Endo's Valeant-esque guidance-slashing decimates shares

Endo

Endo ($ENDP) has for a long time been good at following in the footsteps of Valeant ($VRX). But after Friday’s share plunge, it may be wishing it wasn’t.

Like the Canadian pharma did one fateful day in March, Endo Friday slashed its 2016 revenue and earnings guidance after a disappointing quarterly performance--and the results were similarly disastrous. Shares tumbled into a downward spiral of nearly 40% to mark their second-worst daily performance in Endo’s history, according to CNBC.

Management took its full-year revenue expectations down to between $3.87 billion and $4.03 billion--well below analyst expectations--and it now expects adjusted diluted EPS to fall between $4.50 and $4.80. The reasons? “Several previously unanticipated headwinds,” according to CEO Rajiv De Silva, including new rivals on the market, greater-than-expected generics price erosion and regulatory delays.

To help compensate, Endo announced a restructuring plan that includes 740 layoffs in Alabama and North Carolina, which it expects to wring out about $15 million in costs per quarter by the end of next year.

The dismal earnings performance and call--on which one analyst went so far as to inquire about the company’s “strategic options,” i.e. break-up or sale--isn’t the only parallel between Endo and Valeant, of course. De Silva is the former COO of the Quebec-based drugmaker, and for a long time, he seemed to be taking a page from former Valeant CEO J. Michael Pearson’s playbook with a string of acquisitions that piled up debt.

But as industry-watchers well know, Valeant isn’t exactly an act to emulate right now. Its stock is bottom-feeding after a rocky several months of pricing pushback, channel-stuffing allegations and debt-default worries, and Endo and its specialty peers have felt the burn as wary shareholders fled.

Now, it’s up to the Dublin drugmaker to turn things around before it befalls the same fate--and analysts aren’t convinced it can do it.

"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 in a note seen by CNBC, adding that she “can't see a reason” to own it.

- read Endo's release
- see the call transcript

Special Report: The most influential people in biopharma today - 2014J. Michael Pearson - Valeant

Related Articles:
Valeant investors, shocked by lightweight guidance, aren't buying CEO Pearson's recovery plans
Endo scoops up Par Pharma for $8B to gain ground in injectables
Is Endo on the verge of a Valeant-type acquisition binge?