Morgan Stanley Updates Estimates on Endo Health Solutions

In a report published Monday, Morgan Stanley analyst Christopher Caponetti reiterated an Equal-Weight rating on Endo Health Solutions ENDP. In the report, Morgan Stanley noted, “Endo's 1.75% convertible notes (due March 2015) and warrants are in-the-money and add roughly 13-15M to Endo's fully-diluted share count. Our new 2014E EPS est. of $3.61 is down 11% vs. our previous $4.05 and near the high end of mgmt's $3.41-$3.65 range (midpt $3.53). Key assumptions: 1. Mylan launches generic Lidoderm in mid-2Q ($49M in royalties from ACT); 2. no generic competition on Voltaren Gel in 2014; 3. 21.6% tax rate; 4. opex down 12% YOY. Delay of Mylan's launch of Gx Lidoderm, more aggressive cost cutting, and lower tax rate are sources of near-term EPS upside.” Endo Health Solutions closed on Friday at $79.82.