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.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

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 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!