On February 28, 2017 Kite Pharma, Inc. (Nasdaq:KITE) reported a corporate update and fourth quarter and full-year 2016 financial results for the period ended December 31, 2016 (Press release, Kite Pharma, FEB 28, 2017, View Source [SID1234517879]).

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In a separate announcement today, Kite issued positive topline results from the primary analysis of the ZUMA-1 study of axicabtagene ciloleucel in patients with aggressive non-Hodgkin lymphoma (NHL). Kite continues to expect completion of its rolling submission of a Biologics License Application (BLA) to the U.S. Food and Drug Administration (FDA) for axicabtagene ciloleucel (KTE-C19) for the treatment of aggressive NHL by the end of the first quarter 2017, with potential approval and commercial launch in 2017.

"The accomplishments, leadership additions to the company, and performance of Kite during 2016 put us in a position of strength as we prepare to potentially deliver the first CAR-T therapy for aggressive NHL to patients later this year," said Arie Belldegrun, M.D., FACS, Chairman, President, and Chief Executive Officer. "Beyond axicabtagene ciloleucel, we have taken important steps to expand Kite’s global footprint and pipeline of cell therapy candidates. Through our recently announced strategic collaborations with Fosun Pharma and Daiichi Sankyo, our plans for submission and potential launch in Europe, and ongoing clinical studies of axicabtagene ciloleucel, we look ahead to an increasingly strong future for Kite."

Fourth Quarter and Full Year 2016 Financial Results

Revenues were $4.9 million for the fourth quarter of 2016 and $22.2 million for the full year of 2016.
Research and development expenses were $58.9 million for the fourth quarter of 2016, which includes $8.9 million of non-cash stock-based compensation expense. For the full year of 2016, research and development expenses were $197.9 million, which includes $34.7 million of non-cash stock-based compensation expense.
General and administrative expenses were $31.8 million for the fourth quarter of 2016, which includes $10.8 million of non-cash stock-based compensation expense. For the full year of 2016, general and administrative expenses were $97.4 million, which includes $38.8 million of non-cash stock-based compensation expense.
Net loss was $84.9 million, or $1.70 per share, for the fourth quarter of 2016. For the full year of 2016, net loss was $267.1 million, or $5.46 per share.
Non-GAAP net loss for the fourth quarter of 2016 was $65.2 million, or $1.31 per share, excluding non-cash stock-based compensation expense of $19.7 million. For the full year of 2016, non-GAAP net loss was $193.5 million, or $3.95 per share, excluding non-cash stock-based compensation expense of $73.6 million.
As of December 31, 2016, Kite had $414.4 million in cash, cash equivalents, and marketable securities. In January 2017, Kite received a $50 million upfront payment from Daiichi Sankyo related to the recently announced strategic collaboration in Japan.
2017 Financial Guidance

Kite expects full year 2017 net cash burn to be between $325 million and $340 million, which includes approximately $30 million in capital expenditures but excludes cash inflows or cash outflows from business development activities, if any, and excludes planned upfront payments totaling $90 million from recently announced strategic collaborations in Asia. Estimated full year 2017 cash burn is driven primarily by a projected GAAP net loss of between $450 million and $465 million. The 2017 projected net loss includes non-cash stock-based compensation expenses of approximately $135 million.
Kite expects full year 2017 revenue to be between $40 million and $50 million, which assumes no product revenue, and full year 2017 GAAP operating expenses to be between $490 million and $515 million.
As previously announced, Kite expects to have sufficient cash resources to fund its current operations, including planned clinical development programs, through the first half of 2018. This projection excludes cash inflows or cash outflows from future business development activity, if any.
2016 Highlights

Axicabtagene Ciloleucel/KTE-C19 Progress

Presented positive interim results from the ZUMA-1 Phase 2 study of axicabtagene ciloleucel in aggressive NHL in a late-breaker oral presentation at the 2016 American Society of Hematology (ASH) (Free ASH Whitepaper) annual meeting.
Reported a Phase 1 update from the ZUMA-3 and ZUMA-4 trials of KTE-C19 in adult and pediatric relapsed/refractory acute lymphoblastic leukemia at the 2016 ASH (Free ASH Whitepaper) annual meeting.
Initiated ZUMA-6, a Phase 1b/2 study of axicabtagene ciloleucel in combination with the checkpoint inhibitor atezolizumab in patients with chemorefractory diffuse large B-cell lymphoma (DLBCL) in collaboration with Genentech.
Presented results from SCHOLAR-1, the first patient-level pooled analysis of outcomes in chemorefractory DLBCL, providing an important historical benchmark for studies of the disease.
Regulatory Milestones

Initiated BLA rolling submission to the FDA for axicabtagene ciloleucel in December 2016.
Received Orphan Drug Designation from the FDA for KTE-C19 in the treatment of five additional B-cell malignancies, granting Kite the designation for the major indications in hematologic malignancies in the US. KTE-C19 also has Orphan Drug Designation in the EU for these indications.
Received Priority Medicines (PRIME) status from the European Medicines Agency for KTE-C19 in the treatment of chemorefractory DLBCL.
Axicabtagene Ciloleucel Commercial & Manufacturing Readiness

Achieved 99 percent success rate in the manufacturing of clinical product patient dose from a single apheresis for the multi-center ZUMA-1 clinical trial.
Marked the official opening of Kite’s commercial manufacturing plant, a state-of-the-art facility in El Segundo, California estimated to have the capacity to produce more than 4,000 patient therapies per year.
Initiated development of Kite Konnect, a cloud-based solution for commercial-scale ordering, logistics, monitoring and delivery of T-cell therapies, designed to enable a positive prescriber and patient experience.
Pipeline Expansion and Developments

Submitted an investigational new drug (IND) application for KITE-718, a TCR product candidate that targets MAGE-A3/A6 antigens expressed on solid tumors.
Initiated plans to file an IND application in 2017 for KITE-585, a CAR product candidate targeting B cell maturation antigen (BCMA) for multiple myeloma.
Initiated plans to file IND applications in 2018 for KITE-796, a CAR product candidate targeting CLL-1 in acute myeloid leukemia (AML), and for KITE-439, a TCR product candidate targeting human papillomavirus (HPV)-16 E7 for cervical cancer, head and neck cancer, and other solid tumors.
Strategic Collaborations

Entered into a new Cooperative Research and Development Agreement (CRADA) for the development of a fully human anti-CD19 CAR product candidate to treat B-cell malignancies with the National Cancer Institute (NCI).
Licensed intellectual property related to a fully human anti-CD19 CAR to treat B-cell malignancies from the National Institutes of Health (NIH).
Expanded the TCR portfolio by licensing intellectual property from the NIH related to multiple TCR product candidates for the treatment of solid tumors expressing mutated KRAS antigens.
Entered into a new CRADA for the development of TCR product candidates directed against HPV-16 E6 and E7 for the treatment of HPV-associated cancers with the NCI.
Licensed a technology platform from The Regents of the University of California, on behalf of the University of California, Los Angeles, for the scalable production of T cells using pluripotent stem cell lines capable of indefinite self-renewal and designed to overcome limitations of current allogeneic approaches.
Partnered with Leiden University Medical Center to develop TCR product candidates targeting solid tumors associated with HPV-16 infection.

On February 28, 2017 EMD Serono, the biopharmaceutical business of Merck KGaA, Darmstadt, Germany, in the US and Canada, and Pfizer Inc. reported that the US Food and Drug Administration (FDA) has accepted for Priority Review EMD Serono’s Biologics License Application (BLA) for avelumab* as a treatment for patients with locally advanced or metastatic urothelial carcinoma (mUC) with disease progression on or after platinum-based therapy (Press release, Pfizer, FEB 28, 2017, View Source [SID1234517878]). The FDA has set a Prescription Drug User Fee Act (PDUFA) target action date of August 27, 2017, for avelumab in this indication.

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"Taken together with last year’s filing for metastatic Merkel cell carcinoma, this BLA acceptance confirms our rapid and continued progress in the clinical development of avelumab," said Luciano Rossetti, M.D., Executive Vice President, Global Head of Research & Development at the biopharma business of Merck KGaA, Darmstadt, Germany. "We continue to evaluate avelumab in cancers that have limited or suboptimal treatment choices, such as metastatic or locally advanced urothelial carcinoma, to hopefully be able to provide patients with new treatment options for fighting their disease."

Despite advances in the treatment of UC, the prognosis for patients remains poor, particularly when the disease has metastasized. Bladder cancer makes up approximately 90% of urothelial cancers and is the sixth most common cancer in the US.[1],[2] "

Advanced urothelial carcinoma remains a difficult-to-treat tumor, which is why we are developing a comprehensive clinical development program that involves Phase I and III trials designed to address this challenge," said Chris Boshoff, M.D., Ph.D., Senior Vice President and Head of Immuno-oncology, Early Development and Translational Oncology, Pfizer Global Product Development. "We’re continuing to accelerate our urothelial carcinoma development program and look forward to continuing our dialogue with the FDA."

Avelumab is an investigational, fully human anti-PD-L1 antibody. The FDA’s Priority Review status reduces the review time from 10 months to a goal of six months from the day of filing acceptance and is given to drugs that may offer major advances in treatment or may provide a treatment where no adequate therapy exists. In November 2016, the FDA accepted, and granted Priority Review status to, the BLA for avelumab for the treatment of patients with metastatic Merkel cell carcinoma.

The international clinical development program for avelumab, known as JAVELIN, involves at least 30 clinical programs, including nine Phase III trials, and more than 4,000 patients evaluated across more than 15 tumor types. In December 2015, Merck KGaA, Darmstadt, Germany, and Pfizer announced the initiation of a Phase III study (JAVELIN Bladder 100) of avelumab in the first-line setting as a maintenance treatment in patients with locally advanced or metastatic UC. This trial is currently enrolling patients.

*Avelumab is not approved for any indication in any market. This marks the second acceptance of an application by the FDA to review the investigational product, avelumab.

References

1.National Comprehensive Cancer Network. NCCN Guidelines Version 1.2017 Updates. Bladder Cancer. Available from: View Source (link is external). Last Accessed: February 2017.

2.Siegel RL, et al. Cancer Statistics, 2017. CA Cancer J Clin 2017;67:7-30. Available from: View Source (link is external). Last Accessed: February 2017.

3.American Cancer Society. Key Statistics for Bladder Cancer. Available from: View Source (link is external). Last Accessed: February 2017.

About Metastatic Urothelial Carcinoma

Urothelial Carcinoma includes several tumors originating from the cells lining the bladder, renal pelvis and urethra. While cancers outside of the bladder are relatively uncommon, accounting for an estimated 10% of cases, bladder cancer represents 90% of urothelial cancers and is the ninth most common cancer globally.[1],[3] Worldwide, approximately 400,000 new cases of bladder cancer are diagnosed and 150,000 deaths are attributed to this disease each year.[3] The incidence and mortality of bladder cancer have remained unchanged over the past 25 years.[3]

About Avelumab

Avelumab is a fully human antibody specific for a protein found on tumor cells called PD-L1, or programmed death ligand-1. By inhibiting PD-L1 interactions, avelumab is thought to enable the activation of T-cells and the adaptive immune system. By retaining a native Fc-region, avelumab is thought to potentially engage the innate immune system and induce antibody-dependent cell-mediated cytotoxicity (ADCC). In November 2014, Merck KGaA, Darmstadt, Germany, and Pfizer announced a strategic alliance to co-develop and co-commercialize avelumab. Common adverse reactions include fatigue, musculoskeletal pain, diarrhea, nausea peripheral edema, decreased appetite, and rash. Immune-mediated adverse reactions have also been reported.

Alliance between Merck KGaA, Darmstadt, Germany, and Pfizer Inc., New York, US

Immuno-oncology is a top priority for Merck KGaA, Darmstadt, Germany, and Pfizer Inc. The global strategic alliance between Merck KGaA, Darmstadt, Germany, and Pfizer Inc., New York, US, enables the companies to benefit from each other’s strengths and capabilities and further explore the therapeutic potential of avelumab, an investigational anti-PD-L1 antibody initially discovered and developed by Merck KGaA, Darmstadt, Germany. The immuno-oncology alliance will jointly develop and commercialize avelumab and advance Pfizer’s PD-1 antibody. The alliance is focused on developing high-priority international clinical programs to investigate avelumab as a monotherapy, as well as in combination regimens, and is striving to find new ways to treat cancer.

On February 28, 2017 Kite Pharma, Inc., (Nasdaq:KITE) reported positive data from the primary analysis of ZUMA-1 for its lead CAR-T candidate, axicabtagene ciloleucel (previously referred to as KTE-C19), in patients with chemorefractory aggressive B-cell non-Hodgkin lymphoma (NHL) (Press release, Kite Pharma, FEB 28, 2017, View Source [SID1234517877]). The study met the primary endpoint of objective response rate (ORR), or rates of tumor response (complete response + partial response) recorded after a single infusion of axicabtagene ciloleucel, with 82 percent (p < 0.0001).

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These results demonstrate the treatment effect of axicabtagene ciloleucel in a patient population with multiple types of aggressive NHL, including diffuse large B-cell lymphoma (DLBCL) enrolled in Cohort 1, as well as primary mediastinal B-cell lymphoma (PMBCL) and transformed follicular lymphoma (TFL) enrolled in Cohort 2.

One hundred one patients were treated in ZUMA-1. The following table shows the ORR and rate of complete response (CR) as well as the month 6 ORR and CR:


DLBCL (n=77)
TFL/PMBCL (n=24)
Combined (n=101)
ORR (%) CR (%) ORR (%) CR (%) ORR (%) CR (%)
ORR 82 49 83 71 82 54
Month 6 36 31 54 50 41 36

Four of the 101 patients in ongoing CR did not have a month 6 tumor assessment prior to the data cut-off and are therefore categorized as non-responders for month 6 in the table above. These patients have an opportunity to be counted as a month 6 CR in a follow-up analysis, which may increase the month 6 response and month 6 CR rate.

At month 6, 41 percent of treated patients achieved a response, including 36 percent in CR. Five of the 101 patients (5 percent) continue to experience highly significant and durable partial responses (PR) with minimal abnormalities in PET scans. One of these PRs converted to a CR at month 9.

With a median follow-up of 8.7 months for this primary analysis, the median overall survival (OS) has not yet been reached. In a similar patient population, the median OS was estimated to be 6.6 months (SCHOLAR-1 study, ASCO (Free ASCO Whitepaper) 2016).

The most common grade 3 or higher adverse events included anemia (43 percent), neutropenia (39 percent), decreased neutrophil count (32 percent), febrile neutropenia (31 percent), decreased white blood cell count (29 percent), thrombocytopenia (24 percent), encephalopathy (21 percent) and decreased lymphocyte count (20 percent). As compared to the interim analysis, grade 3 or higher cytokine release syndrome (CRS) decreased from 18 percent to 13 percent and neurologic events decreased from 34 percent to 28 percent. There were no cases of cerebral edema.

As previously reported at the American Society of Hematology (ASH) (Free ASH Whitepaper) Annual Meeting in 2016, there were three deaths not due to disease progression in the study. Two events, one hemophagocytic lymphohistiocytosis and one cardiac arrest in the setting of CRS, were deemed related to axicabtagene ciloleucel. The third case, a pulmonary embolism, was deemed unrelated. Between the interim analysis that included 62 patients, and this primary analysis which now includes all 101 patients, there were no additional deaths due to adverse events.

"These results with axicabtagene ciloleucel are exceptional and suggest that more than a third of patients with refractory aggressive NHL could potentially be cured after a single infusion of axicabtagene ciloleucel," said Jeff Wiezorek, M.D., Senior Vice President of Clinical Development. "The ZUMA-1 study was built on a foundation of support and commitment from Dr. Steven Rosenberg and the National Cancer Institute and our ZUMA-1 clinical trial investigators who believed in the potential for CAR-T therapy to change the paradigm of cancer treatment."

Kite intends to seek regulatory approval of axicabtagene ciloleucel in aggressive NHL based upon the combined data from all 101 patients and plans to complete its rolling submission of the Biologics License Application (BLA) by the end of the first quarter of 2017. In addition, Kite plans to submit a marketing authorization application (MAA) for axicabtagene ciloleucel for the treatment of relapsed or refractory DLBCL, PMBCL and TFL with the European Medicines Agency (EMA) in 2017.

"We know as clinicians that patients with aggressive lymphoma who do not respond to their previous treatments have a very poor prognosis. In fact, we know from the SCHOLAR-1 study, these patients have only an eight percent chance of achieving a complete response with current therapies," said Frederick L. Locke, M.D., ZUMA-1 Co-Lead Investigator, and Director of Research for the Immune Cell Therapy Program at Moffitt Cancer Center in Tampa, Florida. "Several patients we treated at Moffitt Cancer Center experienced a rapid and durable complete response with this first-of-its kind therapy. The ZUMA-1 study results suggest that axicabtagene ciloleucel could become a new standard of care for patients with refractory aggressive lymphoma."

Sattva S. Neelapu, M.D., Department of Lymphoma/Myeloma, Division of Cancer Medicine at The University of Texas MD Anderson Cancer Center, served as a co-lead investigator in the ZUMA-1 trial.

Full data from the primary analysis will be presented at the American Association for Cancer Research (AACR) (Free AACR Whitepaper) in April 2017 in Washington, D.C.

ZUMA-1 is supported in part by funding from The Leukemia & Lymphoma Society (LLS) Therapy Acceleration Program.

About axicabtagene ciloleucel
Kite Pharma’s lead product candidate, axicabtagene ciloleucel, is an investigational therapy in which a patient’s T cells are engineered to express a chimeric antigen receptor (CAR) to target the antigen CD19, a protein expressed on the cell surface of B-cell lymphomas and leukemias, and redirect the T cells to kill cancer cells. Axicabtagene ciloleucel has been granted Breakthrough Therapy Designation status for diffuse large B-cell lymphoma (DLBCL), transformed follicular lymphoma (TFL), and primary mediastinal B-cell lymphoma (PMBCL) by the U.S. Food and Drug Administration (FDA) and Priority Medicines (PRIME) regulatory support for DLBCL in the EU.

On February 28, 2017 Amgen (NASDAQ:AMGN) reported positive results from a planned overall survival (OS) interim analysis of the Phase 3 head-to-head ENDEAVOR trial (Press release, Amgen, FEB 28, 2017, View Source [SID1234517876]). The study met the key secondary endpoint of OS, demonstrating that patients with relapsed or refractory multiple myeloma treated with KYPROLIS (carfilzomib) and dexamethasone (Kd) lived 7.6 months longer than those treated with Velcade (bortezomib) and dexamethasone (Vd) (median OS 47.6 months for Kd versus 40.0 for Vd, HR = 0.79, 95 percent CI, 0.65 – 0.96). This Kd regimen administered with 56 mg/m2 KYPROLIS twice weekly is already approved in the U.S., European Union and other countries based on the primary analysis of progression-free survival (PFS) in the ENDEAVOR study.

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"For an incurable disease like multiple myeloma, a major treatment goal for oncologists and hematologists is to help patients live as long as possible," said study co-author and investigator Meletios A. Dimopoulos, M.D., professor of Clinical Therapeutics at the National and Kapodistrian University of Athens, School of Medicine. "Based on these data, we now know that KYPROLIS not only significantly extended progression-free survival compared to Velcade, but also overall survival, making it a clinically meaningful advance in the treatment of relapsed or refractory multiple myeloma."

"These results confirm the superiority of KYPROLIS over Velcade in relapsed or refractory multiple myeloma patients," said Sean E. Harper, M.D., executive vice president of Research and Development at Amgen. "A survival benefit has rarely been demonstrated in relapsed or refractory multiple myeloma. ENDEAVOR is the only study to demonstrate a survival benefit in a head-to-head comparison with a current standard of care regimen. These results further support KYPROLIS as a foundational therapy in this patient population."

Adverse events observed in this updated analysis were consistent with those previously reported for ENDEAVOR. The most common adverse events (greater than or equal to 20 percent) in the KYPROLIS arm were anemia, diarrhea, pyrexia, dyspnea, fatigue, hypertension, cough, insomnia, upper respiratory tract infection, peripheral edema, nausea, bronchitis, asthenia, back pain, thrombocytopenia and headache.

Detailed results will be presented on Saturday, March 4 at 7:30 a.m. IST at the 16th International Myeloma Workshop in New Delhi. Amgen plans to submit these results to regulatory agencies worldwide to support a potential label update to the ENDEAVOR study results.

The KYPROLIS clinical program continues to focus on providing solutions for physicians and patients in treating this frequently relapsing and difficult-to-treat cancer. KYPROLIS is available for patients whose myeloma has relapsed or become resistant to another treatment and continues to be studied in a range of combinations and patient populations.

About ENDEAVOR
The randomized ENDEAVOR (RandomizEd, OpeN Label, Phase 3 Study of Carfilzomib Plus DExamethAsone Vs Bortezomib Plus DexamethasOne in Patients With Relapsed Multiple Myeloma) trial of 929 patients evaluated KYPROLIS in combination with low-dose dexamethasone (Kd), versus bortezomib with low-dose dexamethasone (Vd) in patients whose multiple myeloma has relapsed after at least one, but not more than three prior therapeutic regimens. The primary endpoint of the trial was PFS, defined as the time from treatment initiation to disease progression or death. The primary analysis was published in The Lancet Oncology and is described in the Prescribing Information.

Patients received treatment until progression with KYPROLIS as a 30-minute infusion on days 1, 2, 8, 9, 15 and 16 of 28 day treatment cycles, along with low-dose dexamethasone (20 mg). For Cycle 1 only, KYPROLIS was administered at 20 mg/m2 on days 1 and 2, and if tolerated was escalated to 56 mg/m2 from day 8 Cycle 1 onwards. Patients who received bortezomib (1.3 mg/m2) with low-dose dexamethasone (20 mg) were treated with bortezomib administered subcutaneously or intravenously at the discretion of the investigator and in accordance with regional regulatory approval of bortezomib. More than 75 percent of the patients in the control arm received bortezomib subcutaneously. This study was conducted at 235 sites worldwide. For information about this trial, please visit www.clinicaltrials.gov under trial identification number NCT01568866 or the News Release section of Amgen.com.

About Multiple Myeloma
Multiple myeloma is an incurable blood cancer, characterized by a recurring pattern of remission and relapse.1 It is a rare and very aggressive disease that accounts for approximately one percent of all cancers.2,3 In the U.S., there are nearly 95,000 people living with, or in remission from, multiple myeloma.4 Approximately 30,330 Americans are diagnosed with multiple myeloma each year and 12,650 patient deaths are reported on an annual basis.4

About KYPROLIS (carfilzomib)
Proteasomes play an important role in cell function and growth by breaking down proteins that are damaged or no longer needed.5 KYPROLIS has been shown to block proteasomes, leading to an excessive build-up of proteins within cells.5 In some cells, KYPROLIS can cause cell death, especially in myeloma cells because they are more likely to contain a higher amount of abnormal proteins.5,6

KYPROLIS is approved in the U.S. for the following:

In combination with dexamethasone or with lenalidomide plus dexamethasone for the treatment of patients with relapsed or refractory multiple myeloma who have received one to three lines of therapy.
As a single agent for the treatment of patients with relapsed or refractory multiple myeloma who have received one or more lines of therapy.
KYPROLIS is also approved in Argentina, Australia, Bahrain, Canada, Hong Kong, Israel, Japan, Kuwait, Lebanon, Macao, Mexico, Thailand, Colombia, S. Korea, Canada, Qatar, Switzerland, United Arab Emirates, Turkey, Russia, Brazil, India and the European Union. Additional regulatory applications for KYPROLIS are underway and have been submitted to health authorities worldwide.

IMPORTANT SAFETY INFORMATION

Cardiac Toxicities

New onset or worsening of pre-existing cardiac failure (e.g., congestive heart failure, pulmonary edema, decreased ejection fraction), restrictive cardiomyopathy, myocardial ischemia, and myocardial infarction including fatalities have occurred following administration of KYPROLIS. Some events occurred in patients with normal baseline ventricular function. Death due to cardiac arrest has occurred within one day of KYPROLIS administration.
Monitor patients for clinical signs or symptoms of cardiac failure or cardiac ischemia. Evaluate promptly if cardiac toxicity is suspected. Withhold KYPROLIS for Grade 3 or 4 cardiac adverse events until recovery, and consider whether to restart KYPROLIS at 1 dose level reduction based on a benefit/risk assessment.
While adequate hydration is required prior to each dose in Cycle 1, monitor all patients for evidence of volume overload, especially patients at risk for cardiac failure. Adjust total fluid intake as clinically appropriate in patients with baseline cardiac failure or who are at risk for cardiac failure.
Patients ≥ 75 years, the risk of cardiac failure is increased. Patients with New York Heart Association Class III and IV heart failure, recent myocardial infarction, conduction abnormalities, angina, or arrhythmias may be at greater risk for cardiac complications and should have a comprehensive medical assessment (including blood pressure and fluid management) prior to starting treatment with KYPROLIS and remain under close follow-up.
Acute Renal Failure

Cases of acute renal failure and renal insufficiency adverse events (including renal failure) have occurred in patients receiving KYPROLIS. Acute renal failure was reported more frequently in patients with advanced relapsed and refractory multiple myeloma who received KYPROLIS monotherapy. Monitor renal function with regular measurement of the serum creatinine and/or estimated creatinine clearance. Reduce or withhold dose as appropriate.
Tumor Lysis Syndrome

Cases of Tumor Lysis Syndrome (TLS), including fatal outcomes, have occurred in patients receiving KYPROLIS. Patients with multiple myeloma and a high tumor burden should be considered at greater risk for TLS. Adequate hydration is required prior to each dose in Cycle 1, and in subsequent cycles as needed. Consider uric acid lowering drugs in patients at risk for TLS. Monitor for evidence of TLS during treatment and manage promptly. Withhold KYPROLIS until TLS is resolved.
Pulmonary Toxicity

Acute Respiratory Distress Syndrome (ARDS), acute respiratory failure, and acute diffuse infiltrative pulmonary disease such as pneumonitis and interstitial lung disease have occurred in patients receiving KYPROLIS. Some events have been fatal. In the event of drug-induced pulmonary toxicity, discontinue KYPROLIS.
Pulmonary Hypertension

Pulmonary arterial hypertension (PAH) was reported in patients treated with KYPROLIS. Evaluate with cardiac imaging and/or other tests as indicated. Withhold KYPROLIS for PAH until resolved or returned to baseline and consider whether to restart KYPROLIS based on a benefit/risk assessment.
Dyspnea

Dyspnea was reported in patients treated with KYPROLIS. Evaluate dyspnea to exclude cardiopulmonary conditions including cardiac failure and pulmonary syndromes. Stop KYPROLIS for Grade 3 or 4 dyspnea until resolved or returned to baseline. Consider whether to restart KYPROLIS based on a benefit/risk assessment.
Hypertension

Hypertension, including hypertensive crisis and hypertensive emergency, has been observed with KYPROLIS. Some of these events have been fatal. Monitor blood pressure regularly in all patients. If hypertension cannot be adequately controlled, withhold KYPROLIS and evaluate. Consider whether to restart KYPROLIS based on a benefit/risk assessment.
Venous Thrombosis

Venous thromboembolic events (including deep venous thrombosis and pulmonary embolism) have been observed with KYPROLIS. Thromboprophylaxis is recommended for patients being treated with the combination of KYPROLIS with dexamethasone or with lenalidomide plus dexamethasone. The thromboprophylaxis regimen should be based on an assessment of the patient’s underlying risks.
Patients using oral contraceptives or a hormonal method of contraception associated with a risk of thrombosis should consider an alternative method of effective contraception during treatment with KYPROLIS in combination with dexamethasone or lenalidomide plus dexamethasone.
Infusion Reactions

Infusion reactions, including life-threatening reactions, have occurred in patients receiving KYPROLIS.
Symptoms include fever, chills, arthralgia, myalgia, facial flushing, facial edema, vomiting, weakness, shortness of breath, hypotension, syncope, chest tightness, or angina. These reactions can occur immediately following or up to 24 hours after administration of KYPROLIS. Premedicate with dexamethasone to reduce the incidence and severity of infusion reactions. Inform patients of the risk and of symptoms of an infusion reaction and to contact a physician immediately if they occur.
Hemorrhage

Fatal or serious cases of hemorrhage have been reported in patients receiving KYPROLIS. Hemorrhagic events have included gastrointestinal, pulmonary, and intracranial hemorrhage and epistaxis. Promptly evaluate signs and symptoms of blood loss. Reduce or withhold dose as appropriate.
Thrombocytopenia

KYPROLIS causes thrombocytopenia with recovery to baseline platelet count usually by the start of the next cycle. Thrombocytopenia was reported in patients receiving KYPROLIS. Monitor platelet counts frequently during treatment with KYPROLIS. Reduce or withhold dose as appropriate.
Hepatic Toxicity and Hepatic Failure

Cases of hepatic failure, including fatal cases, have been reported during treatment with KYPROLIS. KYPROLIS can cause increased serum transaminases. Monitor liver enzymes regularly regardless of baseline values. Reduce or withhold dose as appropriate.
Thrombotic Microangiopathy

Cases of thrombotic microangiopathy, including thrombotic thrombocytopenic purpura/hemolytic uremic syndrome (TTP/HUS), including fatal outcome have occurred in patients receiving KYPROLIS. Monitor for signs and symptoms of TTP/HUS. Discontinue KYPROLIS if diagnosis is suspected. If the diagnosis of TTP/HUS is excluded, KYPROLIS may be restarted. The safety of reinitiating KYPROLIS therapy in patients previously experiencing TTP/HUS is not known.
Posterior Reversible Encephalopathy Syndrome (PRES)

Cases of PRES have occurred in patients receiving KYPROLIS. PRES was formerly known as Reversible Posterior Leukoencephalopathy Syndrome. Consider a neuro-radiological imaging (MRI) for onset of visual or neurological symptoms. Discontinue KYPROLIS if PRES is suspected and evaluate. The safety of reinitiating KYPROLIS therapy in patients previously experiencing PRES is not known.
Embryo-fetal Toxicity

KYPROLIS can cause fetal harm when administered to a pregnant woman based on its mechanism of action and findings in animals.
Females of reproductive potential should be advised to avoid becoming pregnant while being treated with KYPROLIS. Males of reproductive potential should be advised to avoid fathering a child while being treated with KYPROLIS. If this drug is used during pregnancy, or if pregnancy occurs while taking this drug, the patient should be apprised of the potential hazard to the fetus.
ADVERSE REACTIONS

The most common adverse reactions occurring in at least 20% of patients treated with KYPROLIS in the combination therapy trials: anemia, neutropenia, diarrhea, dyspnea, fatigue, thrombocytopenia, pyrexia, insomnia, muscle spasm, cough, upper respiratory tract infection, hypokalemia.
The most common adverse reactions occurring in at least 20% of patients treated with KYPROLIS in monotherapy trials: anemia, fatigue, thrombocytopenia, nausea, pyrexia, dyspnea, diarrhea, headache, cough, edema peripheral.
Please see full prescribing information at www.kyprolis.com.

On February 28, 2017 Endo International plc (NASDAQ/TSX: ENDP) reported fourth-quarter 2016 financial results (Press release, Endo Health Solutions, FEB 28, 2017, View Source [SID1234517871]).

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Revenues of $1,242 million, a 16 percent increase compared to fourth-quarter 2015 revenues of $1,074 million.
Reported net loss from continuing operations of $3,333 million compared to fourth-quarter 2015 reported net income from continuing operations of $444 million.

Reported diluted loss per share from continuing operations of $14.96 compared to fourth-quarter 2015 reported diluted earnings per share (EPS) from continuing operations of $1.97.

Adjusted net income from continuing operations of $396 million, a 29 percent increase compared to fourth-quarter 2015 adjusted net income from continuing operations of $307 million.1

Adjusted diluted EPS from continuing operations of $1.77, a 30 percent increase compared to fourth-quarter 2015 adjusted diluted EPS from continuing operations of $1.36.1

EXECUTIVE COMMENTARY
"After I was named CEO last September, Endo began a comprehensive strategic review that has resulted in a series of definitive actions. First, we streamlined our global supply chain and restructured our Pain franchise, including the divestiture of BELBUCA. We then executed a Corporate restructuring and have begun divesting non-core businesses with today’s announced sale of Litha Healthcare Group. All of these measures better position Endo to focus on its core assets, drive margin expansion and de-lever over a period of time," said Paul Campanelli, President and CEO of Endo.
"Endo’s core assets include a Generics business, which is the fourth largest in the U.S. based on sales, that possesses a growing sterile injectables portfolio and a promising ANDA pipeline. Complementing our generics unit is a revamped specialty Branded business focusing on our flagship product XIAFLEX. Despite industry headwinds and other challenges, we are excited about our future and have the people, products, and pipeline in place that we believe will enable us, in time, to create value for our shareholders," Mr. Campanelli concluded.
Blaise Coleman, Executive Vice President and Chief Financial Officer, added, "Expected 2017 revenues of between $3.45 billion and $3.60 billion are forecasted to be lower than 2016 revenues primarily due to the expected revenue decline in our Generics base business and legacy Branded pain franchise, as well as the impact of divestitures and product discontinuations. We estimate 2017 adjusted EBITDA from continuing operations of between $1.50 billion and $1.58 billion due, in part, to cost reduction initiatives undertaken in 2016 and early 2017 that have resulted in a significant year-over-year increase in Endo’s adjusted EBITDA margin as a percentage of revenue. Finally, estimated 2017 adjusted diluted EPS from continuing operations of between $3.45 and $3.75 is significantly impacted by a higher adjusted effective tax rate and an anticipated increase in variable-rate interest expense."
FINANCIAL PERFORMANCE
(in thousands, except per share amounts)


Three Months Ended
December 31,



Year Ended December 31,



2016

2015

Change

2016

2015

Change
Total Revenues
$
1,241,513


$
1,073,697


16
%

$
4,010,274


$
3,268,718


23
%
Reported Income (Loss) from
Continuing Operations
$
(3,333,325)


$
443,709


NM


$
(3,223,772)


$
(300,399)


NM

Reported Diluted Weighted
Average Shares
222,870


225,321


(1)
%

222,651


197,100


13
%
Reported Diluted Income (Loss)
per Share from Continuing Operations
$
(14.96)


$
1.97


NM


$
(14.48)


$
(1.52)


NM

Adjusted Income from
Continuing Operations
$
395,791


$
307,430

1
29
%

$
1,054,382


$
933,235

1
13
%
Adjusted Diluted Weighted
Average Shares
223,178


225,321


(1)
%

223,090


200,438


11
%
Adjusted Diluted EPS from
Continuing Operations
$
1.77


$
1.36

1
30
%

$
4.73


$
4.66

1
2
%

(1) Refer to footnote 14 in the Reconciliation of GAAP and Non-GAAP Financial Measures tables for the twelve months ended December 31, 2016 and 2015, for further discussion.

CONSOLIDATED RESULTS
Total revenues increased by 16 percent to $1,242 million in fourth-quarter 2016 compared to the same period in 2015, primarily attributable to the launch of key first-to-file generic products, quetiapine and ezetimibe. GAAP net loss from continuing operations in fourth-quarter 2016 was $3,333 million compared to GAAP net income from continuing operations of $444 million during the same period in 2015, primarily attributable to the amount of goodwill and intangible asset impairment charges recorded during fourth-quarter 2016. GAAP net loss per share from continuing operations for the three months ended December 31, 2016 was $14.96, compared to GAAP net earnings from continuing operations of $1.97 in fourth-quarter 2015.
Adjusted net income from continuing operations in fourth-quarter 2016 increased by 29 percent to $396 million compared to fourth-quarter 2015, driven primarily by the contribution of quetiapine and ezetimibe. Adjusted net income per share from continuing operations for the three months ended December 31, 2016 increased 30 percent to $1.77 compared to fourth-quarter 2015.
U.S. GENERIC PHARMACEUTICALS
During fourth-quarter 2016, the U.S. Generic Pharmaceuticals business unit completed the restructuring of its product portfolio as well as its manufacturing facility network, including the divestiture of the Charlotte, North Carolina facility.
Fourth-quarter 2016 U.S. Generic Pharmaceuticals results include:
Revenues of $882 million, a 45 percent increase compared to fourth-quarter 2015; this increase was primarily attributable to the launches of quetiapine extended-release tablets, the generic version of SEROQUEL XR, and ezetimibe tablets, the generic equivalent of ZETIA. Par has first-to-file status and associated marketing exclusivity for each product. The introduction of ezetimibe tablets represented the largest product launch in Par Pharmaceutical’s history.
Sterile injectables increased 43 percent compared to fourth-quarter 2015; this increase was driven primarily by VASOSTRICT, which benefited from the market withdrawal of its only competitor’s product in 2015.
Generics base business decreased 23 percent compared to fourth-quarter 2015; this decrease resulted from continued pricing pressure due to increased competition, particularly among Solid Oral Immediate Release (IR) products.
U.S. BRANDED PHARMACEUTICALS
During fourth-quarter 2016, Endo announced highly statistically significant Phase 2b study results on the primary composite endpoint and all secondary endpoints for XIAFLEX in patients with cellulite. The Company also announced its intention to return the BELBUCA (buprenorphine) buccal film product to its developer, eliminate its U.S. Branded pain sales field force and manage the Company’s legacy pain portfolio as mature brands. Endo’s U.S. Branded segment will now focus on its core Specialty products, including its flagship product XIAFLEX, as well as SUPPRELIN LA, TESTOPEL, and AVEED.
Fourth-quarter 2016 U.S. Branded Pharmaceuticals results include:
Revenues of $289 million, a 24 percent decrease compared to fourth-quarter 2015; this decrease was primarily attributable to generic erosion adversely impacting the Company’s Pain and Established Products portfolios, including VOLTAREN Gel, LIDODERM and FROVA, along with the divestiture of STENDRA.
Among Endo’s Specialty products, net sales of XIAFLEX increased 11 percent compared to fourth-quarter 2015; this increase was primarily attributable to double-digit demand growth for the product. Net sales of SUPPRELIN LA increased 23 percent, driven, in part, by continued demand growth.
In January 2017, the U.S. Food and Drug Administration announced that it will hold an advisory committee meeting in March 2017 to discuss certain pre- and post-marketing data relating to OPANA ER, and the overall risk-benefit of that product. The advisory committees will also discuss generic oxymorphone extended-release and oxymorphone immediate-release products.
INTERNATIONAL PHARMACEUTICALS
As with Endo’s U.S. businesses, International Pharmaceuticals underwent a product-by-product and business-by-business assessment. Today, the Company announced the divestiture of Litha Healthcare Group to Acino for approximately $100 million. As part of Endo’s strategic assessment and comprehensive asset review, the Company determined that Litha no longer aligned with its strategy and was not considered a core asset. The divestiture of Litha helps simplify the Endo organization and permits it to better focus on the core Generics and Specialty Branded Pharmaceutical businesses. The transaction is expected to close in the second quarter of 2017, subject to customary conditions, including the expiration or termination of any waiting periods under applicable competition laws. The final purchase price will be subject to cash, debt, working capital and other potential contractual adjustments.
Endo’s International Pharmaceuticals unit continued to effectively manage its business operations in anticipation of the impact of the loss-of-exclusivity for certain Paladin products, during the fourth-quarter 2016, while continuing its efforts to improve adjusted operating margins.
Fourth-quarter 2016 International Pharmaceuticals results include:
Revenues of $70 million, an 18 percent decrease compared to fourth-quarter 2015.
Paladin revenues of $28 million, a 2 percent decrease compared to fourth-quarter 2015, due to expected competition on certain products. In the fourth quarter, Paladin began promoting XIAFLEX and NUCYNTA in Canada. Paladin also retains Canadian marketing rights to serelaxin and looks forward to the results of a Phase III clinical trial expected in 2017.
Emerging market revenues from Litha and Somar of $38 million, a 25 percent decrease compared to fourth-quarter 2015, attributable, in part, to a decrease in Litha revenues as the result of the divestiture of non-core assets in first-quarter 2016. Revenues were also impacted by lower demand for certain products in Mexico and the unfavorable impact of foreign exchange.
2017 FINANCIAL GUIDANCE
For the full twelve months ended December 31, 2017, at current exchange rates, Endo is providing guidance on revenue, GAAP and adjusted diluted EPS guidance from continuing operations and adjusted EBITDA from continuing operations. The Company estimates:
Total revenues to be between $3.45 billion to $3.60 billion;
Reported diluted GAAP EPS from continuing operations to be between $0.04 and $0.34;
Adjusted diluted EPS from continuing operations to be between $3.45 to $3.75; and
Adjusted EBITDA from continuing operations to be between $1.50 billion to $1.58 billion.
The Company’s 2017 non-GAAP financial guidance is based on the following assumptions:
Adjusted gross margin of approximately 62.0% to 63.0%;
Adjusted operating expenses as a percentage of revenues to be approximately 22.5% to 23.0%;
Adjusted interest expense of approximately $470 million to $480 million;
Adjusted effective tax rate of approximately 13.0% to 14.0%;
Adjusted diluted EPS from continuing operations assumes full-year adjusted diluted shares outstanding of approximately 224 million shares; and
Adoption of Accounting Standard Update 2016-09 ("ASU 2016-09") in the first quarter of 2017, changing the GAAP reporting of excess tax benefits and deficiencies associated with employee stock-based compensation. The Company estimates there could be at least a $10 million tax detriment (~$0.04 GAAP and Adjusted diluted earnings per share estimated impact) recognized primarily in the first quarter of 2017 when most employee stock awards vest or expire during the year.
BALANCE SHEET, LIQUIDITY AND OTHER UPDATES
As of December 31, 2016, the Company had $517.3 million in unrestricted cash; net debt of approximately $7.8 billion and a net debt to adjusted EBITDA ratio of 4.6.
Fourth-quarter 2016 cash provided by operating activities was $81.1 million, primarily attributable to the benefit of no interest payments related to high-yield notes and lower mesh payments during the quarter, offset partially by increases in working capital resulting from the fourth-quarter quetiapine and ezetimibe launches in our generics segment.
During fourth-quarter 2016, the Company conducted an annual goodwill impairment assessment, resulting in a pre-tax, non-cash impairment charge of $2,674 million, including the following items:
$2,342.5 million related to the Generics reporting unit, which represents the difference between the estimated implied fair value of the reporting unit’s goodwill and its book value. The impairment charge was driven by a reduction in the expected future cash flows in the Generics reporting unit primarily due to a change in pricing expectations partly driven by an expected increased level of competition and increased buying power from the continued consolidation of the generic business customer base. These charges are primarily due to industry and competitive pressures in the sector, which resulted in a reduction of the Generics reporting unit’s fair value.
$272.6 million related to the Paladin Canada reporting unit, was driven primarily by a reduction in pricing expectations and additional generic competitors for several of Paladin’s products.
$33.0 million and $26.3 million related to the Somar and Litha reporting units, respectively.
In addition to the Company’s goodwill assessment, the Company also incurred pre-tax, non-cash intangible asset impairment charges in the fourth-quarter of approximately $830.3 million, including:
$507.2 million and $285.5 million in our U.S. Generic Pharmaceutical and International Pharmaceutical segments, respectively, resulting from certain market conditions impacting the commercial potential of definite and indefinite-lived intangible assets.
$37.6 million in the U.S. Branded Pharmaceuticals segment primarily resulting from the termination of BELBUCA and the return of this product to BioDelivery Sciences International, Inc.
Conference Call Information
Endo will conduct a conference call with financial analysts to discuss this press release today at 8:30 a.m. ET. The dial-in number to access the call is U.S./Canada (866) 497-0462, International (678) 509-7598, and the passcode is 58581981. Please dial in 10 minutes prior to the scheduled start time.
A replay of the call will be available from February 28, 2017 at 11:30 a.m. ET until 12:30 p.m. ET on March 14, 2017 by dialing U.S./Canada (855) 859-2056, International (404) 537-3406, and entering the passcode 58581981.
A simultaneous webcast of the call can be accessed by visiting www.endo.com. In addition, a replay of the webcast will be available until 12:30 p.m. ET on March 14, 2017. The replay can be accessed by clicking on the Investor Relations section of the Endo website.
The following table presents Endo’s unaudited Net Revenues for the three and twelve months ended December 31, 2016 and 2015:

Endo International plc
Net Revenues (unaudited)
(in thousands)


Three Months Ended December 31,

Percent
Growth

Year Ended December 31,

Percent
Growth

2016

2015


2016

2015

U.S. Generic Pharmaceuticals:











U.S. Generics Base
$
288,142


$
372,417


(23)
%

$
1,230,097


$
1,083,809


13
%
Sterile Injectables
143,905


100,511


43
%

530,805


107,592


393
%
New Launches and Alternative Dosages
450,127


136,267


230
%

803,711


481,015


67
%
Total U.S. Generic Pharmaceuticals
$
882,174


$
609,195


45
%

$
2,564,613


$
1,672,416


53
%
U.S. Branded Pharmaceuticals:











Pain Management:











LIDODERM
$
21,122


$
40,234


(48)
%

$
87,577


$
125,269


(30)
%
OPANA ER
38,880


43,610


(11)
%

158,938


175,772


(10)
%
PERCOCET
36,029


35,181


2
%

139,211


135,822


2
%
Voltaren Gel
18,612


62,169


(70)
%

100,642


207,161


(51)
%

$
114,643


$
181,194


(37)
%

$
486,368


$
644,024


(24)
%
Specialty Pharmaceuticals:











SUPPRELIN LA
$
20,793


$
16,926


23
%

$
78,648


$
70,099


12
%
XIAFLEX
55,530


50,197


11
%

189,689


158,115


20
%

$
76,323


$
67,123


14
%

$
268,337


$
228,214


18
%
Branded Other Revenues (1)
98,330


131,092


(25)
%

411,589


412,369


—
%
Total U.S. Branded Pharmaceuticals (2)
$
289,296


$
379,409


(24)
%

$
1,166,294


$
1,284,607


(9)
%
Total International Pharmaceuticals
$
70,043


$
85,093


(18)
%

$
279,367


$
311,695


(10)
%
Total Revenues
$
1,241,513


$
1,073,697


16
%

$
4,010,274


$
3,268,718


23
%


__________
(1)
Products included within Branded Other Revenues in the table above include, but are not limited to, TESTOPEL, Testim, Fortesta Gel, including authorized generic, and Nascobal Nasal Spray.
(2)
Individual products presented above represent the top two performing products in each product category and/or any product having revenues in excess of $25 million during the three months ended December 31, 2016 or December 31, 2015.

The following table presents unaudited consolidated Statement of Operations data for the three and twelve months ended December 31, 2016 and 2015 (in thousands, except per share data):


Three Months Ended December 31,

Year Ended December 31,

2016

2015

2016

2015
TOTAL REVENUES
$
1,241,513


$
1,073,697


$
4,010,274


$
3,268,718

COSTS AND EXPENSES:







Cost of revenues
756,578


810,068


2,634,973


2,075,651

Selling, general and administrative
212,568


212,014


770,728


741,304

Research and development
46,206


43,989


183,372


102,197

Litigation-related and other contingencies, net
(4,765)


17,207


23,950


37,082

Asset impairment charges
3,518,085


139,859


3,781,165


1,140,709

Acquisition-related and integration items
7,400


54,073


87,601


105,250

OPERATING (LOSS) INCOME FROM CONTINUING OPERATIONS
$
(3,294,559)


$
(203,513)


$
(3,471,515)


$
(933,475)

INTEREST EXPENSE, NET
111,783


123,018


452,679


373,214

LOSS ON EXTINGUISHMENT OF DEBT
—


25,595


—


67,484

OTHER (INCOME) EXPENSE, NET
(740)


1,102


(338)


63,691

(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAX
$
(3,405,602)


$
(353,228)


$
(3,923,856)


$
(1,437,864)

INCOME TAX (BENEFIT) EXPENSE
(72,277)


(796,937)


(700,084)


(1,137,465)

(LOSS) INCOME FROM CONTINUING OPERATIONS
$
(3,333,325)


$
443,709


$
(3,223,772)


$
(300,399)

DISCONTINUED OPERATIONS, NET OF TAX
(4,531)


(562,302)


(123,278)


(1,194,926)

CONSOLIDATED NET LOSS
$
(3,337,856)


$
(118,593)


$
(3,347,050)


$
(1,495,325)

Less: Net income (loss) attributable to noncontrolling interests
—


(130)


16


(283)

NET LOSS ATTRIBUTABLE TO ENDO INTERNATIONAL PLC
$
(3,337,856)


$
(118,463)


$
(3,347,066)


$
(1,495,042)

NET LOSS PER SHARE ATTRIBUTABLE TO ENDO INTERNATIONAL PLC ORDINARY SHAREHOLDERS—BASIC:







Continuing operations
$
(14.96)


$
1.98


$
(14.48)


$
(1.52)

Discontinued operations
(0.02)


(2.51)


(0.55)


(6.07)

Basic
$
(14.98)


$
(0.53)


$
(15.03)


$
(7.59)

NET LOSS PER SHARE ATTRIBUTABLE TO ENDO INTERNATIONAL PLC ORDINARY SHAREHOLDERS—DILUTED:







Continuing operations
$
(14.96)


$
1.97


$
(14.48)


$
(1.52)

Discontinued operations
(0.02)


(2.50)


(0.55)


(6.07)

Diluted
$
(14.98)


$
(0.53)


$
(15.03)


$
(7.59)

WEIGHTED AVERAGE SHARES:







Basic
222,870


224,147


222,651


197,100

Diluted
222,870


225,321


222,651


197,100



The following table presents unaudited condensed consolidated Balance Sheet data at December 31, 2016 and December 31, 2015 (in thousands):


December 31,
2016

December 31,
2015
ASSETS



CURRENT ASSETS:



Cash and cash equivalents
$
517,250


$
272,348

Restricted cash and cash equivalents
282,074


585,379

Accounts receivable
992,153


1,014,808

Inventories, net
555,671


752,493

Assets held for sale
116,985


36,522

Other assets
125,326


790,987

Total current assets
$
2,589,459


$
3,452,537

TOTAL NON-CURRENT ASSETS
11,685,650


15,897,799

TOTAL ASSETS
$
14,275,109


$
19,350,336

LIABILITIES AND STOCKHOLDERS’ EQUITY



CURRENT LIABILITIES:



Accounts payable and accrued expenses
$
2,470,016


$
3,116,841

Liabilities held for sale
24,338


20,215

Other current liabilities
140,391


337,256

Total current liabilities
$
2,634,745


$
3,474,312

LONG-TERM DEBT, LESS CURRENT PORTION, NET
8,141,378


8,251,657

OTHER LIABILITIES
797,397


1,656,391

STOCKHOLDERS’ EQUITY:



Total Endo International plc shareholders’ equity
$
2,701,589


$
5,968,030

Noncontrolling interests
—


(54)

Total shareholders’ equity
$
2,701,589


$
5,967,976

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$
14,275,109


$
19,350,336



The following table presents unaudited condensed consolidated Statement of Cash Flow data for the year ended December 31, 2016 and 2015 (in thousands):

Year Ended December 31,

2016

2015
OPERATING ACTIVITIES:



Consolidated net loss
$
(3,347,050)


$
(1,495,325)

Adjustments to reconcile consolidated net loss to Net cash provided by operating activities



Depreciation and amortization
983,309


632,756

Asset impairment charges
3,802,493


1,390,281

Other
(914,313)


(465,686)

Net cash provided by operating activities
$
524,439


$
62,026

INVESTING ACTIVITIES:



Purchases of property, plant and equipment, net
$
(132,094)


$
(81,774)

Acquisitions, net of cash acquired
(30,394)


(7,650,404)

Proceeds from sale of business, net
4,108


1,588,779

Increase in restricted cash and cash equivalents, net
(831,321)


(747,649)

Decrease in restricted cash and cash equivalents
1,134,734


688,999

Other
(19,172)


(42,721)

Net cash provided by (used in) investing activities
$
125,861


$
(6,244,770)

FINANCING ACTIVITIES:



(Payments on) proceeds from borrowings, net
$
(336,361)


$
4,228,919

Issuance of ordinary shares
—


2,300,000

Other
(57,621)


(473,452)

Net cash (used in) provided by financing activities
$
(393,982)


$
6,055,467

Effect of foreign exchange rate
$
328


$
(7,068)

Movement in cash held for sale
(11,744)


997

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
$
244,902


$
(133,348)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
272,348


405,696

CASH AND CASH EQUIVALENTS, END OF PERIOD
$
517,250


$
272,348


The following schedule presents the significant pre-tax cash outlays and cash receipts impacting our Net cash provided by operating activities for the years ended December 31, 2016 and 2015 (in thousands):


Year Ended December 31,

2016

2015
Payments for mesh-related product liability and other litigation matters (1)
$
1,195,932


$
699,347

Redemption fees paid in connection with debt retirements
—


31,496

Unused commitment fees
—


78,352

Separation and restructuring payments
97,869


73,655

Transaction costs and certain integration charges paid in connection with acquisitions
68,249


191,195

U.S. Federal tax refunds received
(759,950)


(155,814)

Total
$
602,100


$
918,231


(1) Cash payments into QSFs result in a cash outflow for investing activities (CFI). Cash releases from QSFs result in a cash inflow for investing activities and a corresponding outflow for cash provided by (used in) operating activities (CFO). The following table reflects the mesh-related payment activities for the twelve months ended December 31, 2016 and 2015 by cash flow component:


Year Ended December 31,

2016

2015

Impact on CFO (1)

Impact on CFI

Impact on CFO (1)

Impact on CFI
Cash contributions to Qualified Settlement Funds
$
—


(831,131)


$
—


$
(743,132)

Cash payments to claimants from Qualified Settlement Funds
(1,134,734)


1,134,734


(649,391)


649,391

Cash payments made directly to claimants
(7,830)


—


(27,379)


—

Total
$
(1,142,564)


$
303,603


$
(676,770)


$
(93,741)

















(1) These amounts are included in Changes in assets and liabilities which used cash in the table above.

Supplemental Financial Information
To supplement the financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), the Company uses certain non-GAAP financial measures. For additional information on the Company’s use of such non-GAAP financial measures, refer to Endo’s Current Report on Form 8-K furnished today to the Securities and Exchange Commission, which includes an explanation of the Company’s reasons for using non-GAAP measures.
The table below provides reconciliations of our consolidated income (loss) from continuing operations (GAAP) to our adjusted income from continuing operations (non-GAAP) for the three and twelve months ended December 31, 2016 and 2015:


ENDO INTERNATIONAL PLC
Reconciliation of GAAP and Non-GAAP Financial Measures
(UNAUDITED)
(In thousands)


Three Months Ended December 31,

Year Ended December 31,

2016

2015

2016

2015
(Loss) Income from continuing operations (GAAP)
$
(3,333,325)


$
443,709


$
(3,223,772)


$
(300,399)

Non-GAAP adjustments:







Amortization of intangible assets
240,390


227,543


876,451


561,302

Inventory step-up and other cost savings
13,912


117,681


125,699


249,464

Upfront and milestone related payments
2,455


2,092


8,330


16,155

Inventory reserve (decrease) increase from restructuring
(137)


—


24,455


—

Royalty obligations
—


—


(7,750)


—

Separation benefits and other restructuring
37,216


55,151


83,036


125,407

Acceleration of Auxilium employee equity awards
—


—


—


37,603

Charges for litigation and other legal matters
(4,765)


17,207


23,950


37,082

Asset impairment charges
3,518,085


139,859


3,781,165


1,140,709

Acquisition-related and integration costs
8,356


36,112


63,778


170,890

Fair value of contingent consideration
(956)


17,961


23,823


(65,640)

Non-cash and penalty interest charges
—


1,965


4,092


8,267

Other
(1,836)


27,501


(7,273)


130,165

Tax adjustments
(83,604)


(779,351)


(721,602)


(1,177,770)

Adjusted income from continuing operations (non-GAAP)
$
395,791


$
307,430


$
1,054,382


$
933,235


__________
Refer to the following tables for additional information regarding non-GAAP financial measures.



ENDO INTERNATIONAL PLC
Reconciliation of GAAP and Non-GAAP Financial Measures
(UNAUDITED)
(In thousands, except per share data)


Three Months Ended December 31, 2016

Total revenues

Cost of revenues

Gross margin

Gross margin %

Total operating expenses

Operating expense to revenue %

Operating loss from continuing operations

Operating margin %

Other non-operating expense, net

Loss from continuing operations before income tax

Income tax benefit

Effective tax rate

Loss from continuing operations

Discontinued operations, net of tax

Net loss attributable to Endo International plc (14)

Diluted loss per share (15)
Reported (GAAP)
$ 1,241,513

$ 756,578

$ 484,935

39 %

$ 3,779,494

304 %

$ (3,294,559)

(265)%

$ 111,043

$ (3,405,602)

$ (72,277)

2 %

$ (3,333,325)

$ (4,531)

$ (3,337,856)

$ (14.96)
Items impacting comparability:































Amortization of intangible assets (1)
—

(240,390)

240,390



—



240,390



—

240,390

—



240,390

—

240,390

1.08
Inventory step-up and other costs savings (2)
—

(13,912)

13,912



—



13,912



—

13,912

—



13,912

—

13,912

0.06
Upfront and milestone-related payments (3)
—

(655)

655



(1,800)



2,455



—

2,455

—



2,455

—

2,455

0.01
Inventory reserve decrease from restructuring (4)
—

137

(137)



—



(137)



—

(137)

—



(137)

—

(137)

—
Separation benefits and other restructuring (5)
—

(9,284)

9,284



(27,932)



37,216



—

37,216

—



37,216

—

37,216

0.17
Charges for litigation and other legal matters (6)
—

—

—



4,765



(4,765)



—

(4,765)

—



(4,765)

—

(4,765)

(0.02)
Asset impairment charges (7)
—

—

—



(3,518,085)



3,518,085



—

3,518,085

—



3,518,085

—

3,518,085

15.79
Acquisition-related and integration costs (8)
—

—

—



(8,356)



8,356



—

8,356

—



8,356

—

8,356

0.04
Fair value of contingent consideration (9)
—

—

—



956



(956)



—

(956)

—



(956)

—

(956)

—
Other (11)
—

—

—



—



—



1,836

(1,836)

—



(1,836)

—

(1,836)

(0.01)
Tax adjustments (12)
—

—

—



—



—



—

—

83,604



(83,604)

—

(83,604)

(0.38)
Exclude discontinued operations, net of tax (13)
—

—

—



—



—



—

—

—



—

4,531

4,531

—
After considering items (non-GAAP)
$ 1,241,513

$ 492,474

$ 749,039

60 %

$ 229,042

18 %

$ 519,997

42 %

$ 112,879

$ 407,118

$ 11,327

3 %

$ 395,791

$ —

$ 395,791

$ 1.77

































































Three Months Ended December 31, 2015

Total revenues

Cost of revenues

Gross margin

Gross margin %

Total operating expenses

Operating expense to revenue %

Operating loss from continuing operations

Operating margin %

Other non-operating expense, net

Loss from continuing operations before income tax

Income tax benefit

Effective tax rate

Income from continuing operations

Discontinued operations, net of tax

Net loss attributable to Endo International plc (14)

Diluted earnings per share (15)
Reported (GAAP)
$ 1,073,697

$ 810,068

$ 263,629

25 %

$ 467,142

44 %

$ (203,513)

(19)%

$ 149,715

$ (353,228)

$ (796,937)

226 %

$ 443,709

$ (562,302)

$ (118,463)

$ 1.97
Items impacting comparability:































Amortization of intangible assets (1)
—

(227,543)

227,543



—



227,543



—

227,543

—



227,543

—

227,543

1.02
Inventory step-up and other costs savings (2)
—

(117,681)

117,681



—



117,681



—

117,681

—



117,681

—

117,681

0.52
Upfront and milestone-related payments (3)
—

(1,089)

1,089



(1,003)



2,092



—

2,092

—



2,092

—

2,092

0.01
Separation benefits and other restructuring (5)
—

(40,304)

40,304



(14,847)



55,151



—

55,151

—



55,151

—

55,151

0.24
Charges for litigation and other legal matters (6)
—

—

—



(17,207)



17,207



—

17,207

—



17,207

—

17,207

0.08
Asset impairment charges (7)
—

—

—



(139,859)



139,859



—

139,859

—



139,859

—

139,859

0.62
Acquisition-related and integration costs (8)
—

—

—



(36,112)



36,112



—

36,112

—



36,112

—

36,112

0.16
Fair value of contingent consideration (9)
—

—

—



(17,961)



17,961



—

17,961

—



17,961

—

17,961

0.08
Non-cash and penalty interest charges (10)
—

—

—



—



—



(1,965)

1,965

—



1,965

—

1,965

0.01
Other (11)
—

—

—



(3,079)



3,079



(24,422)

27,501

—



27,501

—

27,501

0.12
Tax adjustments (12)
—

—

—



—



—



—

—

779,351



(779,351)

—

(779,351)

(3.47)
Exclude discontinued operations, net of tax (13)
—

—

—



—



—



—

—

—



—

560,762

560,762

—
After considering items (non-GAAP)
$ 1,073,697

$ 423,451

$ 650,246

61 %

$ 237,074

22 %

$ 413,172

38 %

$ 123,328

$ 289,844

$ (17,586)

(6)%

$ 307,430

$ (1,540)

$ 306,020

$ 1.36


Notes to the reconciliation of certain line items included in the GAAP Statements of Operations to the Non-GAAP line items are as follows:

(1) Adjustments for amortization of commercial intangible assets included the following:


Three Months Ended December 31,

2016

2015
Amortization of intangible assets excluding fair value step-up from contingent consideration
$
228,876


$
218,491

Amortization of intangible assets related to fair value step-up from contingent consideration
11,514


9,052

Total
$
240,390


$
227,543


(2) Adjustments for inventory step-up and other cost savings included the following:


Three Months Ended December 31,

2016

2015
Fair value step-up of inventory sold
$
9,669


$
109,746

Excess manufacturing costs that will be eliminated pursuant to integration plans
4,243


7,935

Total
$
13,912


$
117,681


(3) Adjustments for upfront and milestone-related payments to partners included the following:


Three Months Ended December 31,

2016

2015

Cost of
revenues

Operating
expenses

Cost of
revenues

Operating
expenses
Sales-based milestones
$
655


$
—


$
1,089


$
—

Development-based milestones
—


1,800


—


1,003

Total
$
655


$
1,800


$
1,089


$
1,003


(4) To exclude decreases of restructuring related excess inventory reserves of $0.1 million recorded during the three months ended December 31, 2016.

(5) Adjustments for separation benefits and other restructuring included the following:


Three Months Ended December 31,

2016

2015

Cost of
revenues

Operating
expenses

Cost of
revenues

Operating
expenses
Separation benefits
$
6,150


$
21,772


$
40,304


$
1,828

Accelerated depreciation
3,134


5,729


—


10,361

Other
—


431


—


2,658

Total
$
9,284


$
27,932


$
40,304


$
14,847


(6) To exclude litigation settlement charges or reimbursements.

(7) To exclude goodwill and intangible asset impairment charges. During the three months ended December 31, 2016, we recorded total impairment charges of $3.5 billion. These charges primarily related to the Company’s annual goodwill impairment assessment, which resulted in non-cash impairment charges of $2,343 million, $273 million, $33 million and $26 million for its U.S. Generics, Paladin, Somar and Litha reporting units, respectively. Intangible asset impairment charges of $830 million primarily included non-cash impairment charges of $507 million and $285 million in the Company’s U.S. Generic Pharmaceuticals and International Pharmaceuticals segments, respectively, resulting from certain market conditions, including price erosion and increased competition, and $38 million in our U.S. Branded Pharmaceuticals segment resulting primarily from the termination of our BELBUCA product. During the three months ended December 31, 2015, we recorded impairment charges of $140 million resulting primarily from a non-cash goodwill impairment charge of $86 million related to our Paladin reporting unit, non-cash intangible asset impairment charges of $38 million related to our U.S. Generic Pharmaceuticals segment and $10 million related to our U.S. Branded Pharmaceuticals segment.

(8) Adjustments for acquisition and integration items primarily relate to various acquisitions, including Par Pharmaceuticals and Auxilium Pharmaceuticals, and included the following:


Three Months Ended December 31,

2016

2015
Integration costs (primarily third-party consulting fees)
$
6,441


$
17,892

Transaction costs
—


8,498

Transition services
—


8,858

Other
1,915


864

Total
$
8,356


$
36,112


(9) To exclude the impact of the change in fair value of contingent consideration resulting from certain market conditions impacting the commercial potential of the underlying products.

(10) To exclude penalty interest charges of $1,965.

(11) Adjustments to other included the following:


Three Months Ended December 31,

2016

2015

Operating
expenses

Other
non-operating
expenses

Operating
expenses

Other
non-operating
expenses
Costs associated with unused financing commitments
$
—


$
—


$
—


$
—

Foreign currency impact related to the re-measurement of intercompany debt instruments
—


(1,192)


—


(1,130)

Loss on extinguishment of debt
—


—


—


25,595

Other miscellaneous
—


(644)


3,079


(43)

Total
$
—


$
(1,836)


$
3,079


$
24,422


(12) Adjusted income taxes are calculated by tax effecting adjusted pre-tax income at the applicable effective tax rate that will be determined by reference to statutory tax rates in the relevant jurisdictions in which the Company operates and includes current and deferred income tax expense commensurate with the non-GAAP measure of profitability.

(13) To exclude the results of the Astora business reported as discontinued operations, net of tax.

(14) This amount includes non-controlling interest of $(130) for the three months ended December 31, 2015.

(15) Calculated as income (loss) from continuing operations divided by the applicable weighted average share number. The applicable weighted average share number for the three months ended December 31, 2016 is 222,870 and 223,178 for the GAAP and non-GAAP EPS calculations, respectively. The applicable weighted average share number for the three months ended December 31, 2015 is 225,321 for both the GAAP EPS calculation and the non-GAAP EPS calculations.


ENDO INTERNATIONAL PLC
Reconciliation of GAAP and Non-GAAP Financial Measures
(UNAUDITED)
(In thousands, except per share data)


Year Ended December 31, 2016

Total revenues

Cost of revenues

Gross margin

Gross margin %

Total operating expenses

Operating expense to revenue %

Operating loss from continuing operations

Operating margin %

Other non-operating expense, net

Loss from continuing operations before income tax

Income tax benefit

Effective tax rate

Loss from continuing operations

Discontinued operations, net of tax

Net loss attributable to Endo International plc (16)

Diluted loss per share (17)
Reported (GAAP)
$ 4,010,274

$ 2,634,973

$ 1,375,301

34 %

$ 4,846,816

121 %

$ (3,471,515)

(87)%

$ 452,341

$ (3,923,856)

$ (700,084)

18 %

$ (3,223,772)

$ (123,278)

$ (3,347,066)

$ (14.48)
Items impacting comparability:































Amortization of intangible assets (1)
—

(876,451)

876,451



—



876,451



—

876,451

—



876,451

—

876,451

3.94
Inventory step-up and other costs savings (2)
—

(124,349)

124,349



(1,350)



125,699



—

125,699

—



125,699

—

125,699

0.56
Upfront and milestone-related payments (3)
—

(2,628)

2,628



(5,702)



8,330



—

8,330

—



8,330

—

8,330

0.04
Inventory reserve increase from restructuring (4)
—

(24,455)

24,455



—



24,455



—

24,455

—



24,455

—

24,455

0.11
Royalty obligations (5)
—

7,750

(7,750)



—



(7,750)



—

(7,750)

—



(7,750)

—

(7,750)

(0.03)
Separation benefits and other restructuring (6)
—

(28,678)

28,678



(54,358)



83,036



—

83,036

—



83,036

—

83,036

0.37
Charges for litigation and other legal matters (8)
—

—

—



(23,950)



23,950



—

23,950

—



23,950

—

23,950

0.11
Asset impairment charges (9)
—

—

—



(3,781,165)



3,781,165



—

3,781,165

—



3,781,165

—

3,781,165

16.98
Acquisition-related and integration costs (10)
—

—

—



(63,778)



63,778



—

63,778

—



63,778

—

63,778

0.29
Fair value of contingent consideration (11)
—

—

—



(23,823)



23,823



—

23,823

—



23,823

—

23,823

0.11
Non-cash and penalty interest charges (12)
—

—

—



—



—



(4,092)

4,092

—



4,092

—

4,092

0.02
Other (13)
—

—

—



8,350



(8,350)



(1,077)

(7,273)

—



(7,273)

—

(7,273)

(0.03)
Tax adjustments (14)
—

—

—



—



—



—

—

721,602



(721,602)

—

(721,602)

(3.25)
Exclude discontinued operations, net of tax (15)
—

—

—



—



—



—

—

—



—

123,278

123,278

—
After considering items (non-GAAP)
$ 4,010,274

$ 1,586,162

$ 2,424,112

60 %

$ 901,040

22 %

$ 1,523,072

38 %

$ 447,172

$ 1,075,900

$ 21,518

2 %

$ 1,054,382

$ —

$ 1,054,366

$ 4.73

































































Year Ended December 31, 2015

Total revenues

Cost of revenues

Gross margin

Gross margin %

Total operating expenses

Operating expense to revenue %

Operating loss from continuing operations

Operating margin %

Other non-operating expense, net

Loss from continuing operations before income tax

Income tax benefit

Effective tax rate

Loss from continuing operations

Discontinued operations, net of tax

Net loss attributable to Endo International plc (16)

Diluted loss per share (17)
Reported (GAAP)
$ 3,268,718

$ 2,075,651

$ 1,193,067

36 %

$ 2,126,542

65 %

$ (933,475)

(29)%

$ 504,389

$ (1,437,864)

$ (1,137,465)

79 %

$ (300,399)

$ (1,194,926)

$ (1,495,042)

$ (1.52)
Items impacting comparability:































Amortization of intangible assets (1)
—

(561,302)

561,302



—



561,302



—

561,302

—



561,302

—

561,302

2.84
Inventory step-up and other costs savings (2)
—

(249,464)

249,464



—



249,464



—

249,464

—



249,464

—

249,464

1.26
Upfront and milestone-related payments (3)
—

(6,955)

6,955



(9,200)



16,155



—

16,155

—



16,155

—

16,155

0.08
Separation benefits and other restructuring (6)
—

(41,210)

41,210



(84,197)



125,407



—

125,407

—



125,407

—

125,407

0.63
Acceleration of Auxilium employee equity awards (7)
—

—

—



(37,603)



37,603



—

37,603

—



37,603

—

37,603

0.19
Charges for litigation and other legal matters (8)
—

—

—



(37,082)



37,082



—

37,082

—



37,082

—

37,082

0.19
Asset impairment charges (9)
—

—

—



(1,140,709)



1,140,709



—

1,140,709

—



1,140,709

—

1,140,709

5.78
Acquisition-related and integration costs (10)
—

—

—



(170,890)



170,890



—

170,890

—



170,890

—

170,890

0.86
Fair value of contingent consideration (11)
—

—

—



65,640



(65,640)



—

(65,640)

—



(65,640)

—

(65,640)

(0.34)
Non-cash and penalty interest charges (12)
—

—

—



—



—



(8,267)

8,267

—



8,267

—

8,267

0.04
Other (13)
—

—

—



(3,879)



3,879



(126,286)

130,165

—



130,165

—

130,165

0.65
Tax adjustments (14)
—

—

—



—



—



—

—

1,177,770



(1,177,770)

—

(1,177,770)

(6.00)
Exclude discontinued operations, net of tax (15)
—

—

—



—



—



—

—

—



—

1,236,760

1,236,760

—
After considering items (non-GAAP)
$ 3,268,718

$ 1,216,720

$ 2,051,998

63 %

$ 708,622

22 %

$ 1,343,376

41 %

$ 369,836

$ 973,540

$ 40,305

4 %

$ 933,235

$ 41,834

$ 975,352

$ 4.66




Notes to the reconciliation of certain line items included in the GAAP Statements of Operations to the Non-GAAP line items are as follows:

(1) Adjustments for amortization of commercial intangible assets included the following:


Year Ended December 31,

2016

2015
Amortization of intangible assets excluding fair value step-up from contingent consideration
$
834,966


$
532,670

Amortization of intangible assets related to fair value step-up from contingent consideration
41,485


28,632

Total
$
876,451


$
561,302


(2) Adjustments for inventory step-up and other cost savings included the following:


Year Ended December 31,

2016

2015

Cost of
revenues

Operating
expenses

Cost of
revenues

Operating
expenses
Fair value step-up of inventory sold
$
108,768


$
957


$
232,460


$
—

Excess manufacturing costs that will be eliminated pursuant to integration plans
15,581


393


17,004


—

Total
$
124,349


$
1,350


$
249,464


$
—


(3) Adjustments for upfront and milestone-related payments to partners included the following:


Year Ended December 31,

2016

2015

Cost of
revenues

Operating
expenses

Cost of
revenues

Operating
expenses
Sales-based milestones
$
2,628


$
—


$
6,955


$
—

Development-based milestones
—


5,702


—


9,200

Total
$
2,628


$
5,702


$
6,955


$
9,200


(4) To exclude charges due to increases of restructuring related excess inventory reserves related to the 2016 U.S. Generic Pharmaceuticals restructuring initiative.

(5) To adjust for the reversal of the remaining Voltaren Gel minimum royalty obligations as a result of a generic entrant.

(6) Adjustments for separation benefits and other restructuring included the following:


Year Ended December 31,

2016

2015

Cost of
revenues

Operating
expenses

Cost of
revenues

Operating
expenses
Separation benefits
$
18,119


$
39,780


$
41,210


$
60,176

Accelerated depreciation and product discontinuation charges
10,559


8,532


—


18,681

Other
—


6,046


—


5,340

Total
$
28,678


$
54,358


$
41,210


$
84,197


(7) To exclude the acceleration of Auxilium employee equity awards at closing of acquisition.

(8) To exclude litigation settlement charges or reimbursements.

(9) To exclude asset impairment charges. During the year ended December 31, 2016 we recorded total impairment charges of $3.8 billion. These charges primarily related to the Company’s annual goodwill impairment assessment, which resulted in non-cash impairment charges of $2,343 million, $273 million, $33 million and $26 million for its U.S. Generics, Paladin, Somar and Litha reporting units, respectively. Intangible asset impairment charges for the year ended December 31, 2016 primarily included non-cash impairment charges of $677 million, $302 million and $110 million in our U.S. Generic Pharmaceuticals, International Pharmaceuticals and U.S. Branded Pharmaceuticals segments, respectively. During the year ended December 31, 2015, we recorded pre-tax, non-cash impairment charges of $1.1 billion primarily as a result of a $674 million goodwill impairment charge related to the Company’s former UEO reporting unit, an $86 million goodwill impairment charge related to the Company’s Paladin reporting unit and non-cash intangible asset impairment charges of $371 million.

(10) Adjustments for acquisition and integration items primarily relate to various acquisitions, including Par Pharmaceuticals and Auxilium Pharmaceuticals, and included the following:


Year Ended December 31,

2016

2015
Integration costs (primarily third-party consulting fees)
$
44,752


$
41,248

Transaction costs
—


99,081

Transition services
9,729


21,769

Other
9,297


8,792

Total
$
63,778


$
170,890


(11) To exclude the impact of the change in fair value of contingent consideration resulting from certain market conditions impacting the commercial potential of the underlying products.

(12) Adjustments to interest charges included the following:


Year Ended December 31,

2016

2015
Penalty interest charges
$
4,092


$
6,634

Non-cash interest expense related to our 1.75% Convertible Senior Subordinated Notes
—


1,633

Total
$
4,092


$
8,267


(13) Adjustments to other included the following:


Year Ended December 31,

2016

2015

Operating
expenses

Other
non-operating
expenses

Operating
expenses

Other
non-operating
expenses
Costs associated with unused financing commitments
$
—


$
—


$
800


$
78,352

Other than temporary impairment of equity investment
—


—




18,869

Foreign currency impact related to the re-measurement of intercompany debt instruments
—


366


—


(25,121)

Loss on extinguishment of debt
—


—




67,484

Other miscellaneous expense (income)
(8,350)


711


3,079


(13,298)

Total
$
(8,350)


$
1,077


$
3,879


$
126,286


(14) During the third quarter of 2016, Endo completed a legal entity reorganization that moved the Generics business to a new U.S. holding company structure that is separate from the legacy Branded business structure. The reorganization also provides operating flexibility and benefits and reduces the potential impact related to any future limits that could apply to the use of tax attributes by utilizing most of the Company’s attributes to offset the gain in the intercompany sale that stepped-up the tax basis of the U.S. Generics business assets. The utilization of acquired attributes in the reorganization would have had an unfavorable impact of $157 million on our full-year 2016 adjusted tax expense under Endo’s non-GAAP policy prior to the adoption of the SEC’s updated guidance on Non-GAAP measures (see below). The elimination of this acquired attribute benefit was largely offset by an improved mix of jurisdictional adjusted pre-tax income resulting primarily from the reorganization. The reorganization also gave rise to a discrete GAAP tax benefit of $636 million arising from outside basis differences. This benefit has been excluded from our adjusted effective tax rate in accordance with our policy.

Separately, as a result of the SEC’s updated guidance on Non-GAAP measures issued in May 2016, Endo is no longer excluding the non-cash deferred tax expense associated with acquired attributes in our adjusted income tax expense. This change has no impact on Endo’s historic or forward looking GAAP tax or cash tax profile. The following table presents the impact of our change in policy as of the second quarter of 2016 on Adjusted Diluted EPS from Continuing Operations for each relevant period of 2015 and 2016:


Three Months Ended March 31, 2015

Three Months Ended June 30, 2015

Three Months Ended September 30, 2015

Three Months Ended December 31, 2015

Twelve Months Ended December 31, 2015

Three Months Ended March 31, 2016
Adjusted Diluted EPS from Continuing Operations
– As Previously Reported
1.17


1.08


1.02


1.36


4.66


1.08

Amount attributable to the change in approach to
Non-GAAP income taxes
(0.11)


(0.09)


(0.16)


(0.18)


(0.56)


(0.16)

Adjusted Diluted EPS from Continuing Operations
– As Revised
1.06


0.99


0.86


1.18


4.10


0.92


*Amounts in the table above may not add due to rounding

(15) To exclude the results of the Astora business reported as discontinued operations, net of tax.

(16) This amount includes noncontrolling interests of $16 and $(283) for the year ended December 31, 2016 and 2015, respectively.

(17) Calculated as income (loss) from continuing operations divided by the applicable weighted average share number. The applicable weighted average share number for the year ended December 31, 2016 is 222,651 and 223,090 for the GAAP and non-GAAP EPS calculations, respectively. The applicable weighted average share number for the year ended December 31, 2015 is 197,100 and 200,438 for the GAAP and non-GAAP EPS calculations, respectively.


Reconciliation of Projected GAAP Diluted Earnings Per Share to Adjusted Diluted Earnings Per Share Guidance for 2017


Year Ending

December 31, 2017
Projected GAAP diluted earnings per share
$
0.04

to
$
0.34

Amortization of commercial intangible assets

3.50

Acquisition related, integration and restructuring charges and certain excess costs that will be eliminated pursuant to integration plans

0.41

Tax effect of pre-tax adjustments at applicable tax rates

(0.50)

Diluted earnings per share guidance
$
3.45

to……
$
3.75


The Company’s guidance is being issued based on certain assumptions including:
Certain of the above amounts are based on estimates and there can be no assurance that Endo will achieve these results.
Includes all completed and pending business development transactions as of February 28, 2017.
ENDO INTERNATIONAL PLC
Reconciliation of GAAP and Non-GAAP Financial Measures
For the Twelve Months Ended December 31, 2016
(UNAUDITED)
(In thousands)



Twelve Months
Ended
December 31,
2016
Net (loss) income

$
(3,347,066)

Income tax

(700,084)

Interest expense, net

452,679

Depreciation and amortization (1)

955,802

EBITDA

$
(2,638,669)




Inventory step-up

$
125,699

Other income, net

(338)

Stock-based compensation (1)

58,655

Asset impairment charges

3,781,165

Acquisition-related and integration items

87,601

Certain litigation-related charges, net

23,950

Upfront and milestone payments to partners

8,330

Separation benefits and other cost reduction initiatives

107,491

Other income

(7,750)

Discontinued operations, net of tax

123,278

Net income attributable to noncontrolling interests

16

Adjusted EBITDA

$
1,669,428




Calculation of Net Debt:


Debt

$
8,272,503

Cash (excluding Restricted Cash)

517,250

Net Debt

$
7,755,253




Calculation of Net Debt Leverage:


Net Debt Leverage

4.6


__________
(1) Depreciation and amortization does not agree to the amount reported per the Statement of Cash Flows due to certain depreciation amounts reflected in the Acquisition-related and integration items line of this Adjusted EBITDA calculation.
(2) Stock-based compensation does not agree to the amount reported per the Statement of Cash Flows as the amount presented here does not include discontinued operations balances.


Non-GAAP Financial Measures
The Company utilizes certain financial measures that are not prescribed by or prepared in accordance with accounting principles generally accepted in the U.S. (GAAP). These Non-GAAP financial measures are not, and should not be viewed as, substitutes for U.S. GAAP net income and its components and diluted earnings per share amounts. Despite the importance of these measures to management in goal setting and performance measurement, we stress that these are Non-GAAP financial measures that have no standardized meaning prescribed by U.S. GAAP and, therefore, have limits in their usefulness to investors. Because of the non-standardized definitions, Non-GAAP adjusted EBITDA and Non-GAAP adjusted net income and its components (unlike U.S. GAAP net income and its components) may not be comparable to the calculation of similar measures of other companies. These Non-GAAP financial measures are presented solely to permit investors to more fully understand how management assesses performance. See Endo’s Current Report on Form 8-K furnished today to the Securities and Exchange Commission for an explanation of Endo’s non-GAAP financial measures.