Endo International plc – Ordinary Shares (NASDAQ:ENDP) shares Soar on earnings news – shares of the pharma giant are up 22 percent at the time of this writing – which is good news for hedge funds which have not sold out yet. What is the good news? Here is what analysts are saying.

Endo International

Endo International plc – Ordinary Shares (NASDAQ:ENDP) – Comments by Analysts


After a guidance reset last quarter, ENDP reported strong 2Q16 revenues of $920.9bn (+25% y/y, Cons. $863.9mn), supported by Brands of $288.3mn (Cons. $275.9mn), from a broad based beat on many Brands, greater-than-expected Generics at $565.4mn (Cons $539.9mn, benefiting from $15-20mn acceleration of product orders from 3Q to 2Q), and in-line International. Gross margin remained stable at 59.1% and controlled OpEx led to 2Q16 EPS of $0.86 (-20% y/y, Cons. $1.05). Despite a strong quarter, ENDP reiterated revenue guidance of $3.87-4.03bn and EPS of $4.50-4.80, from increased R&D investment (Xiaflex and Generics), and continues to point to 2H16 for signs of recovery. We particularly look to Generics, which should benefit from additional product launches, continued growth of injectables, and approvals of Seroquel and Zetia late in 2016. ENDP remains committed to restructuring and execution, and we think this quarter was strong demonstration of these activities.


On the call, management disclosed that is has had conversations with the FDA on its 505b2 products (two potassium products – one liquid, one powder), and believes it may be in position to have market exclusivity by year-end as unapproved competitors are removed. While Endo indicated the delay in regulatory action may impact the durability of these products (add’t competitors coming to market), we see the potential for these products to benefit 2017 results, and will look for other similar opportunities coming from the Par pipeline over time.


While there were a number of positives to take away from 2Q, there are stillmany uncertainties regarding run rates for key franchises, and we await further execution on those. This includes legacy pain brands that generated upside in2Q (Lidoderm, Percocet, Voltaren Gel), the growth brands (Xiaflex, Belbuca) that disappointed in 2Q but ENDP is investing further behind them, and the base generics that continue to erode with consortium pricing pressures and new generic entrants. In generics, ENDP did sound confident with sustainability of Vasostrict and potential contribution from two new 505(b)(2) potassiumproducts beginning in 2017. It also continues to see good growth from sterileinjectables and remains optimistic on the overall pipeline. Based on 2Q and the guidance, we are lowering revenue by $15mn in 2016 and $9-28mn in the out years. Our EPS comes down $0.07 in 2016 and $0.05-0.13 in the out years.


Revenue and EPS of $921 million and $0.86 were above consensus of $864 million and $0.75, with general strength across the revenue base. Given recent disappointments, 2Q offered a reversal, with management setting a reasonable bar and beating it. ENDP reaffirmed full-year guidance across all line items although 3Q will effectively step down with 2016 now more weighted to 4Q. For 3Q, revenue and EPS guidance is $830–870 million and $0.77–0.82 vs. consensus of $952 million and $1.06, which will need to move lower.


Revenues of $921mln were above our $884mln and consensus $869mln. Brand sales of $288mln were ahead of our $272mln but the mix was not ideal, as Lidoderm, Percocet and Voltaren were stronger while Opana and Xiaflex lagged. Destocking was noted for Xiaflex and growth in Peyronies’s was noted as strong, though Dupuytren’s slowed. Generics of $565mln was above our $545mln with upside in sterile injectables (+$11mln) and the base portfolio though $15-$20mln of stocking will presumably reverse in 3Q. International of $67mln was above our $59mln. Gross margin was 90bps above our forecast, helping offset higher spending.

Deutsche Bank

ENDP reported 2Q results, with revenue and EPS coming in ahead of our previously-lowered expectations, although generic revenues were helped modestly by timing of certain orders. We were encouraged to hear from management that the generic business, while the environment remains highly competitive, played out largely as planned. Our new model reflects lower 3Q and higher 4Q EPS vs. our prior model, which is consistent with ENDP’s expectations for revenue and spending trends in 2H (see below). We also lowered our cash tax rate estimates, which took our DCF-based target to $31 (from $30). We are sticking with our Buy rating based primarily based on valuation, and our thesis relies on, among other things, relative stability of the base generic business, significant generic launch activity in 2H, and continued exclusivity on Vasostrict through 2017.

Goldman Sachs

Generics sales of $565mn beat GS/consensus by 6%/5% with a 3% benefit from wholesaler buying patterns. ENDP expects unchanged 5% sequential base business declines in 3Q/4Q and stabilized 10% yoy declines in 2017+. The tone on sterile injectable pipeline and pricing opportunities was also positive, with a recent 20% price increase on Vasostrict helping 2H16 and additional product opportunities helping 2017. Branded sales of $288mn beat GS/consensus by 9%/5%, led by legacy brands Lidoderm and Voltaren Gel which are expected by ENDP to decline sequentially on increased generic pressure.

William Blair

Management highlighted an action plan on the U.S. generics franchise, which was implemented after the first-quarter miss and is now rather advanced after just one quarter. Endo is on track for about 30 expected product launches in 2016 (with 11 products launched through August 1 and also includes three first-to-file products, one alternative dosage product, and 10 sterile injectable products as well as Seroquel XR and Zetia), about 25-30 expected submissions in 2016 (seven filings submitted through August 1), and about $60 million in annual net run-rate savings to be fully realized by fourth quarter 2017.

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