In the past I have been extremely bearish on Endo International (ENDP). Drug companies like Endo, Mallinckrodt (MNK) and Insys (INSY) have seen their revenue and earnings free fall due to the declines in opioid sales. Accidental deaths and drug overdoses related to opioids have spiked over the years and the government has made a concerted effort to tamp down opioid prescriptions.
I documented Endo’s free fall in Q4 2018:
Q4 revenue was off 38% Y/Y. Surprisingly, the largest decline came in Generics which was off 43%. Within Generics, revenue from new launches of $149 million was a disappointment, falling over 65%. The North America Generics market is currently in a state of upheaval. Large clients are demanding price cuts while the FDA is accelerating drug approval which is increasing competition. Mylan (MYL) and Teva (TEVA) have also been hit by declining drug prices in North America …
Revenue from Branded drugs (29% of revenue) fell 21%. This segment includes pain-related drugs such as Opana, Percocet, Voltaren, and Lidoderm. The opioid crisis has dominated the national news cycle for several months. According to the Centers for Disease Control and Prevention, opioid overdoses spiked 30% from July 2016 to September 2017.
Endo’s share price reflected its demise, falling to as low as $5.27 earlier this year. Things could be looking up. Over the past six months ENDP is up over 65%. According to Shocking The Street, a premium investment service in conjunction with Seeking Alpha, ENDP’s drug pipeline is a 4-bagger. Today Merc (MRK) may have given Endo a major seal of approval. Read more:
