I have been following Mallinckrodt (MNK) for a few years and always wanted to dig deeper into companies like Endo International (ENDP), Depomed (DEPO) and Insys (INSY) who were involved in the opioid crisis. I did my first research report on Endo in September. True to form I followed the negative revenue and earnings trends and rated the stock a sell.

The company’s Q2 2017 revenue of $876 million was off 5% Y/Y. Revenue from the Branded segment was off 15%, while U.S. Generics and International was flat. U.S. Generics was over 60% of the company’s total revenue, but it was nothing to write home about. It was well-known that large buyers in the U.S. were wielding leverage in North America, and driving down pricing for generic drugs. Teva (TEVA) and Mylan (MYL) were also hampered by price erosion in the region.

Opana, one of Endo’s pain-related drugs, was about to be taken off the market. Regulators ruled the drug’s risks outweighed its benefits. I felt Opana’s demise (as well as that of other pain-related drugs) would cause Endo’s 40% EBITDA margins to crater. Then there was the issue of its $8.3 billion debt load at junk levels.

 What A Difference A Year Makes

In May Shocking The Street, a premium investment service Shock Exchange runs in conjunction with Seeking Alpha, suggested Endo’s key drug could make the stock a 4-bagger. The drug is so disruptive that competitors could “eat or be eaten.” The question remains, “Which drug company will try to acquire ENDP first?” Read more:



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