Growth Uncertainty For Endo Continues Through 2017

• The share price of Endo International plc - Ordinary Shares ENDP (Endo Health Solutions, Inc.) has declined over 10 percent in the last six months.
• Morgan Stanley’s David Risinger has downgraded the rating on Endo International from Overweight to Equal-Weight, while lowering the price target from $101 to $85.
• Risinger believes that there is uncertainty regarding the company’s growth beyond 2017, given the tough generic comps and uncertainties surrounding its branded pipeline.

According to the Morgan Stanley report, the EPS accretion from the recent significant acquisition of Par is being offset by the multiple contraction in Endo International’s stock, driven by the company’s higher exposure to generics, along with the uncertain growth outlook beyond 2017.

“We believe that Par can drive double-digit generics growth over the next few years due to major launches, including expected first-to-file launches on Seroquel XR in Nov '16 and Zetia in Dec '16,” Risinger said, while adding, that “once these large, short-duration revenue contributions roll over, annual growth will be pressured.”

Risinger also expressed concern regarding Endo International’s branded pipeline, especially Belbuca and Xiaflex. The 2020 sales estimates for Belbuca and Xiaflex have been reduced from $325 million to $202 million and from $419 million to $229 million, respectively.

Belbuca will be launched into a highly competitive chronic pain market, which is characterized by “strong incumbents and questionable payer interest in a new agent,” the report stated. Risinger also expressed concerns regarding the prospects of Xiaflex for new indication in both cellulite and frozen shoulder.