Endo International plc (ENDP): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report
Summary:
Endo's third-quarter 2014 earnings of $1.15 per share beat the Zacks Consensus Estimate of $0.99 but decreased 14% from the year-ago period. The year-over-year decline in earnings was primarily due to generic competition for branded Lidoderm. Strong generic revenues contributed to the top-line beat. We are impressed by Endo increasing its guidance further. We are also positive on the impending acquisition of Auxilium Pharmaceuticals. The deal is expected to boost the company's sales and earnings growth from 2015. We are pleased with the company's effort to advance its pipeline. Based on these factors, we upgrade our recommendation on the stock to Outperform with target price of $96.00.
Overview:
Endo International plc, a global specialty healthcare company, came into existence following the acquisition of Paladin Labs by Endo. Endo International reports results through four segments Branded Pharmaceuticals (U.S.), Generic Pharmaceuticals (U.S.), Devices and International Pharmaceuticals from the first quarter of 2014. The company's key products are Lidoderm, Opana ER, Frova and Voltaren Gel. The portfolio has expanded following the acquisition of Paladin Labs.
Major drugs in the Branded Pharmaceuticals (U.S.) segment include Lidoderm, Opana ER, Voltaren Gel, Frova, Supprelin LA and Fortesta Gel. The segment deals with high-value branded pharmaceuticals drugs that satisfy the unmet needs of patients.
Generic Pharmaceuticals (U.S.): The division focuses on manufacturing and distributing generic and over-the-counter drugs (tablets, capsules, liquids, suspensions, creams and ointments). Endo expects generic products to grow at low double digits. The acquisition of Boca Pharmacal is expected to be a strategic growth driver.
The Devices unit is a diversified supplier of medical devices and procedures for pelvic health. Endo expects to achieve accelerated growth in its Men's Health subgroup apart from increasing efficiency and managing the declining sales of its Women's Health products.
International Pharmaceuticals: The newly formed division aims at providing quality products to patients across the globe in competitive and emerging markets. The segment recorded sales of $24.8 million in the first quarter of 2014 on the back of sales generated from the Paladin Labs business. Following the acquisition of Paladin Labs, Endo is aiming at strengthening its presence in Ireland. Currently, the company is in the process of recruiting senior staff in its Ireland-based business Endo Ventures. It is also investing in infrastructure to expand its capacity in the region. The impending acquisition of Mexican company, Grupo Farmaceutico Somar, will further strengthen the segment.
Until Dec 31, 2013, the company reported results through three segments - Endo Pharmaceuticals (53.3% of total revenues in 2013), Qualitest (27.9% of 2013 revenues) and American Medical Systems (18.8% of total revenues in 2013).
The company has completed several major acquisitions since 2010. In Feb 2014, Endo completed the acquisition of Boca Pharmacal and Paladin Labs. In Jun 2011, Endo purchased American Medical Systems. In Dec 2010, Endo purchased Qualitest Pharmaceuticals. In Nov 2010, Endo Pharma acquired Penwest Pharmaceuticals Co. and in Jul 2010 the company acquired HealthTronics Inc. The HealthTronics segment was subsequently divested in Feb 2014.
In Jun 2014, Israel's Trendlines Group completed the purchase of intellectual property developed within the framework of the R&D deal inked with Endo in 2012. In Aug 2014, Endo acquired DAVA Pharmaceuticals to strengthen its generic unit.
Endo has its global headquarters in Dublin and U.S. headquarters in Malvern, PA.
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