No one has the Valeant act down quite like Endo. After a guidance-slashing reminiscent of the Canadian pharma’s, the Dublin drugmaker is now following up with asset-sale discussions.
Endo has held talks with private equity firms about potential divestments that could help cut down its $8 billion-plus mountain of debt, Reuters’ sources say. It’s been looking into several options, including an asset swap with another company--though discussions are still in the early stages.
Endo--whose CEO, Rajiv De Silva, previously served as the COO at Valeant--has long seemed to be following in the footsteps of its specialty pharma peer, piling up debt in its race to gobble up smaller companies.
But these days, that’s no longer a good thing. Valeant has gone from Wall Street darling to bottom-feeder as debt-default concerns and dismal sales have taken their toll, and its new CEO--Perrigo vet Joseph Papa--has touted potential asset sales as a way to pay down debt and reduce some of the complexity of Valeant’s business.
Endo, too, reported disappointing quarterly sales last month that forced it to lower its 2016 EPS and revenue benchmarks. Shareholders--as Valeant’s did after a similar takedown in March--bolted for the exits. Shares crashed by nearly 40% as management attributed the change to new rivals on the market, greater-than-expected generics price erosion and regulatory delays.
Now, it remains to be seen if asset sales can turn Endo’s performance around--though after last month’s events, some analysts may be hard to convince.
"Weak longer term outlook, drastically lowered guidance, and pushed out de-levering targets (4.6x leverage) are the key reasons we view the stock as toxic,” Mizuho analyst Irina Koffler wrote after the guidance adjustments, adding that she “can't see a reason” to own Endo shares.
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