I am a major Endo (ENDP) bull. However, I would be remiss in not admitting that it has been one of the market’s most perplexing stocks. ENDP 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. Any FDA approval may not arrive until the second half of 2020.
The opioid epidemic has now taken center stage. The number of accidental deaths related to opioids and the number of people addicted to them have been on the rise. Some believe such accidental deaths have been spurred by a proliferation of opioid prescriptions. State attorneys general also claim that drug makers have, in certain instances, fraudulently misrepresented the serious side effects of opioid use. Short sellers have punished the stocks of companies like Johnson & Johnson (JNJ) and Cardinal Health (CAH) that face opioid litigation. Endo, Teva (TEVA) and Mallinkrodt (MNK) have been punished the most, likely because they have the smallest balance sheets.
Trump And The GE believes Endo has several levers to pull, and the company is fighting back. In August rumors emerged on that Endo was in talks with Alvarez & Marsal, a restructuring firm, to look at restructuring its debt amid thousands of opioid lawsuits and $8 billion in debt. Withing weeks, Endo announced it had reached a $50 million opioid settlement with the state of New York. I expected negotiations with New York to be long and protracted. The deal likely set up a pathway for Endo to strike a global settlement with all the states.
That said, Endo’s share price remains highly-undervalued. ENDP trades at around 6x EBITDA, which is criminal, given the company’s upside. Trump And The GE has recognized eight barbarians at the gate for Endo. However, Novavax (NVAX) could have poll position. At the 36 minute mark of the following video, Trump And The GE: Barbarians At The Gate For Endo (#6), we explain:
Shock Exchange: This could be a line of demarcation where Novavax’s shares and Moderna’s shares can’t keep rise because they are rising, just can’t keep going up because the Fed is printing money and buying stocks with it. Those companies … have to find a way to diversity their revenue. Novavax’s vaccine has not even received emergency use authorization. Merck’s (MRK) oral treatment could receive emergency use authorization before Novavax.
Torian Mitchell: And yet Novavax is trading in the $200s. Make that make sense.
Shock Exchange: Novavax is a start-up operation … it had to build testing facilities and manufacturing facilities. We know they have diversity its revenue, so it should be looking at Endo, a company that’s undervalued. In this market, which is like a unicorn … Novavax has a relationship with Endo. It has engaged Endo for fill finish manufacturing services for Novavax’s vaccines to help fill the vials and distribute the vaccines to their customers and municipalities. They may have poll position.
Novavax has about $2 billion in cash and securities. It needs to diversify its revenue away from the vaccine and it has the capital to do a deal. Stay tuned …