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Endo (ENDP) Defended at Guggenheim

November 5, 2015 2:02 PM EST
Get Alerts ENDP Hot Sheet
Price: $0.29 --0%

Rating Summary:
    14 Buy, 15 Hold, 5 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 10 | Down: 9 | New: 10
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Endo International (NASDAQ: ENDP) shares declined Thursday, dropping 20%. Weakness followed Q3 results and guidance, but may have more to with writedowns and read-through from other companies like Lannett (NYSE: LCI) and Valeant Pharma (NYSE: VRX), said Guggenheim analyst Louise Chen. In the analyst's view, weakness is "overdone."

"The Street appeared disappointed that ENDP wrote down some assets and we believe part of the sell-off can be attributed to broader headlines in the healthcare sector today, said Chen. "We think concerns regarding the writedowns and read-throughs from other companies are overdone. ENDP now trades below 9x forward P/E, which is even lower than MYL (NEUTRAL, $46.58) at 9.5x, and we believe there is far less execution risk to get ENDP to work. Therefore, we remain positive on ENDP shares post 3Q15 results."

"We continue to believe ENDP has set the stage for better-than-expected growth in '16+ driven by Xiaflex (existing and new indications), Belbuca, and the generics business. We anticipate brand-focused M&A to enhance ENDP's overall growth profile. This could be funded through a larger and growing EBITDA base. We expect pro forma EBITDA of $2B+ in '16 and leverage to come down to 3x-4x by mid-'16. We think ENDP could lever up to 5x-6x for the right deal, which suggests a capital structure that could support at least $5B worth of additional transaction(s)," continued the analyst.

Chen added, "3Q15 positives that support our thesis: 1) Branded sales increased 27% YOY driven by Auxilium, there was some Auxilium seasonality in 3Q, but sales were in line with ENDP's internal expectations; 2) Generics sales increased 15% YOY driven by launches and 9/15 acquisition of Par and 8/14 acquisition of DAVA, expect 5-7 new launches in 4Q15; 3) Specialty Pharmacy only 3% of revenues and no affiliations with Specialty Pharmacies; and 4) Belbuca has scheduling advantage and dosing flexibility, ENDP will expand pain field force for '16 launch."

Guggenheim maintained a Buy rating on Endo International price target of $110.00

For an analyst ratings summary and ratings history on Endo International click here. For more ratings news on Endo International click here.

Shares of Endo International closed at $60.49 yesterday.



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