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Endo International (ENDP) has been one the top-performing stocks of 2018. ENDP has more than doubled over the past year. The stock is up about 2.8x since I started writing about it in May. “This Drug Could Make Endo A 4-Bagger” acknowledged that Endo seemingly lacked a moat in the second half of 2017:

The company’s top-line continued to erode for both generics and pain-related drugs. I understood the demise of opioids given the government’s desire to tamp down opioid prescriptions. However, I assumed generics would be a moat, and it was not. The company successfully cut costs and rightsized its operations to help soften the blow of revenue declines. With debt at over 5x EBITDA I surmised it could be difficult to service debt from existing operations.

Q1 2018 results were practically more of the same. Revenue fell by 30% Y/Y, but core products like Sterile Injectables and Specialty products could be the future of the company. A silver lining is that core specialty products (including Xiaflex and Supprelin) made up about 55% of the total U.S. Branded – Specialty segment. They actually grew 7% Y/Y.

Shortly thereafter, Endo began to make major moves to improve its financial situation and the stock. In June the company executed a master settlement agreement allowing for the resolution of all its known testosterone replacement therapy (“TRT”) product liability claims. This signaled to the market that the company was serious about eliminating exposures to certain product liabilities.

There is still major short interest in ENDP despite positive Q2 earnings results. The stock hit a 52-week high today despite drops in the Dow and S&P 500. Are shorts trapped? Read more:

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