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Will Endo's Troubles Continue to Dent Performance in 2017?

Zacks Equity Research

We issued an updated research report on Endo International plc ENDP on Mar 27, 2017.

Endo, a global specialty pharmaceutical company focused on branded and generic pharmaceuticals, came into existence following the acquisition of Paladin Labs by Endo. The company reports results under the following segments – U.S. Branded Pharmaceuticals, U.S. Generic Pharmaceuticals and International Pharmaceuticals.

2017 will continue to challenging for Endo as the generics base business and the legacy branded pain franchise are expected to decline further.

We note that shares of Endo have underperformed the Zacks classified Medical-Drugs industry in the last six months. Specifically, the stock lost 49.5% during this period in comparison with industry’s decline of 3.1%.

In fact, the company’s shares are under tremendous pressure due to concerns related to the ongoing investigations and the present focus on drug pricing.

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 is 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 currently has the fourth largest generic business in the U.S. based on sales with a growing sterile injectables unit and a promising pipeline of almost 120 ANDAs along with a revamped specialty branded business focused on its flagship product Xiaflex.

Zacks Rank & Stocks to Consider

Endo is a Zacks Rank #5 (Strong Sell) stock.

Some better-ranked stocks in the health care sector include Heska Corporation HSKA, Anthera Pharmaceuticals, Inc. ANTH and Retrophin, Inc. RTRX. All three stocks carry 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 30 days. The company posted a positive earnings surprise in all the four trailing quarters with an average beat of 291.54%. Its share price increased 33.8% year to date.

Anthera’s loss estimates narrowed from $1.49 to 63 cents for 2017 over the last 60 days.

Retrophin’s loss estimates narrowed from 85 cents 72 cents for 2017 and from 67 cents to 53 cents for 2018 over the last 30 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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Endo International PLC (ENDP): Free Stock Analysis Report
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