Endo Int'l (ENDP): Increasing Spend to Fund Underperforming Brands - Leerink
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Leerink Partners analyst, Jason Gerberrry, reiterated his Market Perform rating on shares of Endo International plc (NASDAQ: ENDP) after the company reported a solid 2Q, beating revenue expectations by ~6% and EPS by 16%, but left 2016 guidance parameters unchanged as 2Q revenue benefited from customer stocking & advancement of orders while mgmt. left EPS guidance unchanged as ENDP plans to increase spend to fund underperforming brands.
The analyst stated the the increase in spending leaves him "further questioning the growth trajectory of key brands like Xiaflex (dupuytrens/peyronie's) and Belbuca (pain), the latter reporting negligible sales YTD; mgmt. sees Xiaflex and Belbuca as important growth drivers and a recent change in ENDP's brand leadership can only help given disappointing uptake of these products. On generics, we view mgmt.'s strategy of pursuing conversion of unauthorized products to 505(b)2 brands as a very high risk/high reward business and view the product oppty’s as relatively short-lived, in the 1-2 yr range. Our revised sales/EPS ests reflect lower out year new product contribution as we expect significant rebasing in 2018 after two large first-to-file generics lose exclusivity in 2Q17".
The increased spending spurred the analyst to cut his price target to $22.00 (from $23.00).
Shares of Endo International plc closed at $18.19 yesterday.
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