Regulatory issues play a big role in the generic drug business
Generics pharma player Endo Health Solutions Inc (NASDAQ:ENDP) has gained 10.5% over the last 30 days after taking a severe beating early last month. The company’s shares were dumped last month after the U.S. FDA’s recent decision not to ban older generic formulations of Opana ER from the market – a move that shaved $150 million in potential revenue for Endo Health Solutions. The decision also forced the company to reduce its profit forecasts.
Following the unfavorable ruling, the company has undertaken a restructuring exercise that would reduce $325 million from its annual operating expenses primarily through a 15% global workforce reduction, and also through evaluation of strategic alternatives for the Healthtronics and branded pharmaceutical discovery platform business segments. Endo is also interested in pursuing accretive acquisitions and product licensing deals to improve its strategic positioning. The initiatives have apparently clicked with investors and analysts, as UBS and Stifel Nicolaus raised their target price on the stock which currently trades at a forward price earnings ratio of 10.2.
Foolish bottom line
While these strategic initiatives and business updates are important and encouraging, it is imperative for investors to differentiate and understand long-term and short-term implications. For Endo Health Solutions, the restructuring is a positive step, but merely works as a factor negating the impact of an unfavorable ruling. Similarly, AT&T Inc. (NYSE:T)’s massive investment stands to benefit the company and shareholders by extension over a longer period. However, the stocks may see correction in the medium to short-term if volatility returns to the markets.
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The article Crucial Junctures May Offer Opportunity to These Companies originally appeared on Fool.com.
Jacob Wolinsky has no position in any stocks mentioned. The Motley Fool recommends General Motors. Jacob is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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