Takeover Rumors Surround Endo Health Solutions Inc (ENDP)

Endo Health Solutions Inc (NASDAQ:ENDP) shares popped more than 17% last week on rumors of exploratory talks with potential buyers including Valeant Pharmaceuticals Intl Inc (NYSE:VRX) and Warner Chilcott Plc (NASDAQ:WCRX). This week, Bloomberg reported that the push to sell might come from Fidelity Investments — Endo’s largest shareholder.

It’s best to take sale rumors with a bag of salt. But here’s a look back at the tough year that left Endo in a more vulnerable position.

Valeant Pharmaceuticals Intl Inc (NYSE:VRX)String of bad news
Branded pharmaceuticals made up the majority of Endo’s revenues last year. In the third quarter, the pain patch Lidoderm accounted for 32% of overall revenues and over half of its segment. The bad news? Lidoderm’s patent expired last fall. An expensive patent battle with Actavis Inc (NYSE:ACT), formerly Watson, delayed the generic release but only until this September .

Opana ER earned the second slot in the branded drug department, accounting for 8% of overall revenues that quarter following a 36% slip due to a supply issue. Endo replaced the original formula with a crush-resistant formulation that’s harder to abuse. The company later sued the FDA  to try and prevent generic alternatives from entering the market, claiming that their non-tamper-resistant nature posed a safety risk to patients. But a court dismissed the case and opened the path for generics.

In December, Endo announced that CEO David P. Holveck plans to step down this spring, and a search for a replacement is still under way. The company used the same press release to lower its 2013 forecast to include EPS of $4.40 to $4.70 per share and revenues of $2.80 billion to $2.95 billion. That’s down from the month-prior prediction with an EPS of $5.20 to $5.40 per share and revenues of $3 to $3.02 billion.

Bright spot
Endo has more happening than Lidoderm and Opana ER. The generic drug subsidiary Qualitest held 22% of overall revenues in the third quarter and future growth here could offset a bit of the losses from pharmaceuticals. Qualitest launched a generic for Merck & Co., Inc. (NYSE:MRK)‘s asthma medication Singulair last summer and later received FDA approvals for generic versions of Avapro and Provigil. The generics market tends to be competitive with low margins.

The article Takeover Rumors Surround This Drug Stock originally appeared on Fool.com and is written by Brandy Betz.

Fool contributor Brandy Betz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!