We are maintaining our Neutral stance on Endo Pharmaceuticals (ENDP) with a target price of $38.00.
Endo Pharma is a specialty healthcare solutions company that operates in the US and focuses on the areas of pain management, urology, oncology and endocrinology. Endo Pharma reports results through four segments: Branded Pharmaceuticals, Generics, Devices and Services. The company is currently headquartered in Chadds Ford, Pennsylvania. Endo plans to shift its head office to a new building in Malvern, Pennsylvania, by the end of 2012.
Endo Pharma is on an acquisition/deal signing spree to expand its business. In March 2012, Endo joined hands with Mersana Therapeutics Inc. for the development of next-generation antibody-drug conjugates.
Moreover, in January 2012, Endo inked a global license and development agreement with BioDelivery Sciences International (BDSI) regarding the latter’s pain candidate BEMA buprenorphine currently undergoing late-stage development. Endo Pharma has completed four major acquisitions since 2010.
We believe that these acquisitions are steps in the right direction and will help to counter the generic threat that Endo Pharma is currently facing for many of its key products, including lead drug Lidoderm. Lidoderm is facing generic challenges from companies such as Mylan, Inc. (MYL) and Watson Pharmaceuticals (WPI). Patent disputes and entry of generics have the potential to weaken Endo Pharma’s top-line substantially.
Even though Endo Pharma is looking to combat the generic threat by introducing new products, the company’s financials will be affected adversely if the new products perform below-expectations.
Moreover, pipeline setbacks like the failure of pain drug axomadol, have the potential to limit the upside potential from current levels. Consequently, we retain our Neutral recommendation on the shares.
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