Endo International plc – Ordinary Shares (NASDAQ:ENDP) reported second quarter 2016 financial results, including:

  • Revenues of $921 million including the addition of sales from its 2015 acquisition of Par Pharmaceutical, a 25 percent increase compared to second quarter 2015 revenues of $735 million.
  • Reported net income from continuing operations of $390 million compared to second quarter 2015 reported net loss from continuing operations of $(91) million.
  • Reported diluted EPS from continuing operations of $1.75 compared to second quarter 2015 reported diluted loss per share from continuing operations of $(0.49).
  • Adjusted net income from continuing operations of $192 million, a 6 percent decrease compared to second quarter 2015 adjusted net income from continuing operations of $204 million.
  • Adjusted diluted EPS from continuing operations of $0.86 compared to second quarter 2015 adjusted diluted EPS from continuing operations of $1.08.

“During the second quarter 2016, Endo remained focused on operational execution. We have delivered results across all of our businesses that are on-track or ahead of Company expectations for the quarter and today we are affirming our full year 2016 revenue and adjusted diluted EPS financial guidance while increasing investment in Branded and Generics R&D as well as BELBUCA™ and XIAFLEX® promotion,” said Rajiv De Silva, President and CEO of Endo. “We also continue to build our internal team and are pleased to announce the appointment of Joseph J. Ciaffoni to President, U.S. Branded Pharmaceuticals. We look forward to continuing to execute on our corporate objectives and delivering products that improve patients’ lives while creating value for our shareholders.”

ONSOLIDATED RESULTS

Total revenues increased by 25 percent to $921 million in second quarter 2016 compared to the same period in 2015, primarily attributable to revenues related to the September 2015 Par acquisition. GAAP net income from continuing operations in second quarter 2016 increased to $390 million compared to a GAAP net loss from continuing operations of $(91) million during the same period in 2015, primarily attributable to a legal entity reorganization that resulted in the recognition of discrete net tax benefits of $448 million during the second quarter 2016. GAAP net income per share from continuing operations for the three months ended June 30, 2016 was $1.75, compared to a GAAP net loss from continuing operations of $(0.49) in second quarter 2015.

Adjusted net income from continuing operations for second quarter 2016 decreased by 6 percent to $192 million compared second quarter 2015, driven primarily by an increase in interest expense, partially offset by higher operating margin. Adjusted net income per share from continuing operations for the three months ended June 30, 2016 decreased 20 percent to $0.86 compared to second quarter 2015. This decrease was mainly due to a decrease in adjusted net income from continuing operations resulting from the items listed above in this paragraph and an increase in the number of diluted weighted average shares outstanding.

U.S. BRANDED PHARMACEUTICALS

During second quarter 2016, the U.S. Branded Pharmaceuticals business unit continued to focus on the launch of the first and only buprenorphine buccal film approved by the U.S. Food and Drug Administration (FDA), BELBUCA™, while also supporting demand growth for XIAFLEX® in both the Dupuytren’s contracture and Peyronie’s disease indications.

Second quarter 2016 U.S. Branded Pharmaceuticals results include:

  • Revenues of $288 million, a 9 percent decrease compared to second quarter 2015; this decrease was primarily attributable to a generic entrant for Voltaren® Gel in March 2016.
  • Net sales of XIAFLEX® increased 6 percent compared to second quarter 2015; this increase reflects continued double-digit demand growth for the product, partially offset by customer de-stocking in the quarter.
  • Net sales of Voltaren® Gel decreased 46 percent compared to second quarter 2015; this decrease was attributable to a decrease in both volume and price as a result of the entrance of a generic competitor in March 2016.

U.S. GENERIC PHARMACEUTICALS

During second quarter 2016, the U.S. Generic Pharmaceuticals business unit substantially completed the Par integration, implemented the initial phase of the supply chain restructuring and product rationalization activities announced in May 2016, and continued to execute on its sales and marketing, research and development (R&D), and manufacturing plans for the year.

Second quarter 2016 U.S. Generic Pharmaceuticals results include:

  • Revenues of $565 million, a 67 percent increase compared to second quarter 2015; this increase was primarily attributable to growth from the addition of sales by Par.
  • Secured a patent (expiration January 2035) for Vasostrict®, the only vasopressin injection currently approved by the FDA.
  • As expected and previously communicated by the Company, the Generics Base business revenues declined approximately 5 percent sequentially compared to the first quarter 2016, due to consortium pricing pressures and additional competitive entrants.

INTERNATIONAL PHARMACEUTICALS

During second quarter 2016, the International Pharmaceuticals business unit focused on expanding margins for its emerging markets businesses, while in-licensing new products and managing the expected loss of exclusivity for certain products at Paladin.

Second quarter 2016 International Pharmaceuticals results include:

  • Revenues of $67 million, a 17 percent decrease compared to second quarter 2015.
  • Paladin revenues of $26 million, a 14 percent decrease compared to second quarter 2015, due primarily to the previously expected loss of exclusivity for two products. During second quarter 2016, Paladin filed a submission for BELBUCA™ with Health Canada, acquired the Canadian rights to XIAFLEX® and launched Metadol D 1L.
  • Emerging market revenues from Litha and Somar of $37 million, a 23 percent decrease compared to second quarter 2015, driven primarily by a decrease in Litha revenues as it manages its recent divestiture of non-core assets and integrates its new portfolio of products and pipeline programs acquired from Aspen.

2016 Financial Guidance

For the full twelve months ended December 31, 2016, at current exchange rates, Endo is affirming its full year revenue and adjusted diluted EPS financial guidance issued in May 2016. The Company estimates:

  • Total revenues to be between $3.87 billion and $4.03 billion;
  • Diluted GAAP EPS from continuing operations is now expected to be between $1.86 and $2.16; and
  • Adjusted diluted EPS from continuing operations to be between $4.50 and $4.80.

The Company’s 2016 financial guidance is based on the following assumptions:

  • Adjusted gross margin of approximately 59 percent to 60 percent;
  • Adjusted operating expenses as a percentage of revenues to be approximately 21.5 percent to 22 percent;
  • Adjusted interest expense of approximately $455 million;
  • Adjusted effective tax rate of approximately zero to 2 percent; and
  • Adjusted diluted EPS from continuing operations assumes full year adjusted diluted shares outstanding of approximately 223 million shares.

Balance Sheet, Liquidity and Other Updates

As of June 30, 2016, the Company had $667.8 million in unrestricted cash; net debt of approximately $7.6 billion and a net debt to pro forma adjusted EBITDA ratio of 4.6.

Second quarter 2016 reported cash provided by operating activities was $604.5 million, primarily attributable to the Company’s receipt of a $707 million federal income tax refund during the quarter, partially offset by the timing of mesh-related payments, payments related to restructuring and other working capital increases.

During second quarter 2016, the Company recorded pre-tax, non-cash impairment charges of $40.0 million related to certain market and regulatory conditions impacting the commercial potential of certain definite-lived intangible assets in the Company’s U.S. Generic Pharmaceuticals segment.

As part of the continued integration of the legacy Qualitest and Par businesses, Endo initiated a legal entity reorganization that moved the Generics business to a new U.S. holding company structure that is separate from the legacy Branded business structure. The reorganization provides operating flexibility and benefits and reduces the potential impact related to any future limits that could apply to the use of tax attributes by utilizing most of the Company’s attributes to offset the gain that was created in the intercompany sale. This reorganization resulted in stepped-up tax basis of the U.S. Generics business assets to their fair value.

The reorganization also gave rise to a discrete net GAAP tax benefit of $448 million in the second quarter 2016 arising from outside basis differences. This benefit has been excluded from our adjusted effective tax rate, in accordance with our policy.

On an adjusted basis, the elimination of tax benefits from acquired attributes is offset by an improved mix of jurisdictional adjusted pre-tax income resulting primarily from the reorganization.

As a result of the SEC’s recently issued Compliance and Disclosure Interpretations on Non-GAAP measures issued in May 2016, Endo is no longer excluding the non-cash deferred tax expense associated with acquired attributes in our adjusted effective tax rate.  This change has no impact on Endo’s historic or forward looking GAAP tax or cash tax profile. Additionally, as Endo has utilized almost all of its acquired attributes through the legal entity reorganization, Endo’s change in policy is also not expected to have a material impact on our 2016 and forward looking adjusted tax rate.

Management Team Updates

In a separate press release issued today, Endo announced the appointment of Joseph J. Ciaffoni to the position of President, U.S. Branded Pharmaceuticals, effective August 15, 2016. Mr. Ciaffoni most recently served as Senior Vice President, Global Specialty Medicines at Biogen and brings to Endo extensive experience building commercial businesses, leading multi-function organizations and achieving successful results across the primary care, specialty and rare disease markets. (Original Source)

Shares of Endo are up over 11% to $20.22 in after-hours trading Modany. ENDP has a 1-year high of $86.72 and a 1-year low of $12.56. The stock’s 50-day moving average is $16.97 and its 200-day moving average is $28.86.

On the ratings front, ENDP has been the subject of a number of recent research reports. In a report issued on August 5, Morgan Stanley analyst David Risinger reiterated a Hold rating on ENDP, with a price target of $15, which reflects a potential downside of -17.5% from last closing price. Separately, on July 26, BMO’s Gary Nachman reiterated a Hold rating on the stock and has a price target of $21.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, David Risinger and Gary Nachman have a total average return of 1.2% and 14.3% respectively. Risinger has a success rate of 57.8% and is ranked #1786 out of 4102 analysts, while Nachman has a success rate of 75.0% and is ranked #467.

The street is mostly Neutral on ENDP stock. Out of 13 analysts who cover the stock, 8 suggest a Hold rating and 5 recommend to Buy the stock. The 12-month average price target assigned to the stock is $28.29, which implies an upside of 55.5% from current levels.

Endo International Plc operates as a pharmaceutical company. It focuses on developing, manufacturing, and distributing of branded and generic pharmaceutical products. The company was founded on October 31, 2013 and is headquartered Dublin, Ireland.