Endo Pharmaceuticals Inc.
&
Algos Pharmaceutical Corporation
November/December 1999
Agenda
o Background on Endo Pharmaceuticals and Algos Pharmaceutical
o Strategic Rationale
o Endo's Strengths
o Algos' Strengths
o Terms of Merger
Endo Pharmaceuticals Inc.
A Pharmaceuticals Company formed in August 1997 to:
o Be an innovative, therapeutically-focused pharmaceuticals company
with a strong presence in acute and chronic pain management
o Market and develop branded pain products
o Be recognized for its ability to supply high-quality, innovative
products to the marketplace
Endo's Marketing Strategy for Existing Brands
o Capitalize on strong brand equity inherent in each product
o Revitalize existing brands through increased marketing directly to
prescription writers
o Focus on promotionally sensitive products which have not been
marketed in many years preparing market for future products
o Build Franchise - line extensions, novel new technology and new
chemical entities
Algos Pharmaceutical Corporation
o A specialty pharmaceutical company with a focus on pain management
o Develop and commercialize proprietary technology, in an attempt to
improve the efficacy, side-effect profile and duration of action
of existing, FDA-approved compounds
o Multiple late-stage products in clinical trials
- Lead product, MorphiDex(R), once approved by the FDA, will
compete in the $1 billion strong opioid segment of the US
pain management market
Strategic Rationale
o Combined Company will be a US leader in Pain Management with brand
equity and novel proprietary technology
- Leading franchise with critical mass
o Marriage of established specialty pharmaceutical Company with a
broad technology development Company
o Significant growth potential through:
- Existing marketed products
- Newly launched branded products
- Pipeline of late stage development products
o Diversification of clinical development risk
- Creates a publicly-held company with immediate positive cash
flow
Strategic Rationale
o Focus on large, fast-growing Pain Management markets
- Multiple, billion-dollar target markets
o Accelerated market penetration of Algos' patented technology
through existing Endo sales force
- Leverages Endo's existing distribution capabilities with a
broader product portfolio
o Potential to maximize OxycoDex(TM) sales through Percocet(R) brand
Strategic Rationale
o Complementary strengths:
- Management team
- Product formulation and manufacturing
- Existing sales force
- Distribution network
- Clinical development
- Regulatory
Corporate Philosophy of Combined Company
o Sales and marketing driven culture
o Focused, effective research and development
o Flexible cost structure
Pain Management: Key Drivers of Market Growth
o Demographics
o Increase in number of surgical procedures
o Changing attitudes towards pain management
o Introduction of new forms of pain medications
Endo's Strengths
o Established business and focused strategy in Pain Management with
strong brand equity
- 1998 Revenue of $108.4 million
o 1999 launch of new brands including Percocet(R) 2.5, 7.5 and 10.0
mg, Lidoderm(R) and Zydone(R) 5.0, 7.5 and 10.0 mg
o Substantial growth opportunities exist in R&D pipeline
o Efficient and flexible operating structure
Endo's Strengths
o High operating margins and steady cash flow generated by Endo's
core products including Percocet(R), Lidoderm(R) and Zydone(R)
o Experienced and entrepreneurial management team
o Long-term competitive manufacturing agreement
Algos' Strengths
o Focused strategy in Pain Management
o Patented combinations of approved drugs that more effectively
manage pain
o Six patented products in late stage clinical development
- 4 pain products
- 2 addiction treatment products
o Blue chip collaboration partner (J&J)
o Experienced and entrepreneurial management team
Combined Product Portfolio
Moderate Moderately Severe Severe
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Established Brands: Nubain(R) Percocet(R) 5.0,Percodan(R), Percolone(R)
Numorphan(R)
New Marketed Brands: Percocet(R) 2.5 Percocet(R)7.5 Percocet(R) 10
Zydone(R) 5 Zydone(R) 7.5 Zydone(R) 10
Lidoderm(R)
Late Stage Development: HydrocoDex(TM) OxycoDex(TM) MorphiDex(R)
EN3222 EN3212 Numorphan(R) IR and CR
NeuroDex(TM)
Early Stage Development: LidoDexIED(TM)
EN3215 EN3216 LidoDexNS(TM)
Terms of Merger
o Tax-free stock for stock purchase transaction with uninterrupted
public trading
o 80% (Endo)/20% (Algos) ownership at closing
- Opportunity for Algos to increase its ownership to 35%,
through the exercise of warrants, if FDA approval for
MorphiDex(R) received by December 31, 2001
- Algos' ownership will increase by an additional 5% if Endo
(excluding Algos-related revenue and expenses) does not
achieve a specified gross profit target for fiscal year 2000
- Warrant to Endo for an additional 5% ownership if
MorphiDex(R) approval not obtained by December 31, 2002
o Carol A. Ammon named President and CEO and John W. Lyle named
Chairman of the Board
o OxycoDex(TM) collaboration agreement