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Two Top Endo Executives Depart

Zacks Equity Research

Endo Health Solutions (ENDP) announced recently that its two top executives are leaving the company. The company’s Chief Financial Officer (:CFO) Alan G. Levin and Chief Operating Officer Julie H. McHugh have put down their papers. While Levin will continue to discharge his duties as Endo ’s CFO until the fall, McHugh has resigned with immediate effect.

Endo is on the lookout for a new CFO. The company has formed a search committee and engaged a search firm for the purpose. Levin, who joined Endo in 2009, took all possible measures to improve the company’s top line. Before Endo, Levin worked with Texas Pacific Group, a leading private equity firm. Prior to that, he served Pfizer, Inc. (PFE) in multiple capacities.

We note that Endo, which reported lower-than-expected first quarter 2013 revenues earlier in the month, has been going through tough times particularly regarding its lead pain drugs- Opana ER and Lidoderm. The departure of two top executives at this juncture will dent investors’ confidence.

Earlier in the month, Endo suffered a setback with the US Food and Drug Administration (:FDA) turning down its request to prevent the entry of generic versions of Opana ER. The decision by the FDA implies that the generic formulations of the original version of Opana ER will continue to be available in the market.

Endo expects the FDA decision to impact its 2013 guidance adversely. The company expects the adverse FDA ruling to reduce 2013 total net sales of Opana ER by up to $120 million. Moreover, Endo’s 2013 adjusted earnings per share outlook is expected to be hurt by approximately 55 cents following the FDA verdict.

While announcing its first-quarter 2013 results, Endo had stated that it expects adjusted earnings per share for 2013 in the range of $4.40–$4.70 per share and revenues in the range of $2.80–$2.95 billion. The Zacks Consensus Estimate for 2013 pegs earnings at $4.31 per share on revenues of $2.8 billion. Endo intends to throw more light on its 2013 guidance in the coming months.

Moreover, Lidoderm is expected to face generic competition later in the year from Actavis, Inc. (ACT). This will hamper sales of the drug significantly.

Endo currently carries a Zacks Rank #3 (Hold). Jazz Pharmaceuticals (JAZZ) appears to be more attractive with a Zacks Rank #1 (Strong Buy).

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