Endo Health Solutions (NSDQ:ENDP) said it struck an $830 million deal to settle thousands of lawsuits over its American Medical Systems pelvic mesh products.
The deal would put some 20,000 product liability claims to rest with no admission of guilt, but it also pushed Endo into the red for the 1st quarter, the pharmaceutical and medical device maker said today.
Endo, which paid $2.9 billion in cash for American Medical Systems in June 2011, in February took a $500 million write-down on the value of its AMS segment. The division is embroiled in a spate of product liability lawsuits filed over its pelvic mesh products that’s also ensnared Johnson & Johnson‘s (NYSE:JNJ) Ethicon subsidiary, C.R. Bard (NYSE:BCR), Boston Scientific (NYSE:BSX), Cook Medical and Coloplast (CPH:COLO B). The Malvern, Pa.-based company said at the time that it would book a $316 million pre-tax charge to boost its product liability reserve to $520 million to cover "all known, pending and estimated future claims primarily related to vaginal mesh cases."
"Endo’s top priority is the safety and efficacy of its products and supporting the patients and physicians who use them. The company continues to support the FDA’s recommendations that physicians be well-trained and patients fully understand the risks associated with the use of mesh products. Endo and AMS remain committed to the safety and efficacy of AMS’s transvaginal mesh products and will continue developing AMS’ women’s health business and devices product suite so that women have appropriate access to innovative, safe and effective therapies. AMS’s commitment to these treatment solutions is demonstrated by its ongoing and significant investments in developing clinical evidence to support the restoration of quality of life AMS’s mesh solutions provide," the company said yesterday.
Today Endo reported a 1st-quarter loss of -$433.3 million, or -$3.41 per share, on sales of $594.6 million for the 3 months ended March 31, a -9.7% top-line slide compared with Q1 2013. But, adjusted to exclude 1-time items, earnings per share were 92¢, 6¢ ahead of Wall Street’s expectation. That and news of the settlement combined to push ENDP shares up 5.5% to $66.40 apiece as of about 11:45 a.m. today.
Endo said its latest pelvic mesh lawsuit settlement led to a $625 million pre-tax charge during the quarter, boosting its product liability reserve to $1.1 billion – enough to carry it through 2016, the company estimated.
"We had a solid 1st quarter delivering strong operating results as we continue to execute against our strategic plans to transform Endo into a leading global specialty healthcare company," president & CEO Rajiv De Silva said in prepared remarks. "We completed 2 acquisitions during the 1st quarter and will continue to actively pursue additional business development opportunities throughout the year. We are focused on building a diversified and sustainable portfolio of product offerings through a combination of disciplined allocation of capital to strategic growth opportunities and investment in organic growth drivers for our existing businesses."
Endo said sales for its medical device segment were $124 million for the quarter, up 1% on a constant-currency basis, driven by 12% growth for its AMS’s benign prostatic hyperplasia business. Sales for the men’s health segment rose 1% on better revenues for male continence products; women’s health sales slumped 10%, "attributable to year-over-year declines in U.S.-based procedural volumes."
Looking ahead to the rest of 2014, Endo said it expects to post per-share losses of -$1.35 to -$1.10 on sales of $2.55 billion to $2.64 billion, with adjusted EPS of $3.60 to $3.85.
