Late last month, reports said Impax Labs may be looking to bulk up in the face of industry-wide generics pricing pressure with a deal for Amneal. And at least one analyst thinks it may make sense for Endo to follow suit.
The way RBC Capital Markets’ Randall Stanicky sees it, Impax’ “game plan” could be “the answer” for the struggling Endo, which earlier this year recorded a $3.5 billion write-down that it largely attributed to the generics squeeze. And while that idea has met with pushback from investors, it’s “a necessary/exercise consideration that we have gone through with our other generic names to answer the question, ‘what strategically can they do?’” Stanicky wrote to clients this week.
What makes Stanicky think M&A’s the answer for Endo? A few factors. First off, de-levering—the path the company is currently pursuing—is “going to take time,” he wrote late last month. Endo’s management on the company’s Q2 call also said it would be open to looking at deals, and private equity firm TPG Capital is the company’s largest shareholder with 9.92%.
Plus, the similarities between Impax and Endo “are striking but sentiment and share performance could not be more different”—and Stanicky attributes that difference “largely ... to anticipated large-scale M&A.”
Impax, which The Wall Street Journal has said could buy Amneal for $2 billion or so, isn’t the only drugmaker turning to M&A during tough times. Bloomberg recently reported that Alvogen’s private equity owners are weighing their options for the New Jersey pharma, and a sale of the company’s U.S. business to Shanghai Pharmaceuticals is on the table.
Endo, meanwhile, is in the middle of what's been a tough stretch beyond the mammoth write-down. The company—led by CEO Paul Campanelli, who took over for Valeant vet and M&A enthusiast Rajiv de Silva last September—has cut more than 1,000 jobs through three phases of restructuring since last May. The 2017 guidance didn't live up to expectations, either, which were "already diminished," Barclays analyst Doug Tsao wrote in February.