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Endo International (NASDAQ:ENDP)
Q1 2019 Earnings Call
May. 09, 2019, 7:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good day, ladies and gentlemen. And welcome to the first-quarter 2019 Endo International plc earnings conference call. As a reminder this conference is being recorded. I would now like to introduce your host for today's conference.

Laure Park, senior vice president, investor relations, and corporate affairs. Please begin.

Laure Park -- Senior Vice President, Investor Relations, and Corporate affairs

Good morning, and thank you for joining us to discuss our first-quarter 2019 financial results. Joining me on today's call are; Paul Campanelli, president and CEO of Endo; Blaise Coleman, executive vice president and CFO; and Pat Barry, executive vice president, and chief commercial officer of our Branded business. We have prepared a slide presentation to accompany today's webcast, and that presentation as well as other materials are posted online in the investor section at endo.com. I would like to remind you that any forward-looking statements made by management are covered under the US Private Securities Litigation Reform Act of 1995, and the applicable Canadian Securities Laws and are subject to the changes, risks, and uncertainties described in today's press release in our U.S.

and Canadian Securities filing. In addition, during the course of this call, we may refer to non-GAAP financial measures that are not prepared in accordance with accounting principles generally accepted in the United States. And that may be different from non-GAAP financial measures used by other companies. Investors are encouraged to review Endo's current report on Form 8-K furnished with the SEC today for Endo's reasons for including those non-GAAP financial measures in today's earnings announcement.

The reconciliation of non-GAAP financial measures the most directly comparable GAP financial measures is contained in our earnings press release issued prior to today's call. Unless otherwise noted there in. During the first quarter of 2019, Endo change the name of its reportable segment. This change, which was intended to simplify the segments name, had no impact on Endo's consolidated or segment results.

I'd like to now turn the call over to Paul.

Paul Campanelli -- President and Chief Executive Officer

Thank you, Laure. Good morning and thank you for joining us for today's call. I hope you've had the chance to review the company's earning release issued early this morning. Let's turn our attention to the first-quarter 2019 earnings presentation. Beginning on slide 2.

Here's a brief agenda for today's call. Moving to Slide 3. I'm very proud of our strong operating performance in the quarter. We reported a second consecutive quarter of revenue growth, the 3% revenue growth versus the same period last year was primarily attributable to continued strong performance in both the Specialty Products portfolio of our Branded Pharmaceutical segment, and the Sterile Injectable segment. In March, we executed the debt refinancing which increases our operational flexibility and significantly reduced the amount outstanding; our most near-term debt maturity, and we are on target to meet our full year financial guidance.

Blaise, will walk you through our financial performance later in our presentation. Moving to Slide 4. You will see a snapshot of our segment revenues for the first quarter. We delivered continued strong growth in both the Specialty Products portfolio of our Branded Pharmaceutical segment, and Sterile's Injectable segment in the first quarter, which was partially offset by competitive pressures in the Generic Pharmaceutical segment. We establish our product portfolio of the Branded Pharmaceutical segment and the International segment.

In the first-quarter of 2019, we reported adjusted EBITDA of $334 million, which was comparable the first-quarter of 2018. Now moving to Slide 5 . Our Branded Pharmaceutical segment grew by 2% year over year. The Specialty Products portfolio of our Branded Pharmaceutical segment continued to advance in the first quarter with year-over-year growth of 19%. This was largely driven by the significant growth of our XIAFLEX franchise which grew 20% in the first quarter, compared to the first-quarter of 2018.

This year on year growth reflects continued strong underlying demand due to expanded consumer awareness in activation for both our Peyronie's and Dupuytren's Contractures indications. Additionally, NASCOBAL and AVEED grew by 24.38% respectively in the first quarter, compared to the prior year, primarily driven by volume. Based on the continued strong underlying growth in our Specialty Products portfolio, we are affirming our full-year 2019 revenue growth guidance in the low double-digit percentage range, and our full-year 2019 XIAFLEX revenue guidance a growth in the mid -to-high teens percentage range. As noted earlier, the first quarter performance of the Established Products portfolio of our Branded Pharmaceutical segment reflected ongoing generic competition.

Moving to our CCH development program for assessing the treatment of cellulite, we continue to appear on both the commercial and regulatory front, and on track for a second-half 2019 DLA submission, with a target market launch in the second half of 2020 subject to FDA approval. As part of our plan to introduce Endo aesthetics to the physician community, we expect to attend between 25 and 30 congresses and medical meetings in 2019. Additionally, our Phase 3 data was recently presented at the American Academy of Dermatology conference. This data will also be highlighted at hot topics at the upcoming American Society for Aesthetic Plastic Surgery conference in New Orleans, by Dr.

Lawrence Bass. Additionally, we are pleased with the peer reviewed publication of our Phase 2 data in dermatologic surgery in the first quarter of 2019. Turning to Slide 6. Our Sterile Injectable segment continues to deliver with net sales growth of 25% in the first quarter of 2019, versus the first quarter of 2018.

This performance was driven by growth of ertapenem for injection, the Authorized Generic of events with net sales of $32 million. Also contributing to the revenue growth were ADRENALIN, with net sales of $47 million, a 59% increase versus the same period in 2018. In VASOSTRICT with net sales of $139 million in the quarter, up 22% compared to last year. While we anticipated a drag on Sterile Injectable net sales in the quarter, as a result of the unwinding of the fourth-quarter 2018 stocking benefit, the Sterile Injectables first-quarter net sales actually included a stocking benefit driven by the timing of VASOSTRICT shipments.

We expect this benefit to reverse in the second quarter. Blaise, will provide additional related commentary on this later in our presentation. While we are pleased with the FDA decision to remove vasopressin from the 503B Bulks List, as a result it is now unlawful for outsourcing facilities to sell compounded vasopressin products, unless they compound those products using an FDA approved vasopressin products. Currently, VASOSTRICT is the only product to meet this requirement.

Looking forward, we affirm our guidance of 2019, Sterile Injectables revenue growth in the high single to low double-digit percentage range with VASOSTRICT revenues expected to grow by a low double-digit percentage. Turning to our Generic Pharmaceuticals on Slide 6 . The decrease in revenue for the segment during the first quarter, versus the same period last year, primarily reflects the impact of anticipated competitive pressures on certain generic products that had limited competition in the first quarter of 2018. This performance was partially offset by the benefit of product launches including colchicine tablets, the authorized generic of Colcrys. As we noted on our fourth-quarter earnings call, we expect 2019 to be a transitional year for Generics portfolio, with competition materializing on a number of our larger margin contributors in key product launches expected to be in late 2019.

We affirm our guidance for full-year 2019 generics revenue to decline in the mid-to-high teens percentage range. Moving to Slide 8. As expected, our International Pharmaceutical segment performance reflects the impact of ongoing generic competition on our business in Canada, and a shift in timing of our sales on certain products. For the full-year 2019, we affirm our guidance of International Pharmaceutical revenue declines of approximately 20%, compared to full-year 2018. Turning to Slide 9.

We shift focus to our diverse pipeline. We continue to progress through our regulatory in pre-commercialization activities for CCH for cellulite, and remain on track for a commercial launch in the second half of 2020. As part of our data generation plan, we have several real world CCH studies in development focused on dosing, injection technique, and responses in target patient populations. We also continue to have optionality with CCH to develop new indications.

We remain on track to launch approximately 15 new products in 2019 across our sterile injectables, Generic Pharmaceuticals, and International Pharmaceutical segments, and have launched four products year to date. Our Sterile Injectables pipeline is supplemented by strategic relationships with third parties such as, Nevakar, which will potentially provide five differentiated 505(b)(2) hospital in critical care based products. We continue to expect the first launch on our Nevakar agreement in late 2020. The table on the bottom of Slide 9, shows some of our key disclosed future first-to-file our first to market opportunities. Let me turn the call over to Blaise, to further discuss the company's first-quarter financial performance in 2019 financial guidance. Blaise.

Blaise Coleman -- Executive Vice President and Chief Financial Officer

Thank you, Paul. And good morning, everyone. First off , Slide 10. You'll see a snapshot in the first quarter GAAP and non-GAAP financial results.

Paul covered company and segment revenues earlier. So I will not review that again. On a GAAP basis, we had a dilutive loss per share of $0.6 from continuing operations in the core, which is a loss of $2.20 per share in the first quarter of 2018. GAAP operating income in first-quarter 2019 was $16 million, compared to a GAAP operating loss of $361 million during the same period in 2018.

The improvement was primarily driven by, gain related to the March 2019 debt refinancing transactions, a reduction in asset impairment charges, and an overall reduction in operating expenses. On an adjusted basis, first quarter adjusted net income of $122 million, and adjusted diluted earnings per share from continuing operations at $0.53 was lower than the previous year, driven by higher interest expense and a higher adjusted effective tax rate, as well as lower adjusted gross margin due to sales mix,reflective of the strong performance of our largest authorized generic products in the quarter, slightly offset by lower adjusted operating expenses. As we noted on our year end call, the first-quarter 2019 adjusted effective tax rate is well above the full-year estimated rate, and is projected to be the highest quarterly rate of the year due to jurisdictional adjusted pre-tax income mix within the quarter. Our better than expected net sales performance in the first quarter was primarily driven by our Sterile Injectable segment. Sterile Injectables net sales were higher than anticipated, due by higher volumes as the destocking expected in the first quarter did not occur, and in fact there was actually a stocking benefit for these districts in the quarter.

Also contributing to the performance, was higher net price mainly due to favorable customer mix in the quarter. We now anticipate our second-quarter 2019, Sterile Injectables net sales to be lower than first quarter 2019 by an estimated $25 million to $30 million. This reflects the non recurrence of the first-quarter stocking benefit, and the estimated destocking in the second quarter with channel inventory levels, which we expect to revert toward historical average levels by the end of the second quarter, as well as lower net price. Additionally, while we expect the second quarter, total adjusted operating expense to remain relatively flat with the first-quarter 2019.

A higher portion of adjusted operating expenses will be included in the second-quarter adjusted EBITDA, due to the quarter on quarter increase in non-stock compensation related expenses. Slide 11 provides the summary vendors 2019 for your financial guidance. We are affirming our financial guidance through the year, and the financial guidance assumptions are unchanged. These assumptions are presented at the bottoms by 11. In terms of quarterly phasing, we expect the split of total enterprise revenant, adjusted EBITDA, and adjusted earnings per share to be slightly more weighted to the second half of 2019, due to our expected revenue, adjusted operating expense, and adjusted effective tax rate cadence.

The higher anticipated second half 2019 revenue reflects the expected timing in 2019 new product launches. Moving to Slide 12. This is a summary of the segment and product specific guidance previously discussed. Advancing to Slide 13, and wrapping up the financial discussion. For the first-quarter 2019.

we had a $142 million use of undershoot cash prior to get in. We end this first-quarter 2019 approximately $1 billion of undershoot cash, and a net debt to adjusted EBITDA leverage ratio approximately 5.3 times. We're updating our 2019 guidance for our expected use of cash, use of undershoot cash, prior to debt payment in the range of approximately $100 million to 200 million, from $75 million to $175 million. This change reflects the impact of the debt refinancing we executed in March 2019.

Now let me turn it back over to Paul.

Paul Campanelli -- President and Chief Executive Officer

Thank you, Blaise. Moving to Slide 14, and concluding today's presentation. We are very proud of the many achievements to date and the steadfast focus of our teams to execute on all levels. We have taken and will continue to take the actions needed to become the company we aspire to be over the long term.

We believe that our focus on enhancing our capabilities in Sterile Injectables, and our Branded Specialty Products portfolio, including medical aesthetics positions us well for the future. We will continue to invest in our key growth drivers and maintain optionality when it comes to how we maximize the value of our assets in our portfolio. We'll continue to take a prudent and highly focused approach to our capital allocation decisions. However, our ultimate path to success lies in our ability to grow adjusted EBITDA by building, and investing in the portfolio, we need for the future.

The capital allocation priorities we have set for ourselves are aligned with this goal. I'm grateful to all of our Endo colleagues for their commitment and hard work. Let me now turn the call back over to Laure, to manage our Q&A. Laure.

Laure Park -- Senior Vice President, Investor Relations, and Corporate affairs

Thank you, Paul. In the interest of time if you could limit your initial question to allow us to get in as many as possible within the hour, we would appreciate it. Operator, may we have the first question.

Questions & Answers:


Operator

And our first question comes from Randall Stanicky with RBC Capital Markets. You may proceed.

Randall Stanicky -- RBC Capital Markets -- Analyst

Hi, good morning. This is Ashley, sitting in for Randall. Thanks for taking my questions. Can you talk a little bit more about your expectation of 2019 as a transitional year.

Does not imply more of revenue stability overall in 2020 is your competitive pressures being the largest ramp. And would you also talk a little bit about ADRENALIN. Obviously, it's a nice product for you and a grower. You have your trial in July, I believe with that 30 months expiring in December.

Can you just talk a little bit about your expectations.

Paul Campanelli -- President and Chief Executive Officer

So, we're probably not going to go too deep with respect to anything beyond 2019. What I can shed a little light on ADRENALIN, we have a trial that we are embarking on with respect to a paragraph for [Inaudible] that filer has a developed an ampule. Right now I would tell you that we believe in our intellectual property. When I look at our market share with respect to that 1ml presentation.

We actually have a vial which is different than the product that [Inaudible] is pursuing. We control about 35% of that one market. There's another company already on the market that controls about 65% of that presentation, a company's called [Inaudible]. So that's pretty much we're focused.

I believe at one and I'll present presentation is somewhere around %33 million to %35 million, and in that sale. So that's what we're dealing with. Regarding the paragraph IV on ADRENALIN. And as I said in terms of our comments at this point in time, we'll just stick to 2019, and we'll need more time later in 2020 to comment on how we're looking at new launches.

Randall Stanicky -- RBC Capital Markets -- Analyst

And if I could just sneak in one more. Just on the CCH DLA filing, you said before that you think that you can get kind of a separate DLA filing for the pricing. At that point will it be more clarity to you whether the agency will accept that charging you within the typical filing acceptance period or at what point would there be a little bit more visibility around that.

Paul Campanelli -- President and Chief Executive Officer

I'll take the first part of that question and then I'll pass it over to Pat Barry. As we indicated, we were very confident in our expectations that we will continue. And as I indicated in my prepared remarks, our expectation is that we will be filing a BLA in the latter half of of 2019. And Pat you can add a little more color.

Pat Barry -- Executive Vice President, and Chief Commercial Officer, Branded Business

We believe the BLA to be an appropriate regulatory pathway. And again we've had very productive discussions with the agency as Paul has said. Regarding the inherent differences of the two products, again there are two distinct products in terms of safety profile indications, patient populations in the treating and the treatment regimen as well. So for those reasons, we are very confident in our regulatory submission.

We're confident based on the interactions that we've had with the agency thus far, and we're right on track. As Paul said on the call, for that submission in the second half. So in terms of how we'll communicate obviously, we want to maintain the protocol with the agency and keep those discussions in between we and the agency. And then once we file the submission and it'll be incumbent upon the agency, once we submit the file of the combination up on the agency to actually file, and then once we get that filing obviously we would be in a better position to communicate.

But again, not all systems go with our BLA submission at this point.

Operator

Thank you. And our next question comes from Gregg Gilbert with SunTrust. You may proceed.

Gregg Gilbert -- Bank of America / Merrill Lynch

Hi, good morning. Thanks for the questions. Paul, on the more important part of the ADRENALIN franchise, at the start filed and did not sue them. Can you shed more light on that.

Is that either product is fundamentally different and therefore potentially not suitable or is there something else going on there. And the second part of my question is about the opioid overhang, I know there have been no big external data points here in recent months that maybe could come in on any progress you see brewing behind the scenes as the two sides discuss how to get this tied up in a responsible way. Thank you.

Paul Campanelli -- President and Chief Executive Officer

Sure. Thanks, Greg. I mean I'll just take that. But the opioid question first and I think as as you're aware there is no new update with respect to opioids since the last earnings call that we that we had on our prepared remarks.

So again, what's in the public domain and with the press reports on, is as we know the first trial is scheduled for Oklahoma in May. I believe it's May 28, we're not part of that trial again. I think that's well understood. Track 1 is scheduled for October 21st.

And I would tell you at the same response as we said back in Q4. We don't know if we are part of that track when at this point in time. We have and continue to have dialogue with plaintiffs and if there is a way to settle our track one. We continue to do that.

Absent of a settlement that we are prepared for trial should we enter into Track 1 for October. We are prepared. I think that's probably as accurate as we can get with today's set of facts. Regarding ADRENALIN, your question goes to why we did not sue [Inaudible] folks know us fairly well.

What we had a very bullish opinion on our intellectual property with respect to this filing, we would have asserted our intellectual property rights. A little bit different than the previous question with the paragraph 4 first to file on 1ml a different situation. Regarding the reason we didn't sue, we also have a regulatory strategy which should allow us to stay on the market a little bit longer. Again, this is a complicated ANDA submission I should say 505(b)(2) submission rather.

So there is a lot of moving parts to it. We spent an enormous amount of resources with respect to the 505(b)(2)  and there are regulatory challenges that we will work with the FDA regarding ANDA applicants so that's probably as far as I can go on that.

Operator

And our next question comes from Dewey Steadman with Canaccord. You may proceed.

Dewey Steadman -- Canaccord Genuity Inc. -- Analyst

Hi, thanks for taking the questions. I guess I'm on a couple and sterile and VASOSTRICT. Is there any update on the litigation there in terms of VASOSTRICT and is there an ability for the compounds to appeal this march FDA box decision. And then going you're looking at the stocking component for the quarter is a $240 million run rate that we could see in second quarter appropriate to use going forward, or is there some adjustments we need to make to get between $240 million and $270 million.

Thank you.

Paul Campanelli -- President and Chief Executive Officer

Yes, sure. I'll take the maybe I'll take the first questions here with respect to compounding in [Inaudible]. Your question in terms of is it appealed. I would tell you that it's already being litigated.

So it's already in progress. So we're waiting for a for a decision. And I think that decision will be about four to six weeks or so. So that's where we stand on the next situation on compounding.

On a paragraph 4 situation, there is no update with respect to status. It's a timing issue. Right now we are scheduled to go to trial just over a year from now. So I think we're scheduled for May of 2020.

That's why we last a series of weeks, and there'll be obviously, a decision that will come off of that. And we will be prepared for an appeal one way or another. I think that's probably the way we're looking at a solution. No new materialization regarding the status of the paragraph 4.

There has been a couple of other filers that have submitted ANDAs and certified against our intellectual property. Absent of that, there's no there's no material update regarding the paragraph foreign in VASOSTRICT.

Pat Barry -- Executive Vice President, and Chief Commercial Officer, Branded Business

And then just in terms of your cadence question and run rate question, I think as we talked of on the call, we did see a benefit in Q1 specifically on VASOSTRICT from a stocking perspective. We also saw some favorable price mix as well. So as you think about the Q2 number, that would be below a normal run rate. And then we would expect to see Q3 and Q4 revert back to a more normalized run rate from there.

Thank you.

Operator

And our next question comes from Gary Nachman with BMO Capital Markets. You may proceed.

Gary Nachman -- BMO Capital Markets -- Analyst

Hi, good morning. First that curious how much of the 40 product launches contribute in the first quarter. How is the environment executing on new generic launches that maybe you could speak at a high level for expectations on the new launches later this year. And then just on XIAFLEX, just talk about the promotional efforts behind Peyronie's and Dupuytren's seems like you're still getting traction there and if those will be stepping up over the course of this year.

Thank you.

Paul Campanelli -- President and Chief Executive Officer

Yes. So what I'm going to do is I'm going to pass this XIAFLEX question over to Pat. We'll start with the Branded side.

Pat Barry -- Executive Vice President, and Chief Commercial Officer, Branded Business

Thanks, Paul. Thank you for the question regarding XIAFEX. You pointed that out, we continue to see excellent execution in the marketplace from our sales force, that's a focus on on quality interactions with our physician customers. It's also a focus on continuing to expand our injector base.

So we've had success there as well. And a big part of what we do is his mastery of the distribution network, making sure that when the physician makes that treatment choice that that's an easy experience for them to acquire so that they can then treat. So we're seeing just quality execution across the board. And then one of the decisions that we made this year was to continue not only with consumer activation on the branded side digitally, but also to increase and enhance our investments around them direct to consumer broadcast television through unbranded media.

So that's been highly successful. And as a result in Q1, as Paul talked about on the earnings call, we saw 20% net sales growth, and largely driven by volume which is exactly what we want to see. So the majority of that was volume driven. And then when we inspect what's happening underneath in terms of underlying demand, we continue to see both indications grow. Peyronie's grew at 17% from an underlying demand perspective and due to trends contraction grew at 9%.

So when we begin to evaluate what we're placing out in the market, those are good signs for us. And of course there's just good qualitative metrics that we look at in terms of consumer activity ,consumer setting our website, the number of click through rates, and the impressions that we're having in the marketplace. So we're seeing really good signs. And so as Paul said, we continue to hold firm on the guidance that we've put out there for XIAFLEX, and we feel like the potential for sustainable growth is there.

Paul Campanelli -- President and Chief Executive Officer

And I think of the question regarding generic new product launches what I would say at this point in time, it's very early in the process. We're not gonna go too deep in terms of the contribution we're really at market formation. So from that standpoint, we're really not going to to opine too deeply. Now what we've said is, we need people to be patient as the lion's share of our contribution for new product launches will be late in 2019.

The one sound bite that I would put out there in terms of the new product launches, one of them is an A.G. it's Albuterol. It's an authorized generic product for Prudential with a relationship with Merck. We're excited about this product as it is a an albuterol product, which could potentially be substituted for a series of products.

But again, we're very early in the process. We're at market formation and we need more time to pass.

Laure Park -- Senior Vice President, Investor Relations, and Corporate affairs

Just a quick clarification of the product launches. What happened late in the first quarter and the other mentioned are actually in the second quarter, but then early second quarter. So I just want to get that timing right for you.

Gary Nachman -- BMO Capital Markets -- Analyst

Okay. Thanks for that.

Operator

And our next question comes from Irina Coffler with Mizuho.

Irina Coffler -- Mizuho Securities -- Analyst

Hi. Thanks for taking the question. So we see progression very interested in the CCH cosmetics right. We wanted to understand more about the injection technique and appropriate patient.

Can you comment on the study that you're working on and timing of the data. And also whether or not there was data will be used to supplement the DLA or you're going to submit them after you get approval. Thanks.

Paul Campanelli -- President and Chief Executive Officer

Okay. Thank you Irene. And Paul will you respond.

Pat Barry -- Executive Vice President, and Chief Commercial Officer, Branded Business

Thanks for the question. We're very excited, of course we're excited by the Phase 3 results. I mean given the stringent and points and to be able to meet those stringent endpoints with that [Inaudible] composite is impressive and of course the before and afters that are that have been talked about from the podium already have been well received. But we're also very excited about an aggressive data generation program that we have, and our aim would be of course to have this data available for manuscript publications and podium presentations.

But we are putting ourselves in a position to make sure that that data generation plan would be a part of the submission. So we've got multiple programs going on. Of course our Phase 2 and Phase 3, a rollover designs so that will give us important data regarding durability, which I think will make an impact in the marketplace with positive durability data. We also have some work some Pharmacokinetic work which will be important safety work.

Physicians are gonna want to know that the safety aspect of treating multiple treatment areas. So we'll have that data as well. Very excited about our 209 trial, which is a safety dosing and injection technique trial which we just completed which essentially validates our technique. Also has optimized our fight technique and interesting enough the approaches that we outlined in this trial was based on key opinion leader feedback and they validated that and it's consistent with injection techniques on another injectable modality.

So that's really exciting for us. We'll be embarking upon a 212 trial. And again, all this is really focused on generating real world data that that's what our KOLs are telling us. So the 212 will be a open label design, non-obese patients, younger patients in both buttocks and thighs.

More like that real world aesthetically experienced woman that's walking into the office today, and then we will be launching a 305 real world trial which will be a focus on efficacy and patient satisfaction and real world patients. So when you begin to think about the profile that we have, the Phase 3 the pivotal Phase 3,-- Let me remind you that's the largest cellulite trial ever. We believe that we've got a great profile for regulatory approval, and we've had great dialogue with our KOLs and our investigators in terms of the type of real world data that they would want. And we're putting ourselves in a position to be able to disseminate that and publish that, but also submit with our regulatory filings.

So we've got a great program. My hat's off to the R&D team here at and who has really worked really hard on this program, we're very excited about it.

Operator

[Operator Instructions]. Our next question comes from David Amsellem with Piper Jaffray. You may proceed.

David Amsellem -- David Amsellem -- Analyst

Thanks. So on the injectable business in VASOSTRICT and I apologize if I missed this just putting the file of the other generic filing the side. Can you talk about the extent to which you can get more volume capture in terms of the injectable vasopressin market over the long term. I'm just trying to get a better sense of the runway for organic growth of that product.

And then secondly, regarding the injectables pipeline and the more of a focus on the 505(b)(2)s, can you give us some color on the pace of filings and potentially pace of approvals over the next couple of years. And I guess part of that question is also how aggressive do you think you can be in terms of adding injectable products by acquisition as you look to diversify that business.

Paul Campanelli -- President and Chief Executive Officer

Thank you, David. So what I would start with in terms of being able to grow VASOSTRICT, I would tell you that my understanding of the market is about 3.5 million vials to 3.6 million vials. That's pretty much been a historical trend. Now what we're finding is that, the volume growth in this particular product is going to only be in the low-single digits.

So from that standpoint, I think we've maximized the volume situation here and again, this product has long been converted from unapproved sources back probably 18 months ago. So I think we've pretty much maximized the volume situation. Again just seeing small single-digit growth. Regarding pipeline color in terms of pace, what we have is we are taken a new approach about how we're looking at product.

And if you went back seven years ago, we along with many other companies were focused on a volume game. Our goal was to file 25, 30 applications. And what we've seen is that the environment has changed. Now your question is specifically to injectables but our R&D program is really overlapping, frankly three segments.

In our current strategy, and I say current it's really not anything new. We've communicated this over the last 12 months or so. We're looking at the ratio of our already dollars from the generic retail side to the injectable side. We are our target to file about 15 applications per year.

Now we haven't we haven't quantified how many are going to be generic retailer versus sterile injectable, but I will tell you the, majority is going to lead toward sterile injectable. And that's just because of where we see how we can create value in our communications on where we see good core growth for Endo. So why should we be moving toward to look toward a sterile injectable side. And then maybe your last question in terms of how we look at adding products through acquisition.

So again ,we are incredibly proud of our [Inaudible] provides an extended reach to products in which we do not have the capabilities today. So this is taking standard injectable products putting them into different presentations whereby, we are really trying to get to the patient into the caregiver, so these are emergency room type products. They are critical care targets. This is an area that we want to continue to work with[Inaudible]and looked at ad products to into that particular category.

At the same time, we are in the process and we've previously communicated this as well. We are increasing our injectable capabilities ourselves here at Endo through our Research and Development program focused in Mumbai, India. Many people are aware that we our R&D up and running in India. You will start to see applications coming in the 2020 and the 2021 timeframe with respect to our own internal development coming out of India, which will be supplementing our current R&D program at Worcester facility.

M&A, I should say product acquisition clearly going to help us with new product presentations, and then products that are refill syringes and vials. We have the internal capabilities and you're going to see a heightened development program coming out of a vendor.

Operator

And our next question comes from[Inaudible]

Unknown Speaker

Thank you for taking my question. Just on the U.S. generics for the quarter the year-over-year declines of about 12%, which is above the guidance range. Does that mean that loss of exclusivity that maybe you're expecting on certain key products haven't yet come in we should expect this to take forward later this year.

And then maybe a bigger picture just within U.S. generics are continuing to see stabilization in the marketplace and how do you see this going forward.

Paul Campanelli -- President and Chief Executive Officer

Sure. So I'll take the stabilization question and I'll pass it over to Blaise, regarding how we're looking at the financial portion of it. So I want to be really careful on how we choose our words with respect to stabilization maybe versus what we're calling it more of a normalization. Right.

We've used words and explanations that we kind of go to pre-2015 time frames. That's what I'm seeing in the generic retail section right now. It's a normalization in terms of how things were pre-2015. And what I'm saying here is, when you go back to that period of time we would have a cadence and a frequency of right first offers, many bids, things of that nature.

So we're not seeing these large portfolio shifts and swings that we had seen and maybe late 2015 and 2016 due to changes in consortium's. So from my standpoint that's the normalization portion of how we communicated. That said, the challenge as we see the the the right of first refusal in the many bids keeping in mind that today the consortiums are much bigger. So the impact to changes in product swings whether you win bids, whether you lose bids, how you launch a product, generally speaking three consortiums holding about 30 plus percent, you're going to have material swings.

That's what we need to be cautious about. So the normalization or the stability aspects is that we're starting to see things that where maybe normal course in frequency and cadence, but the results of what happened are much more material and I think that's what we need to be careful about in the generic segment. And then I'll pass the second question over to Blaise.

Blaise Coleman -- Executive Vice President and Chief Financial Officer

Thanks for the question on generics for Q1 performance. So our Q1 performance we saw in our generics revenue was consistent with our internal expectations. And then in terms of the relationship between Q1 annualized run rate opposite the midpoint of our generics for your guidance, the guidance does imply that we will continue to see some pretty significant competitive pressure throughout the year. That will be partially offset by the new product launches that Paul spoke about earlier in the call.

But as we've noticed, those are going to be very late in 2019. So that's really the dynamic you see playing out there.

Operator

Next question comes from Louise Chen, Cantor Fitzgerald. You may proceed.

Louise Chen -- Cantor Fitzgerald -- Analyst

Yes. Thanks for taking the questions. This is Sudan Logan Nathan Louis. So first question is, hows the formulation of XIAFLEX for Peyronie's and Dupuytren's then from that for the cellulite treatment, and how will the pricing be changed or be similar to the Peyronie's and Dupuytren's indications.

And then secondly, how is the termination of the Somerset therapeutics acquisition affect future plans for business development if any or any other pipeline advancements and if you can elaborate on any other business development in 2019 as well, and timing on that.

Paul Campanelli -- President and Chief Executive Officer

Sure. I'll take the Somerset question and I'll pass the formulation and presentation on XIAFLEX and CCH over to Pat. I would say we're disappointed in the Somerset transaction terminating we always have multiple shots on goal. And I think as I previously just mentioned here, the [Inaudible] provides us with a portfolio or ready to use price.

So again, very important to us an area that's untapped in an area that we want to grow in. Our business development team is out all the time looking for products and or small potential acquisitions that are going to fit with our corporate strategy. We are agnostic when we look across our segments, where we can build value and create value. That's that's going to be the focus area.

The normal view toward that is always going to lead toward our Specialty business, and our Sterile business. So where we have opportunities,[Inaudible]always got a portfolio that we're evaluating and so we may execute on some. We'll just be mindful of how we look at our capital allocation. And as I said maybe earlier today, what I'm very proud of is our aggressive R&D program that is back up and running at full strength here in both India in Mumbai.

And also in Rochester. So two shots on go from an R&D standpoint, and I think we'll start to see the fruition of applications being filed starting in the middle of 2019. With that, I'll pass the the formulation question over to Pat for CCH XIAFLEX.

Pat Barry -- Executive Vice President, and Chief Commercial Officer, Branded Business

Yes, sure. Thanks for the question Paul. As you cited the formulations are different. Essentially, you're talking about two different products.

So I want to keep it somewhat at a high level because some of this is obviously proprietary. But the formulations contain, they're different presentations, they contain different incipient the volume for treatment is much different. And so as a result with different formulations there's clinical implications. So that's why it's important to understand that it's appropriate to separate out these two submissions for those inherent differences.

Again the patient populations are much different presentations different. So there's a safety play important to dose correctly not underdose or overdose. That's the two presentations wouldn't be transferable within the indications. And obviously, based on this, the different presentation products not only is it appropriate but allowable to have a separate PLA submission so that's based on that.

That's what our regulatory strategy is is based on. And so we understand that the price points are going to be different. We understand that the markets are completely different, and we feel we have the freedom to operate to be able to price appropriately in the medical aesthetic market. So you're really honing in on what's the price point of the CCH and cellulite.

Obviously, we've got some time between now and launch. And upon launch we would reveal our price point. In the meantime, we're doing an abundance of both qualitative and quantitative market research with plastic surgeons, and dermatologists, and other medical aesthetic physicians to reveal the right price point for us. Our aim as we've communicated consistently and we'll continue to be.

We understand there's a sweet spot in the marketplace for an injectable product for the treatment of cellulite. Again, a reminder that there's not an injectable approved by the FDA today. And so should this CCH be proved it would be a remarkable breakthrough. And so with that, we understand that we would want to price appropriately for wide scale adoption from both consumers and medical aesthetic physicians.

And so we're going to do that work to determine what that price point is that find that sweet spot for wide scale adoption. And so as we get closer to launch, we would reveal that price point. But it's really too soon to talk about specifically what that price point will be today.

Operator

Our next question comes from [Inaudible]. You may proceed.

Unknown Speaker

Just a couple of quick questions. As most of our business questions have been asked. Can you just give us an update on what your secure capacity is as of today. And does that include what you have available under your revolver.

Blaise Coleman -- Executive Vice President and Chief Financial Officer

So our security capacity today looking at our most restrictive covenant is run $300 million. And so we could access the revolver today for that amount.

Unknown Speaker

And then you had some favorable rulings out of Pennsylvania on the mesh case. Is it safe to assume at this point that the mesh lawsuits are behind you, or are there still open trials that you're going through.

Paul Campanelli -- President and Chief Executive Officer

So I think what we have, we've said probably several earnings calls though that we've resolved virtually all no mesh cases. So I would say ,that's probably where we've left it. We're not seeing a lot of activity on our side. So we'll stay behind, or stand behind our previous comments that some measures virtually unknown mesh cases are virtually behind us.

Unknown Speaker

And then just the last question is going to VASOSTRICT. I know you have a bench trial starting in May of next yea, but with regards to the other two ANDA filers, is there any update on the on their trials.

Paul Campanelli -- President and Chief Executive Officer

I think they'll probably be enjoined in that particular case. So my understanding is that the follow along on the other 10ml will be Sandoz and enjoined within the main timeframe.

Unknown Speaker

Thank you.

Operator

And our next question comes from Liav Abraham with Citigroup. You may proceed.

Liav Abraham -- Citi -- Analyst

Good morning. Perhaps you can talk a little bit about the investments you're currently making behind the launch of CCH as you prepare for approval on launch. And then secondly, can you just remind us how you're thinking about a potential XUs opportunity for CCH and cellulite. Thank you.

Paul Campanelli -- President and Chief Executive Officer

So, Pat, maybe I'll take the XUs personnel will pass it back over to Pat regarding the clip commercial question. So what we're simply doing XUs, we're evaluating our options. Our business development team, and our commercial teams are looking at ways in which certain markets that we would partner if appropriate. So we've done as you would expect market research.

We have a series of territories that that could be appropriate and exciting to us, but I just need to let you know I've got to communicate and be very clear here that. All focus is harming us. We've got work to do. We're excited about the BLA target submission expected for the second half of this year.

That's where the focus is. We'll get ourselves situated, and then we'll look at how we can really go after the International market. Obviously, we don't want to do anything on the international front that could create any bumps in the road to the height and focuses on the US. And then we'll move forward into more material discussions on the international side.

With that, I'll pass it over to Pat.

Pat Barry -- Executive Vice President, and Chief Commercial Officer, Branded Business

Thanks, Paul. Well we've had a lot activity. Actually the activity started last year where we introduced Endo prosthetic community introduced and though aesthetics we've hired a lot of talent. We've got our head of sales and marketing, Rob Catlin onboard.

And he's been building out his team with a plethora of medical aesthetic experience and really credentialing Endo. So we get into to this year as Paul mentioned on the call, we'll be at approximately 25 to 30 plus significant meetings. We're excited about rolling out some branding around Endo Aesthetics and an official Endo Aesthetic campaign and materials to support that at ASDS, which is one of the premier meetings. We'll be doing several advisory boards engaging with thought leaders and leading medical aesthetic physicians as we build out the commercial plan.

I mentioned already that we've got our quiet pricing research in the market. And in late 2019, will be begin hiring our sales leaders and finalizing our territory footprint. Of course, the full on recruiting the sales force will come in 2020 and that is getting closer to a launch as we get into early 2020. The Endo Aesthetics commercial team will begin communicating with physicians regarding unbranded communications around prevalence.

The science and structural properties of satellite against them. Some great market preparation. We will begin Branded and unbranded consumer campaign in education likely to begin late spring or early summer of 2020. And then we will also be reaching out in an unbranded fashion to provide education to media and influencers likely to begin and Q1 of 2020.

And we understand the importance of injection training. And so we've got a very aggressive injection training program that at launch we would be prepared to create a critical mass of medical aesthetic injectors that can focus them on targeting the appropriate patients, and driving toward great patient outcomes. So we've got a terrific plan in place and you can look for us to continue to be more prominent at the medical congresses and the medical meetings of this year. And we will build--we'll continue to build that momentum in that presence in 2020.

I think it's important to understand that there is investment associated with that. What we obviously, also can continue to lean on our internal sales and marketing infrastructure to support that launch as we complement that with the medical aesthetic experience necessary to have a successful commercial launch with CCH as an injectable product for cellulite.

Operator

Thank you, ladies and gentlemen. This is actually a portion of today's conference. I would now like to turn the call back over to Mr. Paul Campanelli for any closing remarks.

Sir, you may proceed.

Paul Campanelli -- President and Chief Executive Officer

Thank you. I just want to close by saying how excited we are to report out on a very solid Q1. Great start to the New Year here for us. I want to say that we appreciate everyone's continued interest and support of the company.

We look forward to providing you with updates as we move forward. And thank you for joining us this morning all.

Operator

[Operator signoff]

Duration: 60 minutes

Call participants:

Laure Park -- Senior Vice President, Investor Relations, and Corporate affairs

Paul Campanelli -- President and Chief Executive Officer

Blaise Coleman -- Executive Vice President and Chief Financial Officer

Randall Stanicky -- RBC Capital Markets -- Analyst

Pat Barry -- Executive Vice President, and Chief Commercial Officer, Branded Business

Gregg Gilbert -- Bank of America / Merrill Lynch

Dewey Steadman -- Canaccord Genuity Inc. -- Analyst

Gary Nachman -- BMO Capital Markets -- Analyst

Irina Coffler -- Mizuho Securities -- Analyst

David Amsellem -- David Amsellem -- Analyst

Unknown Speaker

Louise Chen -- Cantor Fitzgerald -- Analyst

Liav Abraham -- Citi -- Analyst

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