Endo International plc ENDP recently announced preliminary results for first-quarter 2017.
The company projects first-quarter 2017 revenues between $1,015 million and $1,035 million, up from $964 million in first-quarter 2016. The current Zacks Consensus Estimate is $1.05 billion. The company expects adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations to be between $440 million and $460 million. Endo plans to report first-quarter 2017 earnings results on May 9.
2017 will continue to be challenging for Endo as the generics base business and the legacy branded pain franchise are expected to decline further.
We note that of Endo’s shares lost 59% in the last six months, underperforming the Zacks classified Medical-Drugs industry’s gain of 2.7%.
Revenues from the Generics base business declined 30% in 2016 compared to 2015. The business is under significant pressure due to intensifying consortium pricing pressures, and additional competitive entrants and product discontinuations as well as discrete factors, including destocking and shifts in purchase timing due to market conditions.
The company expects that the underlying rate of base business price erosion to be in the high single-digit in 2017 (excluding the impact of product discontinuances, the full-year impact of prior year competitive events, and the impact of expected new competitive events in 2017). The segment is projected to decline in the high single-to low double-digit percentage range in 2017 which will be partially offset by growth in its sterile injectables and new launch revenues respectively.
Endo’s Branded segment continues to be under pressure due to additional competitive entrants as well as a continuous rise in the number of public policy and regulatory actions including the recent CDC guidelines related to opioid prescribing and divestiture of Strenda.
International revenues in 2017 are expected to decline in the mid to high 20% range, reflecting the divestiture of Litha as well as the competitive pressure for Paladin and the impact of foreign exchange on Somar. The company is currently assessing strategic alternatives for Somar.
Following an agreement with a wholly owned subsidiary of Novartis AG NVS, Endo’s subsidiary, Paladin Labs Inc. had licensed the Canadian rights to commercialize serelaxin, an experimental drug for the treatment of acute heart failure. However, the study failed in Mar 2017. As a result, Endo has concluded that its serelaxin in-processresearch and development intangible asset is fully impaired resulting in a $45 million impairment charge.
Zacks Rank & Stocks to Consider
Endo currently carries a Zacks Rank #5 (Strong Sell) stock.
Some better-ranked stocks in the health care sector include Heska Corp. HSKA, and Retrophin, Inc. RTRX. Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Heska’s earnings estimates increased from $1.53 to $1.65 for 2017 and from $1.90 to $2.01 for 2018 over the last 60 days. The company posted a positive earnings surprise in all the four trailing quarters with an average beat of 291.54%.
Retrophin’s loss estimates narrowed from 85 cents 72 cents for 2017 and from 67 cents to 53 cents for 2018 over the last 60 days. The company posted a positive earnings surprise in three of the four trailing quarters with an average beat of 80.55%.
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