How Guidance Sank Endo International

Endo International PLC (NASDAQ: ENDP) reported its first-quarter financial results after the markets closed on Thursday. The company posted $1.08 in earnings per share (EPS) on $963.5 million in revenue. Thomson Reuters consensus estimates had called for EPS of $1.05 on $964.4 million in revenue. In the same period of last year, it reported $1.17 in EPS and revenue of $714.1 million.

In terms of guidance for the full year, the company expects to have EPS in the range of $4.50 to $4.80 and revenues in the range of $3.87 billion to $4.03 billion. The consensus estimates are $5.69 in EPS on $4.30 billion in revenue.

Separately, Endo announced the appointment of two new members to its board of directors: Douglas S. Ingram, former president of Allergan and current CEO of Chase Pharmaceuticals, and Todd B. Sisitsky, managing partner of TPG Capital.

For the first quarter, Endo’s U.S. Generic Pharmaceutical segment revenues totaled $583 million, up 63% from the same period last year. This was the result of the additional sales from the Par acquisition and the underlying growth of certain products. International Pharmaceuticals had revenues of $71 million, down 2% from last year, but it would be up 11% excluding a $10 million unfavorable currency impact.
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Rajiv De Silva, president and CEO of Endo, commented:

Despite increasing competitive and pricing pressures across both our Generics and Branded businesses, Endo was able to deliver first quarter results largely in line with our expectations. However, as we move further into 2016, we are rebasing our full-year financial expectations due to the impact of several previously unanticipated headwinds: new competitive entrants, including for Voltaren Gel; greater than expected price erosion across the Generics sector; and delays on regulatory actions related to certain Endo products. We are also continuing to evolve Endo’s corporate strategy and are taking decisive action to best position the Company for a return to long-term, organic growth within a rapidly changing market environment. We look forward to executing on this evolved strategy to deliver products that improve patients’ lives while creating value for our shareholders.

On the books, cash and cash equivalents totaled $222.0 million at the end of the quarter, compared to $272.3 million at the end of 2015.

A few analysts weighed in on the company after earnings:

• Mizuho downgraded to an Underperform rating from Neutral and lowered the price target to $13 from $42.
• Piper Jaffray downgraded it to a Neutral rating from Overweight.
• Leerink Swann downgraded it to Market Perform from Outperform.
• RBC Capital downgraded it to Sector Perform from Outperform.
• Stifel has a Buy rating but lowered its price target to $75 from $90.

Shares of Endo closed Thursday down 2.9% at $26.59, with a consensus analyst price target of $55.59 and a 52-week trading range of $25.23 to $88.84. Following the release of the earnings report, the stock was down 30% at $18.56 in early trading indications Friday.