Endo Pharma Evenly Poised - Analyst Blog
May 17 2011 - 12:23PM
Zacks
We are maintaining our Neutral stance on Endo
Pharmaceuticals (ENDP) with a target price of $44.00.
Headquartered in Chadds Ford, Pennsylvania and founded in 1997,
Endo Pharma is a specialty healthcare solutions company. The
company, which operates in the US, reports results through three
segments: Branded Pharmaceuticals, Generics and Devices and
Services. Endo Pharma offers more than 175 products in the areas of
pain management, urology and oncology.
In April 2011, Endo Pharma reported its first quarter 2011
results. First quarter adjusted earnings of $1.00 per share were in
line with the Zacks Consensus Estimate but $0.26 above the year ago
figure.
The year-over-year rise in earnings was attributable to the
higher revenues reported in the first quarter of 2011. (Read our
full coverage on the earnings report at: Endo Pharma Q1 Result
Matches Est.)
We note that Endo Pharma is on an acquisition spree to expand
its business. In April 2011, the company announced that it will
purchase American Medical Systems (AMMD), a
leading pelvic-health devices provider, for $2.9 billion or $30.00
per share in cash, having completed three major acquisitions in
2010.
We believe that these acquisitions along with the impending
purchase of American Medical are steps in the right direction to
counter the loss of revenues due to the generic threat hanging over
Endo Pharma.
Endo Pharma boasts of a strong product portfolio which should
drive growth in the coming quarters. The portfolio was strengthened
further by the US launch of Fortesta Gel for treating men (above 18
years of age) with low levels of testosterone (hypogonadism) in
March 2011. The entry of Fortesta Gel into the market has widened
the treatment options for hypogonadism patients.
The disorder affects approximately 14 million men in the US.
However, only approximately 9% are being treated. In March
2011, Endo received further good news when the US Food and Drug
Administration (FDA) approved its oral contraceptive, Emoquette,
for the prevention of pregnancy. The approval of the oral
contraceptive, the generic version of Johnson &
Johnson’s (JNJ) Ortho-Cept, further strengthens Endo’s
portfolio.
However, the lack of near-term catalysts concerns us, especially
with its lead product Lidoderm slated to go off patent in 2015. The
patent challenge to Lidoderm by Mylan Inc. (MYL)
is another test for Endo Pharma.
Apart from the generic threat, pipeline setbacks like the
complete response letter (CRL) received for the new formulation of
Opana ER limit the upside potential from current levels.
Consequently, we maintain our Neutral recommendation on the
stock.
AMER MED SYS (AMMD): Free Stock Analysis Report
ENDO PHARMACEUT (ENDP): Free Stock Analysis Report
JOHNSON & JOHNS (JNJ): Free Stock Analysis Report
MYLAN INC (MYL): Free Stock Analysis Report
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