Cleveland's Judge Dan A. Polster

Endo International (ENDP) is still one of the market’s most frustrating, confounding stocks. The stock hit a 52-week high of over $18 in the second half of 2018. Investors were excited about the potential for Xiaflex to treat cellulite. Late stage clinical trials were extremely positive. The stock free fell after Q3 2018 earnings were announced. Analysts and investors fretted over the fact that an FDA application was not expected until 2019.

Endo has shot the lights out ever since. The company has met or exceeded earnings expectations each quarter. It has reduced its reliance on generics and pain-related drugs. Meanwhile, it has softened the decline in revenue with new drugs and stabilized its EBITDA and margins. CEO Paul Campanelli did a yeoman’s job of holding down the fort while generic competitors like Mylan (MYL) and Teva (TEVA) whose revenue and earnings declined sharply. How did investors reward Endo and Campanelli. They sold the stock down to below $2 on opioid litigation fears.

Since, ENDP has more than doubled. The FDA recently accepted the company’s Biologics License Application for collagenase clostridium histolyticum (“CCH”) for the treatment of cellulite. Once approved, a new indication for Xiaflex could create upside for Endo in the way botox created upside for Allergan (AGN). ENDP currently trades at just over $5 and the upside from Xiaflex is likely not priced in. The stock trades at almost 2x earnings. The low valuation is due to the overhang from potential opioid litigation. Market chatter suggests the negotiating class to settle opioid claims was recently approved. Read more:


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