In the past I had been extremely bearish on Endo International (ENDP) given the diminution in the company’s core generic sector and its high exposure to pain-related drugs. The generic sector continues to decline, yet management has practically weaned itself off pain-related drugs and opioids. In my previous research I also acknowledged the company lacked a moat:

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.

Xiaflex and Sterile Injectables may have emerged as the next growth engines and solid anchors for the stock. Total Q3 2018 revenue of $745 million was off 5% Y/Y. Revenue from Sterile Injectables was up 17% Y/Y. It represents over 30% of Endo’s total revenue. The segment was driven by Adrenalin (up 40%) and Vasostrict (up 6%). That said, BlackRock’s Larry Fink maintains a major stake in ENDP. Shocking The Street believes Fink knows something. Read more:

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