What is Driving Shares of Endo (ENDP) Sharply Lower?
Ireland-domiciled specialty pharmaceutical company, Endo International plc’s ENDP shares touched a 52-week low of $27.45 on Mar 17 after the company revealed weaker-than-expected first-quarter 2016 guidance at the Barclays Global Healthcare Conference. Shares tumbled 11.4% on the news.
However, the company maintained its 2016 guidance that was provided during the release of the fourth-quarter 2015 results.
In the first quarter of 2016, Endo expects revenues in the range of approximately $928–$972 million, which is below the Zacks Consensus Estimate of $1.03 billion. It expects earnings per share in the range of about $1.02 to $1.08, also below the Zacks Consensus Estimate of $1.19 per share.
We note that Endo reports results through three segments – Branded Pharmaceuticals (U.S.), Generic Pharmaceuticals (U.S.) and International Pharmaceuticals. While the company expects U.S. Branded Pharmaceuticals sales to decline in the first quarter of 2016 compared with the fourth quarter of 2015, primarily due to expected seasonality among other factors, it said that erosion in its Generics base business continued in first-quarter 2016. On the other hand, seasonality and historical stocking fluctuations among other factors are expected in the International Pharmaceuticals segment.
For 2016, Endo continues to expect revenues in the range of $4.32 billion to $4.52 billion. The Zacks Consensus Estimate for revenues is currently $4.44 billion. It still expects earnings per share in the range of $5.85 to $6.20. The Zacks Consensus Estimate for earnings is currently $5.97 per share.
It seems that the uncertainties that are looming around Valeant Pharmaceuticals International, Inc. VRX have had a contagion effect, hitting the shares of other specialty pharmaceutical companies including Endo.
Of late, Valeant has made it to the headlines for all the wrong reasons and seen its stock spiraling down. Earlier this week, the company reported preliminary results for the fourth quarter of 2015, and projected a lowered guidance for the first quarter of 2016 and full year. And it’s not just that, the company has even hinted of slipping into a default.
In fact, it all started in late 2015 when Valeant came under the lens for raising drug prices and practicing a business model that involved limited investment in research and development. Instead, the company followed a strategy of acquiring companies and selling their drugs at higher prices. Valeant also faced questions related to accounting policies and is currently being assessed, which has led to a delay in the filing of its annual report.
With Valeant coming under the scanner, concerns have been raised surrounding companies like Endo who practice a somewhat similar business model.
It’s time to wait and see how far this goes.
Endo is a Zacks Rank #3 (Hold) stock. A couple of better-ranked stocks in the health care sector are Anika Therapeutics Inc. ANIK and Actelion Ltd. ALIOF, each sporting a Zacks Rank #1 (Strong Buy).
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