in interest income of $.6
million due to an increase in the average cash balance for the year ended
March 31, 2001 compared to the comparable 2000 period. The increase in the
average cash balance was in part due to the acquisition of $19.6 million in
net cash and cash equivalents in the Merger with Algos. In addition, due to
the adoption of SFAS 133 on January 1, 2001, the Company recorded a $.2
million charge for the accumulated transition adjustment relating to
derivative instruments that do not qualify as a hedge under SFAS 133.
Income tax benefit for the three months ended March 31, 2001 was not
material. The Company has recorded a valuation allowance on its existing
deferred tax assets due to the uncertainty of the utilization of such
amounts in the foreseeable future.
Liquidity and Capital Resources
Net cash provided by operating activities increased by $14.6 million
to $25.2 million for the three months ended March 31, 2001 from $10.6
million for the three months ended March 31, 2000. This increase was
substantially due to an increase in cash flow provided by working capital
including a reduction in cash flow utilized in inventory and accounts
payable. During the first quarter of 2000, the Company was building up
inventories to support the launches of several new products, which utilized
a significant amount of cash flow.
Net cash utilized in investing activities increased by $1.0 million to
$1.2 million for the three months ended March 31, 2001 from $.2 million for
the three months ended March 31, 2000 due to an increase in capital
expenditures. This increase in capital expenditures was due to the
implementation of an electronic document management system during 2001 and
the purchase of leasehold improvements and other furniture and fixtures
related to the Company's new principal executive offices, the lease of
which is expected to commence in the third quarter of 2001.
Net cash utilized in financing activities increased by $1.9 million to
$4.1 million for the three months ended March 31, 2001 from $2.2 million
for the three months ended March 31, 2000 due to repayments made on the
Company's credit facility.
On March 15, 2001, Penwest Pharmaceuticals Co., a collaboration
partner of Endo with which Endo has an alliance agreement and with which
Endo is developing one of its pipeline projects, received a "going concern"
opinion from Ernst & Young LLP, its independent auditors, in connection
with Penwest's Annual Report on Form 10-K for the year ended December 31,
2000. Specifically, Ernst & Young stated that they had substantial doubt
about Penwest's ability to continue as a going concern in light of its
recurring operating losses and negative cash flows from operations in each
of the three years in the period ended December 31, 2000. In addition,
Penwest's Annual Report indicated that, based on anticipated levels of
operations and currently available capital resources, Penwest's management
expects continued operating losses and negative cash flows during 2001. If
Penwest is unable to fund their portion of the project, this may adversely
affect the results of operations and cash flows of Endo in the foreseeable
future.
The Company's cash and cash equivalents totaled $79.1 million at March
31, 2001. 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, including the funding of the Company's pipeline
projects in the event that Endo's collaboration partners are unable to fund
their portion of any particular project. 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.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
On October 20, 2000, The Purdue Frederick Company (and related
companies) filed suit against Endo and its subsidiary, Endo Pharmaceuticals
Inc., in the U.S. District Court for the Southern District of New York
alleging that Endo's bioequivalent versions of Purdue Frederick's
OxyContin(R), 40 mg strength, infringe three of its patents. This suit
arose from the United States Food and Drug Administration (FDA) acceptance
of Endo Pharmaceuticals Inc.'s Abbreviated New Drug Application (ANDA)
submission for a bioequivalent version of Purdue Frederick's OxyContin(R),
40 mg strength. On March 13, 2001, Purdue Frederick (and related companies)
filed a second suit against Endo and Endo Pharmaceuticals Inc. in the U.S.
District Court for the Southern District of New York alleging that Endo's
bioequivalent versions of Purdue Frederick's OxyContin(R), 10 and 20 mg
strengths, infringe the same three patents. This suit arose from Endo
Pharmaceuticals having amended its earlier ANDA on February 9, 2001, to add
bioequivalent versions of the 10 mg and 20 mg strengths of OxyContin(R).
For each of the 10 mg, 20 mg and 40 mg strengths of this product, Endo
Pharmaceuticals made the required Paragraph IV certification against the
patents listed in the FDA's Orange Book as covering these products.
OxyContin(R) is indicated for the treatment of moderate-to-severe pain.
Although Endo believes the patents asserted by Purdue Frederick are invalid
and/or not infringed by Endo's formulation of oxycodone hydrochloride
extended-release tablets, 10 mg, 20 mg and 40 mg strengths, no assurance
can be given as to the outcome of the patent challenge process.
In addition to the above, Endo is involved in, or has been
involved in, arbitrations or legal proceedings which arise from the normal
course of its business. Endo cannot predict the timing or outcome of these
claims and proceedings. Currently, Endo is not involved in any arbitration
and/or legal proceeding that Endo expects to have a material effect on its
business, financial condition or results of operations and cash flows.
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 reference 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 [Intentionally Omitted.]
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 (incorporated herein by reference
to Exhibit 10.21 of the Quarterly Report on Form
10-Q for the Quarter Ended September 30, 2000)
10.22 Endo LLC Amended and Restated 1997 Employee
Stock Option Plan (incorporated herein by
reference to Exhibit 10.22 of the Quarterly
Report on Form 10-Q for the Quarter Ended
September 30, 2000)
10.23 Endo LLC Amended and Restated 1997 Executive
Stock Option Plan (incorporated herein by
reference to Exhibit 10.23 of the Quarterly
Report on Form 10-Q for the Quarter Ended
September 30, 2000)
10.24 Endo LLC 2000 Amended and Restated Supplemental
Employee Stock Option Plan (incorporated herein
by reference to Exhibit 10.24 of the Quarterly
Report on Form 10-Q for the Quarter Ended
September 30, 2000)
10.25 Endo LLC 2000 Amended and Restated Supplemental
Executive Stock Option Plan (incorporated herein
by reference to Exhibit 10.25 of the Quarterly
Report on Form 10-Q for the Quarter Ended
September 30, 2000)
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)
10.27 Amended and Restated Employment Agreement, dated
as of April 26, 2000, by and between Endo
Pharmaceuticals and Carol A. Ammon (incorporated
herein by reference to Exhibit 10.27 of the
Quarterly Report on Form 10-Q for the Quarter
Ended September 30, 2000)
10.28 Amended and Restated Employment Agreement, dated
as of April 26, 2000, by and between Endo
Pharmaceuticals and Jeffrey R. Black
(incorporated herein by reference to Exhibit
10.28 of the Quarterly Report on Form 10-Q for
the Quarter Ended September 30, 2000)
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. (incorporated herein by reference to
Exhibit 10.29 of the Quarterly Report on Form
10-Q for the Quarter Ended September 30, 2000)
10.30 Amended and Restated Employment Agreement, dated
as April 26, 2000, by and between Endo
Pharmaceuticals and Mariann T. MacDonald
(incorporated herein by reference to Exhibit
10.30 of the Quarterly Report on Form 10-Q for
the Quarter Ended September 30, 2000)
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
(incorporated herein by reference to Exhibit
10.35 of the Quarterly Report on Form 10-Q for
the Quarter Ended September 30, 2000)
10.36 Employment Agreement, dated as of August 11,
2000, by and between Endo and Peter A. Lankau
(incorporated herein by reference to Exhibit
10.36 of the Quarterly Report on Form 10-Q for
the Quarter Ended September 30, 2000)
10.37 License Agreement, dated as of August 16, 1993,
by and between Endo Inc. (f/k/a Algos
Pharmaceutical Corporation) and The Medical
College of Virginia (incorporated herein by
reference to Exhibit 10.4.1 of the registration
statement on Form S-1 of Algos Pharmaceutical
Corporation declared effective on September 25,
1996)
10.38 Lease Agreement, dated as of March 27, 1997, by
and between Endo Inc. (f/k/a Algos
Pharmaceutical Corporation) and Commercial
Realty & Resources Corp. (incorporated herein by
reference to Exhibit 10.5 of the Quarterly
Report of Algos Pharmaceutical Corporation on
Form 10-Q for the Quarter Ended March 31, 1997)
11 Statement Regarding Computation of per Share Earnings
(b) Reports on Form 8-K.
On March 15, 2001 and March 23, 2001, the Company filed Forms
8-K with respect to press releases that the Company issued. No financial
statements were filed in connection with either such Form 8-K.
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: May 14, 2001
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 reference 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 [Intentionally Omitted.]
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 (incorporated herein by reference
to Exhibit 10.21 of the Quarterly Report on Form
10-Q for the Quarter Ended September 30, 2000)
10.22 Endo LLC Amended and Restated 1997 Employee
Stock Option Plan (incorporated herein by
reference to Exhibit 10.22 of the Quarterly
Report on Form 10-Q for the Quarter Ended
September 30, 2000)
10.23 Endo LLC Amended and Restated 1997 Executive
Stock Option Plan (incorporated herein by
reference to Exhibit 10.23 of the Quarterly
Report on Form 10-Q for the Quarter Ended
September 30, 2000)
10.24 Endo LLC 2000 Amended and Restated Supplemental
Employee Stock Option Plan (incorporated herein
by reference to Exhibit 10.24 of the Quarterly
Report on Form 10-Q for the Quarter Ended
September 30, 2000)
10.25 Endo LLC 2000 Amended and Restated Supplemental
Executive Stock Option Plan (incorporated herein
by reference to Exhibit 10.25 of the Quarterly
Report on Form 10-Q for the Quarter Ended
September 30, 2000)
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)
10.27 Amended and Restated Employment Agreement, dated
as of April 26, 2000, by and between Endo
Pharmaceuticals and Carol A. Ammon (incorporated
herein by reference to Exhibit 10.27 of the
Quarterly Report on Form 10-Q for the Quarter
Ended September 30, 2000)
10.28 Amended and Restated Employment Agreement, dated
as of April 26, 2000, by and between Endo
Pharmaceuticals and Jeffrey R. Black
(incorporated herein by reference to Exhibit
10.28 of the Quarterly Report on Form 10-Q for
the Quarter Ended September 30, 2000)
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. (incorporated herein by reference to
Exhibit 10.29 of the Quarterly Report on Form
10-Q for the Quarter Ended September 30, 2000)
10.30 Amended and Restated Employment Agreement, dated
as April 26, 2000, by and between Endo
Pharmaceuticals and Mariann T. MacDonald
(incorporated herein by reference to Exhibit
10.30 of the Quarterly Report on Form 10-Q for
the Quarter Ended September 30, 2000)
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
(incorporated herein by reference to Exhibit
10.35 of the Quarterly Report on Form 10-Q for
the Quarter Ended September 30, 2000)
10.36 Employment Agreement, dated as of August 11,
2000, by and between Endo and Peter A. Lankau
(incorporated herein by reference to Exhibit
10.36 of the Quarterly Report on Form 10-Q for
the Quarter Ended September 30, 2000)
10.37 License Agreement, dated as of August 16, 1993,
by and between Endo Inc. (f/k/a Algos
Pharmaceutical Corporation) and The Medical
College of Virginia (incorporated herein by
reference to Exhibit 10.4.1 of the registration
statement on Form S-1 of Algos Pharmaceutical
Corporation declared effective on September 25,
1996)
10.38 Lease Agreement, dated as of March 27, 1997, by
and between Endo Inc. (f/k/a Algos
Pharmaceutical Corporation) and Commercial
Realty & Resources Corp. (incorporated herein by
reference to Exhibit 10.5 of the Quarterly
Report of Algos Pharmaceutical Corporation on
Form 10-Q for the Quarter Ended March 31, 1997)
11 Statement Regarding Computation of per Share
Earnings
Exhibit 11
Endo Pharmaceuticals Holdings Inc.
Statement Regarding Computation of Per Share Earnings
Three Months Ended
March 31,
------------------
2001 2000
---- ----
Numerator:
Net loss available to common stockholders $(14,238) $(17,594)
========= =========
Denominator:
For basic per share data - weighted average shares 89,138,950 71,324,957
Effect of dilutive stock options - -
For diluted per share data
89,138,950 71,324,957
Basic loss per share
$(.16) $(.25)
====== ======
Diluted loss per share
$(.16) $(.25)
====== ======