) first quarter 2014 earnings (excluding special items) of 92
cents per share beat the Zacks Consensus Estimate by 8 cents but
decreased 16% from the year-ago period. The year-over-year
decline in earnings was due to lower revenues.
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Revenues came in at $594.6 million in the first quarter of 2014,
down 10%. Revenues were well short of the Zacks Consensus
Estimate of $607 million.
Following the completion of the acquisition of Paladin Labs
earlier in the year, the company has started reporting results
through four segments - Branded Pharmaceuticals (U.S.), Generic
Pharmaceuticals (U.S.), Devices and International pharmaceuticals
from the first quarter of 2014.
The First Quarter in Details
Revenues were hurt by lower sales of Endo's painkillers, Lidoderm
(down 82%), Opana ER (down 17%) and Fortesta Gel (hypogonadism:
down 24%). Reduced sales of the drugs were primarily responsible
for a 35% decline in the quarterly branded pharmaceutical
revenues to $234 million. Lidoderm sales were hurt by generic
competition during the first quarter.
) launched its generic version of the painkiller in Sep 2013.
In a bid to strengthen its portfolio of branded products in the
field of pain and migraine management, Endo inked a deal last
month to buy the global rights to Sumavel DosePro from
) for $85 million in cash and milestone payments of up to $20
Endo reported generic product net sales of $212 million in the
quarter, up 19%. Increased demand for the generic drugs
contributed to the increase. The addition of the products of the
erstwhile Boca Pharmacal (acquisition completed in Feb 2014) also
led to the expansion of the segmental sales. Endo intends
to launch an authorized generic version of Lidoderm shortly
through its generic unit.
Revenues from the devices segment came in at $124 million in the
reported quarter, up 1% at constant exchange rates. Segmental
sales benefited from improved performance of the benign prostatic
hyperplasia therapy (up 12%) sub-group.
The newly formed international pharmaceuticals division
contributed $24.8 million to total revenues in the first quarter
of 2014. In a bid to expand further, Endo announced a deal to
acquire Mexico based private company Grupo Farmaceutico Somar
last month. The company has entered into agreements to buyback
about $240 million aggregate principal amount of its 1.75%
convertible senior notes due 2015.
2014 Outlook Raised
Apart from announcing results for the first quarter of 2014, Endo
upped its guidance for 2014. The company now expects adjusted
earnings per share for 2014 in the range of $3.60-$3.85 per share
(old guidance: $3.40-$3.65). The Zacks Consensus Estimate (pre
earnings) stands at $3.51 per share. We expect it to be revised
upwards following the management's new outlook. The company now
expects revenues in the range of $2.55 billion-$2.64 billion (old
guidance: $2.50-$2.62 billion). The Zacks Consensus Estimate is
$2.56 billion. The improved outlook issued by the company
impacted the stock positively.
Endo carries a Zacks Rank #3 (Hold). An example of a
better-ranked stock in the medical sector is
WuXi PharmaTech (Cayman) Inc.
) with a Zacks Rank #1 (Strong Buy).