In light of recent 1Q earning results from pharmaceutical companies Endo International plc – Ordinary Shares (NASDAQ:ENDP), and Medivation Inc (NASDAQ:MDVN), Barclay’s analysts are providing input on these two stocks. While ENDP is facing some challenges regarding competition and generic brand weakness, MDVN depicts a positive first quarter report with strong sales and a promising guidance.
Endo International plc
Barclay’s analyst Douglas D. Tsao weighed in on Endo due its recently posted 1Q earning results, a prominent company conference call, and issues regarding some of its key segments and drugs.
The analyst first discusses the lower than expected 1Q results, noting, “We knew ENDP was going to be lowering numbers with 1Q results, though we were surprised to see them come down this much.” The company projected revenues for this quarter of $964 million and an EPS of $1.03.
The analyst mentions competition ENDP is facing, commenting specifically on the company’s topical gel, Voltaren Gel. Tsao states, “ENDP acknowledged pressure from generic competition for Voltaren Gel, though we felt our $5.35 estimate, well below consensus at $5.70, captured those headwinds, so seeing numbers “rebased” to $4.50-4.80, down from the prior $5.85-$6.20 caused us do a double-take when reading the press release Furthermore, with the ’16 effective tax rate lowered to a range of 0-2%, the cut to op income was even greater.”
ENDP anticipates that its 505(b)2 program will aid in the approval of drugs, however, the company seems to be neglecting the issue of overly priced drugs. The analyst mentions, “While ENDP expressed some hope [the 505(b)2 program] would work out eventually, given the recent focus on drug pricing, it’s unclear to us that the FDA will take actions that increases costs to hospitals.”
Tsao explains the key theme from the conference call held was to find a need for brand segment growth aimed at offsetting generic weakness. Specifically, Endo International plc’s global specialty pharmaceutical company, Qalitest. The analyst elaborates mentioning “The recent pickup on FDA approvals has pressured other commodity products; much of this has been in Qualitest, though Par has seen competitive entrants too.” Additionally, the analyst notes “The 505(b)2 program’s importance suggests Par’s growth profile maybe less durable than assumed.”
Tsao reiterated a Hold rating on the stock with a $28.00 price target. He reasons, “we lack confidence in the ability of the segment to carry top-line growth.”
According to TipRanks.com, Tsao’s prediction succeeded 51% of the time, ultimately delivering a one-year average return per recommendation of 7.5%. Among 15 analysts offering recommendations on ENDP in the past three months, 6 analysts gave a Buy rating, 8 offered a Hold recommendation, and 1 analyst recommended a Sell rating on the stock. All recommendations amounted to a 12-month average price target of $42.36 marking a 161.97% upside from where shares last closed.
Medivation recently reported its 1Q earnings call. In light of this, Barclays analyst Geoff Meacham shared his thoughts on some key factors. The analyst reiterated a Buy rating on the stock with a $70.00 price target.
According to Meacham, Medivation used its 1Q earnings call to defend its value proposition to investors. The company emphasized a “robust growth” outlook for its key drug, Xtandi, through 2020 as well as a deep pipeline.
The 1Q performance portrayed positive results for MDVN, as the company beat on U.S. sales for Xtandi by $2 million. However, EPS was $0.11, which was below consensus.
Meacham comments further on the company’s 2020 guidance, explaining, “While the 2020 guidance ($2.5B+ in revenue) will be appreciated, the details on longer treatment duration, increased visibility on timing for PROSPER / EMBARK read-outs, and insight into the pipeline strategy are more tangible.”
The analyst notes that MDVN’s Xtandi drug remains undervalued, and explains that the company will benefit from higher valuations once this is realized by investors. Meacham mentions, “Overall, we still think there is underappreciated scarcity value in MDVN shares given Xtandi’s best-in-class profile and line-of-sight to tapping into new segments of the prostate market. Combine that with important data read-outs for Xtandi and talazoparib in breast cancer over the next 12 months, and we think the portfolio can support higher valuations even before factoring in synergies with strategic suitors.”
According to TipRanks.com, Meacham’s prediction succeeded 56% of the time, ultimately delivering a one-year average return per recommendation of 15.9%. Among 17 analysts offering recommendations on MDVN in the past three months, 11 analysts gave a Buy rating and 6 offered a Hold recommendation on the stock. All recommendations amounted to a 12-month average price target of $61.56 marking a 2.23% upside from where shares last closed.