Investors Concerned as Endo Pharma Mimics the Path of Valeant
May 9, 2016
By Alex Keown, BioSpace.com Breaking News Staff
DUBLIN – Could Endo Pharmaceuticals be traversing the same path as Canada-based Valeant Pharmaceuticals ?
That comparison is one that Bloomberg columnist Max Nisen makes in his latest column, saying the Irish company has mimicked the rise of Valeant and is now on the same downward trajectory as that embattled company. Last week Endo’s stock plunged nearly 40 percent following the company’s announcement it was slashing its 2016 forecasts due to increased competition and regulatory delays. Sales of Voltaren Gel, a non-steroid used to treat joint pain in the hands, dropped 21 percent during the first quarter, largely due to generic competition, the company said. However, during the quarter sales of Xiaflex, used to treat Dupuytren's contracture is adults, jumped more than 57 percent largely due to increased demand for the product, the company said. Additionally, Endo saw regulatory approval of chronic pain drug, Belbuca.
Still, Endo said it would undergo a restructuring and evolution of its corporate strategy to meet the new challenges, which includes laying off about 740 employees at two facilities as well as the shuttering of a manufacturing site in Charlotte, N.C.
Throughout 2015, Endo maintained a trend of expanding its portfolio offerings through acquisitions, including a $130 million deal to acquire a large portfolio of anti-pain anti-infectives, cardiovascular and other therapeutics areas from Aspen Pharmacare Holdings. In January 2015, Endo acquired Auxilium Pharmaceuticals for $2.6 billion. That transaction broadened Endo’s offerings of urological and orthopedic therapies, including Xiaflex, Testopel and Stendra. The Auxilium deal came on the heels of deals to buy Boca Pharmacal and DAVA Pharmaceuticals. More recently Endo snapped up Par Pharmaceuticals for $8.5 billion to spur sales growth in generic medications. The acquisition of Par brings approximately 100 products in multiple dosage forms and delivery systems, including oral solids, oral suspensions, injectables and high barrier-to-entry products. Endo said it was hoping to see a strong boost in revenue from the Par deal, however Nisen said that was not a guaranteed money-maker for the company, considering increase competition or possible regulatory issues.
Endo did lose a bidding war with Valeant to acquire Salix Pharmaceuticals, Ltd. , the maker of Xifaxan, a drug used to treat traveler’s diarrhea and liver disease.
The company has also divested itself of several divisions that were capital resource drains, including its AMS Men’s Health business and Astora Women’s Health, the maker of vaginal mesh used to treat pelvic organ prolapse in addition to urinary incontinence. The company said it has set aside money for litigation against the vaginal mesh products
That aggressive M&A strategy has caused Endo’s debt to soar, far outpacing the company’s market value. Nisen said Endo’s debt is $8.2 billion, while it has a market cap of $3.2 billion, which has undercut the credibility of management, he said. Because of that high debt, Nisen speculated the company will have to switch from its M&A growth strategies to a more organic one. With Endo’s rapidly sliding stock, Nisen reported that several analysts told company leaders during an earnings call last week that the company should explore strategic options, which could include a sale of assets, or breaking up into smaller companies.
Earlier this month, an analyst at The Motley Fool suggested Endo as a bargain biotech stock for investors, although that was prior to the company’s changing of its 2016 forecast.
Shares of Endo International have steadily slid since a February high of $54.30. The stock is currently down more than 70 percent since then, trading at $15.94 per share as of this morning.