Over the past year I did some work on drug companies caught up in the opioid crisis and it was not pretty. When I first analyzed Endo International (ENDP) in Q3 2017 its revenue was falling in the mid-single-digits Y/Y, and its core generics business was demonstrating no traction at all. ENDP was off 60% Y/Y and I felt it could fall further:

Within the generics segment revenue from U.S. generics fell 34%; generics are suffering from negotiated price cuts with big clients and an acceleration in generic drug approval by the FDA, which has increased competition. This was offset by strong sales of Sterile Injectables and recent launches of ezetimibe tablets (generic Zetia) and quetiapine ER tablets (generic Seroquel). The combination of new product launches and growth in Sterile Injectables helped stabilize generics this quarter, but will it be enough going forward?

By Q1 2018 the situation had worsened. The company’s $700 million in revenue was off over 30% Y/Y. Its Generics revenue was down 55%; in effect its moat had disappeared.

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