Endo Pharmaceuticals’ (ENDP) third quarter 2011 earnings (excluding special items) of $1.25 per share surpassed the year-ago earnings by $0.39 and the Zacks Consensus Estimate by $0.07. The year-over-year rise in earnings was attributable to a surge in revenues.

Quarter in Details

Revenues climbed 71% to $759.1 million in the reported quarter. The revenue increase was attributable to impressive performances across all segments at Endo Pharma. Revenues beat the Zacks Consensus Estimate of $737 million.

The third quarter witnessed a 17% rise in the sale of branded drugs to $425.5 million. The impressive showing by key products in the pain franchise drove the increase. The sale of generic products at Endo jumped 439% to $148.0 million in the reported quarter.

The generic segment was boosted by the acquisition of privately-held generic company Qualitest Pharmaceuticals in December 2010. Endo currently has approximately 50 abbreviated new drug applications (ANDAs) under review by the US Food and Drug Administration (FDA).

Revenues from devices and services came in at $185.6 million in the reported quarter, up 259% year over year. Revenues were boosted by the acquisition of American Medical Systems, a leading pelvic-health devices provider, in June 2011. The remaining revenues (approximately 29%) from the segment came from HealthTronics, a provider of urology products and services, which was acquired by Endo Pharma in July 2010.

We note that the purchase of American Medical is the fourth major acquisition by Endo Pharma over the last one year. Endo Pharma completed three major acquisitions in 2010.

2011 View Maintained

Apart from announcing financial results, Endo Pharma reaffirmed its 2011 guidance. The company continues to expect earnings (on an adjusted basis) in the range of $4.55-$4.65 per share on revenues of $2.72-$2.80 billion. The Zacks Consensus Estimate for 2011 currently hints at earnings of $4.59 per share on revenues of $2.7 billion.

Our Recommendation

We have a Neutral stance on Endo Pharma. The stock carries a Zacks #3 Rank (Hold rating) in the short run.

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