Growth Spurt: Endo Pharmaceuticals - ' Paying it Forward '

Paying it Forward

Charge-backs are "of huge importance," says Dave Weiss, pharma industry manager for SAP. At the time Endo was putting in R/3, it was "not an appropriate solution'' for this particular problem.

But, as it often does, SAP used the Endo case as a launchpad. Now, Weiss argues, "we have a very robust charge-back'' system and a whole suite of tools that help smaller players like Endo and bigger players like Novartis compete in pharmaceutical manufacturing.

Endo did not base its entire software infrastructure on SAP, however. Endo's marketing group felt SAP's forecasting program was cumbersome and inflexible. So Bloom says Endo elected to purchase an application called Futurecast for this purpose. By January 2003, that application still was not linked into the rest of the SAP enterprise planning effort. "Excel is the poor man's link here,'' says Bloom.

Data from Futurecast is entered by hand into SAP.

SAP now claims to have created "one of the best in class" forecasting programs, with easier-to-use features and mobile updates that can feed information to retailers and a sales force at the same time, according to Michael Maguire, SAP's vice president for supply-chain solutions. In some industries, the forecasts of retailers and distributors can be fed back to manufacturers to help create their projections. SAP hopes to be able to convince Endo to switch out Futurecast, as time goes on.

For the most part, Endo's own future has turned out much like Ammon, MacDonald and Vollmer forecast. In 2002, the company went into the black. Also, the company revised its "guidance" to Wall Street three times as to how great its sales would grow. It originally predicted sales of $280 million. In its fourth prediction, it indicated it would hit $380 million. It wound up the year at $399 million in sales.

But investors weren't always appreciative of this. They had stepped up their expectations for Endo shares after the company purchased Algos Pharmaceutical in July 2000. Its big hit was supposed to be MorphiDex, a chronic pain drug. But trials ultimately proved that the product was no better than morphine itself. Endo stock plunged under $5. Shares lost half their value.

Now, 2003 is starting to look like 2002 all over again. Already, the company has raised its estimate of annual sales, from $440 million to $470 million for the year.

And the founders are getting the payoff they sought. On April 9, Mariann MacDonald said she would retire at the end of the year, at age 55.