Will Endo (ENDP) Continue To Disappoint Investors In 2017?

We issued an updated report on Endo International plc (NASDAQ:ENDP) on Aug 24.

Endo, a global specialty pharmaceutical company focused on branded and generic pharmaceuticals, was formed following the acquisition of Paladin Labs.

Revenues from the Generics base business is under significant pressure due to intensifying consortium pricing pressures and additional competitive entrants and product discontinuations as well as discrete factors, including destocking and shifts in purchase timing due to market conditions. Revenues from the segment is projected to decline in the high single-to low double-digit percentage range in 2017 due to base business sales decline, partially offset by revenues growth in sterile injectables and new launch in alternative dosages which will be partially offset by growth in its sterile injectables and new launch revenues respectively.

Endo’s Branded segment continues to be under pressure due to additional competitive entrants as well as a continuous rise in the number of public policy and regulatory actions including the recent CDC guidelines related to opioid prescribing and use and divestiture of Strenda.

In a major setback, Endo withdrew opioid pain medication Opana ER (oxymorphone hydrochloride extended release) from the market following FDA’s request in June. In March 2017, the FDA Drug Safety Risk Management and Anesthetic and Analgesic Drug Products Advisory Committees voted in the ratio of 18 to 8 and consented that reformulated Opana ER did not outweigh public health risks.

A few members stated that the benefits are now overshadowed by the continuing public health concerns around the product's misuse, abuse and diversion. In June, the FDA directed the company to remove the drug from the market. The move comes in wake of the widespread opioid abuse epidemic. The drug represented 4% of total 2016 revenues.

International revenues in 2017 is expected to decline in the mid to low 20% range, reflecting the divestiture of Litha and Somar.

Meanwhile, Endo stock has declined 46.7% in the year so far compared to the industry’s gain of 2.2% during the same period.

The company lowered is revenue guidance range by $70 million and now expects revenues in the range to be $3.38 billion to $3.53 billion. The guidance was lowered due to withdrawal of Opana ER and discontinuation of products associated with recently announced manufacturing restructuring.

Zacks Rank & Key Picks

Endo currently carries a Zacks Rank #5 (Strong Sell). Some better-ranked stocks in the healthcare sector include Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) , Gilead Sciences, Inc. (NASDAQ:GILD) and Aduro Biotech, Inc. (NASDAQ:ADRO) .

While Regeneron sports a Zacks Rank #1, Gilead Sciences and Aduro carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Regeneron’s earnings per share estimates have increased from $10.52 to $13.81 for 2017 and from $12.10 to $14.54 for 2018 over the last 30 days. The company delivered positive earnings surprises in two of the trailing four quarters, with an average beat of 6.29%.

Gilead’s earnings per share estimates increased from $7.98 to $8.53 for 2017, over the last 30 days. The company delivered positive earnings surprises in three of the trailing four quarters, with an average beat of 8.18%.

Aduro Biotech’s loss per share estimates narrowed from $1.46 to $1.32 for 2017 and from $1.41 to $1.24 over the last 30 days. The company delivered positive surprises in two of the trailing four quarters with an average beat of 2.53%.

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