ENDP - Endo Health Solutions Inc.

[giofranchi]

Phaceliacapital suggested to start a thread about ENDP. So, I have taken a look at the company, and I think it is worthwhile to follow it.

Their strategy is very similar to VRX’s, which I like. They are smaller, which I like. They are not yet truly proven, which I don’t like (although, during the last 5 years they have increased sales at an annual compound rate of 22.77%!).

 

The stock price also looks cheap: at the end of the presentation in attachment you might find the reconciliation between GAAP Earnings and Adjusted Diluted EPS: they add back amortization of commercial intangible assets, rightly so imo, without adding back depreciation of physical assets, and without subtracting capital expenditures on physical assets (which, anyway, tend to be low in the pharmaceutical business). So, imo, Adjusted Diluted EPS represent the true cash generating capability of ENDP. Well, they are projected to be in between $4.1 and $4.4 for 2013, the stock price yesterday closed at $37.69, for an average earnings yield of 11.27%. If on top of that you add a potential for growth similar to VRX’s during the last 5 years, you get the picture of a deeply undervalued company.

Net Debt is not low, but at 2.8 x EBITDA is still kept well below the 4 x EBITDA target for VRX.

 

I don’t know ENDP well yet. So, if I am wrong, please correct me!

 

giofranchi

Endo_Health_Solutions_June_2013_Strategy_Call_Presentation.pdf

[Palantir]

I like your style, from the CF statement angle it looks good.

[Cunninghamew]

Here is a data dump of stuff I have collected on ENDP...

 

the 13D is from Brahman Capital a LS hedge fund. They were early to VRX and have been shareholders really since the beginning. Their holding is significant to me, because they know management teams well. They track and follow certain guys around (i.e. Mike Pearson and/or Rajiv). When a cheap company gets paired with one of the mangers they track they dig in hard.

ENDP_6-7-13.pdf

ENDP_5-08-13.pdf

ENDP_4-18-13.pdf

ENDP_2-26-13.pdf

Brahman_13D.pdf

Endo_hires_Valeant_dealmaker_as_new_CEO_-_The_Deal_Pipelin.pdf

Endo_Health_To_Become_The_Next_Valeant_-_or_Part_of_Valeant.pdf

[giofranchi]

Here is a data dump of stuff I have collected on ENDP...

 

the 13D is from Brahman Capital a LS hedge fund. They were early to VRX and have been shareholders really since the beginning. Their holding is significant to me, because they know management teams well. They track and follow certain guys around (i.e. Mike Pearson and/or Rajiv). When a cheap company gets paired with one of the mangers they track they dig in hard.

 

Wow! Thank you, Cunninghamew, for all those files and great information!

You should have started this thread months ago! :)

 

giofranchi

 

[rjstc]

Thanks for all the info!!

[Phaceliacapital]

Thanks for the information, I will gather everything I have at the office tomorrow :)

 

I don't know yet which type of investor in me is interested in this stock, from a pure value point I probably wouldn't touch it, however, after reading "the outsiders" I find it hard to ignore cases where there might be spillover effects from generals (Pearson) to their lieutenants (Rajiv).

 

A quick bio on the man himself:

 

Mr. Rajiv De Silva has been the Chief Executive Officer and President of Endo Health Solutions Inc., since March 2013. Mr. De Silva served as the President at Valeant Pharmaceuticals International, Inc. from October 2010 to January 15,2013 and served as its Chief Operating Officer until January 15,2013. He was responsible for all specialty pharmaceutical operations, including sales and marketing, research and development, manufacturing and business development. He has broad international experience, having worked in the United States, Europe, Canada and Latin America. Mr. De Silva served as the Chief Operating Officer of Specialty Pharmaceuticals at Valeant Pharmaceuticals International from January 5, 2009 to September 2010. He was responsible for overseeing the U.S., Canadian and Australian specialty pharmaceuticals operations. Prior to joining Valeant in January 2009, held various leadership positions with Novartis AG from 2003 to 2009. He served as President of Novartis Vaccines USA and Head, Vaccines of the Americas at Novartis since 2007. During which time, he played a key leadership role at Novartis' Vaccines & Diagnostics Division. From 2005 to 2007, he served as President of Novartis Pharmaceuticals Canada and also served as its Chief Executive Officer. He originally joined Novartis as Global Head of Strategic Planning for Novartis Pharma AG in Basel, Switzerland in 2003. Prior to his time at Novartis, Mr. De Silva served as a Partner at McKinsey & Company and served as its Principal, where he focused his consulting practice on the pharmaceutical industry. During his nine years at McKinsey, he led multiple efforts related to pharmaceutical strategy, sales and marketing, research and development operations, organization design, and mergers and acquisitions. He has been a Director of Endo Health Solutions Inc., since March 2013; and Afexa Life Sciences Inc. since October 2011. He served as a Director of AMAG Pharmaceuticals Inc., from February 2012 to May 23, 2013. Mr. De Silva holds a Bachelor of Science in civil engineering, Honors from Princeton University, a Master of Science in civil engineering from Stanford University and a Master of Business Administration with Distinction from the Wharton School at the University of Pennsylvania.

 

Not one to easily discount I'd say..

[Phaceliacapital]

Credit Notes Endo Creating Positive Credit Catalysts With Restructuring Plans06 Jun 2013

 

High-yield sector pick Endo Health Solutions ENDP (rating: BB-, narrow moat) revealed initiatives Wednesday that could lead to positive credit catalysts for the firm. We are maintaining our credit rating for now, but these announced plans appear to improve Endo's credit trajectory. Most important, the firm aims to rightsize its business in advance of the marketing exclusivity loss on Lidoderm (about 30% of its $3.0 billion in trailing 12-month sales) later this year by cutting an annual $325 million from its operating expense budget. That plan could help the firm preserve more of its ongoing EBITDA, which is around $1.1 billion on a trailing 12-month basis, than expected despite Lidoderm's anticipated decline. With a debt position around $3.1 billion at the end of March, Endo still may not be able to maintain a debt/EBITDA level below 3 times after Lidoderm starts declining. However, with these restructuring initiatives and potential sales of its HealthTronics business (purchased for $223 million in 2010) and its branded pharmaceutical discovery platform, the firm appears to be setting the stage for a healthier financial position than previously expected.

 

The one major wild card for Endo's credit profile remains its acquisition strategy. The new management team has said it will pursue accretive acquisitions with a disciplined capital-allocation strategy. However, much uncertainty surrounds the details of that objective, and management may use its discretion on future deals, which pose the risk of being unattractive for bondholders. For example, management anticipates looking primarily at tuck-in acquisitions (probably in the $250 million-$500 million range), but it may look for transformative acquisitions as well. Also, management believes the debt markets remain the best way to fund those potential deals, meaning leverage may increase from current low levels. However, current debt covenant levels limit Endo to debt/EBITDA of 3.75 times, and management aims to remain below that level.

 

Overall, though, our credit outlook for Endo is improving due to planned restructuring activities, and we remain optimistic about its bonds, which we view as sector overweights. For example, Endo's 2022 notes (with a worst call date in 2016) are indicated at a yield to worst of 5.79% and a spread of 523 basis points over Treasuries. That compares favorably with Valeant Pharmaceuticals' VRX (rating: BB/UR, narrow moat) 2018 notes (with a worst call date of 2017), which are indicated at a yield to worst of 5.41% and a spread of 447 basis points over Treasuries. With negative outlooks from the agencies on Valeant due to the firm's recently announced plans to acquire Bausch & Lomb, we anticipate Endo's bonds will have more positive momentum than Valeant's bonds in the near future, as investors consider Endo's restructuring operations.

 

[Phaceliacapital]

Analyst Note 06 Jun 2013

 

Endo Health Solutions is a diversified health-care company focusing on pain

management, urology, and endocrinology. Flagship product Lidoderm is a

lidocaine patch approved for post-shingles pain and prescribed off-label for

a wide range of pain-related indications. Endo has added urology and

endocrinology products to its offerings through several acquisitions during

the last few years, and has boosted its generics and device capabilities

through the purchase of Qualitest and AMS.

 

After just three months on the job, Endo Health Solutions

ENDP CEO Rajiv De Silva announced that he is spearheading

a major restructuring effort at the specialty health-care

company. This announcement comes on the heels of the

departure of the chief financial and operating officers last

week, which is reminiscent of De Silva's actions during his

turnaround of Valeant VRX . The firm has lowered its fullyear

revenue guidance, which is probably tied to the Food

and Drug Administration's ruling that new opioids do not

need to be crush resistant, thus opening Endo's pain drug

Opana ER to potential generic competition. Our revenue

projection was already on the low end of management's

previous guidance, and the impact of dialing down sales

further this year is mostly offset by expected cost savings

in our valuation model. The firm will reduce head count by

15%, and restructuring efforts are expected to reduce

annual operating expenses by $325 million.

We are maintaining our $33 fair value estimate and our

narrow moat and negative trend ratings as we continue to

be concerned about Endo's ability to pursue growth through

acquisitions. As a case in point, the company has announced

it is looking at strategic alternatives for its HealthTronics

business, which it purchased for $223 million in 2010.

Performance of the firm's services and devices acquisitions

have proved disappointing, which we think serves as a

testament to the riskiness of Endo's strategy of relying on

acquisitions for growth.

[Phaceliacapital]

MS Report

ENDP_US_20130322.pdf

[Phaceliacapital]

And some words on what we should expect for ENDP:

 

Analysis |  Jun 10 2013 |  David Krempa

Thesis  |  10 Jun 2013 Under the control of CEO J. Michael Pearson, Valeant's aggressive acquisition strategy has been executed nearly flawlessly. Since Pearson took over five years ago, Valeant has grown more than 10-fold, reduced its patent exposure, refocused the business on attractive pharmaceutical markets, and drastically improved margins. Although the stock has already had a terrific run since Pearson took over, we believe scale advantages and experience will allow the firm to continue to execute value-creating deals for years to come.

 

We expect Valeant to continue to gain share and leverage its infrastructure across all segments in which it competes. Its rise in the U.S. prescription dermatology market was remarkable. In 2008, the firm was the 11th-largest player, with less than 1% market share. Now, through nearly a dozen acquisitions, it has become the leading player, with market share of 15%-20% and sales 50% higher than the second-place competitor. More important, this rapid growth allowed Valeant to leverage its salesforce and back-office expenses to create an extremely efficient business, with operating margins well above 50%.

 

In ophthalmology, the firm will face a much more concentrated market and larger competitors, such as Novartis NVS, Abbott ABT, and Johnson & Johnson JNJ, but we still believe there are attractive opportunities. The market is growing at a solid mid-single-digit rate and the high cash pay component means relatively little pricing pressure from managed-care and government payers. Valeant is unlikely to dethrone the wide-moat market leader, Novartis, but we think it will be able to profitably consolidate smaller players and build scale.

 

[giofranchi]

the 13D is from Brahman Capital a LS hedge fund. They were early to VRX and have been shareholders really since the beginning. Their holding is significant to me, because they know management teams well. They track and follow certain guys around (i.e. Mike Pearson and/or Rajiv). When a cheap company gets paired with one of the mangers they track they dig in hard.

 

http://beta.fool.com/insidermonkey/2013/06/28/hedge-fund-brahman-capital-bets-big-on-this-pharma/37348/

 

Smart, smart, smart guys!!  ;)

 

giofranchi

 

 

[Palantir]

To be fair, it seems to me that this firm is pretty cheap even if you are not totally confident of Mr Rajiv's abilities. It's trading at something like 10x FCF once you back out the cash/debt to get EV.

[giofranchi]

To be fair, it seems to me that this firm is pretty cheap even if you are not totally confident of Mr Rajiv's abilities. It's trading at something like 10x FCF once you back out the cash/debt to get EV.

 

Mr. Gabelli is forecasting a decrease in adjusted EPS for 2014 to $3.75 vs. $4.35 for 2013. Because Lidoderm will face generic competition starting this September. So, you want to take that into account… Even so, I think Mr. De Silva could find strategic alternatives to make adjusted EPS start to grow again from 2015 onward. So, yes! I agree and think it is pretty cheap right now.

 

giofranchi

 

[Cunninghamew]

Concur... are you looking at TTM or a forward looking measure. I think expectations are for it to decrease into 14 and 15

[giofranchi]

Concur... are you looking at TTM or a forward looking measure. I think expectations are for it to decrease into 14 and 15

 

Yes, you are right! But I don’t understand how you could predict 2015, when one of the stated objectives of Mr. De Silva’s strategy is to find at least 2 or 3 cash flow accretive acquisitions per year… Most probably ENDP in 2015 will be a very different beast than it is now!

Very very very difficult to predict what will happen with ENDP… just like VRX, it is a strategy game here and how skillfully management will play it…

 

giofranchi

 

[Palantir]

Valeant is kicking a-- right now, I can't understand why Rajiv would leave to come here.

[Phaceliacapital]

I can't seem to find it but I remember an excerpt/interview where it was stated that he has always wanted to do something by himself, which is why a possible Valeant takeover should not be in the cards (but then again, you never know I guess).

[Christopher1]

Rajiv mentioned his reasons during a VRX conference call, he likes to run his own show.

Very unusual for me to listen a CEO let his departing COO speaks in a conference call post separation announcement.

Of course he was highly praised by Pearson.

[giofranchi]

Rajiv mentioned his reasons during a VRX conference call, he likes to run his own show.

Very unusual for me to listen a CEO let his departing COO speaks in a conference call post separation announcement.

Of course he was highly praised by Pearson.

 

Thank you, Cristoforo! :)

 

Giovanni

[dcollon]

Endo Health Solutions Names Don DeGolyer Chief Operating Officer of Pharmaceuticals

Monday, July 22, 2013

 

 

MALVERN, Pa., July 22, 2013 /PRNewswire/ -- Endo Health Solutions Inc. (Nasdaq: ENDP) today announced that it has appointed Don DeGolyer as Chief Operating Officer, Pharmaceuticals, which includes Endo Pharmaceuticals and Qualitest, effective August 1, 2013.

 

"Don is a uniquely qualified, seasoned leader with nearly three decades of experience in the healthcare industry.  Don has broad experience in both branded and generic pharmaceuticals and I have tremendous confidence in his ability to drive operational excellence and growth," said Rajiv De Silva, President and Chief Executive Officer of Endo Health Solutions.

 

"I am extremely excited to join Rajiv and the other members of the Endo team as the company enters a new phase of growth and expansion," said Don DeGolyer.  "I believe that Endo is in an excellent position to deliver value to customers, employees and shareholders over the near term and I look forward to being a part of this exciting transformation."

 

Most recently, Mr. DeGolyer served as President  and CEO of Sandoz Inc., Novartis' North America generic pharmaceuticals unit.  Prior to joining Novartis in 2002, he spent 11 years at Johnson & Johnson in various roles of increasing responsibility, including Vice President of Marketing and Sales, and began his career at Pfizer, Inc.

 

[Cunninghamew]

Just attaching an updated report

ENDP_8-07-13.pdf

[giofranchi]

Endo to Acquire Specialty Generics Company Boca Pharmacal:

 

http://www.endo.com/news-events

 

•Unique Generics Product Portfolio, Attractive Pipeline, Builds On Qualitest's Strength In Controlled Substances

•Transaction Expected To Be Immediately Accretive To Endo's Adjusted Diluted EPS

•Transaction Reflects Endo's Ongoing Transformation of Endo Into a Leading Specialty Healthcare Company

 

Endo Health Solutions (NASDAQ: ENDP) today announced that its Qualitest subsidiary has reached a definitive agreement to acquire privately held Boca Pharmacal, a specialty generics company, for $225 million in cash.  The transaction is expected to enhance the growth platform and pipeline for Endo's Qualitest business and is consistent with Endo's strategic transformation into a leading specialty healthcare company.

 

Boca Pharmacal is a specialty generics company that focuses on niche areas, commercializing and developing products in categories that include: controlled substances, semisolids, and solutions.  Boca Pharmacal's commercial footprint and R&D pipeline are a strong complement to Qualitest.  The transaction is expected to be immediately accretive to Endo's 2013 adjusted diluted earnings per share.  On a stand-alone basis, Boca Pharmacal is expected to generate EBITDA of approximately $50 million in full year 2013.  The deal is expected to close before the end of 2013, subject to standard regulatory requirements.  The transaction will be financed with Endo's current cash on hand. 

 

"The acquisition of Boca Pharmacal is the first of several transactions we plan to execute as we transform Endo into a more focused specialty healthcare company with a lean operating model, able to deliver consistent earnings and revenue growth for our shareholders," said Rajiv De Silva, president and CEO of Endo.  "The acquisition is aligned with our current generics footprint and will meaningfully accelerate the growth of Qualitest in 2014.  I believe that the revenue and earnings contribution of this transaction, combined with the unique commercial portfolio and strong pipeline of ANDAs, make this an ideal fit."

 

giofranchi

[giofranchi]

Title: Endo and BioDelivery Sciences Provide Update on BEMA Buprenorphine Phase III Development Program

 

Date(s): 4-Sep-2013 6:01 AM

 

 

MALVERN, Pa. and RALEIGH, N.C., Sept. 4, 2013 /PRNewswire/ -- Endo Pharmaceuticals Inc., a subsidiary of Endo Health Solutions Inc. (Nasdaq: ENDP), and BioDelivery Sciences International, Inc. (Nasdaq: BDSI) announced today that the companies have completed interim analyses of both the opioid naive and opioid experienced Phase III trials for BEMA Buprenorphine. 

 

The interim analyses were conducted as part of the Phase III protocol to allow for adjustments to the sample size in order to maintain appropriate study power to detect statistically significant differences between BEMA Buprenorphine and placebo.  The analyses were conducted by an independent biostatistician.

 

Endo and BDSI view the outcomes of the interim analyses as encouraging. As a result of the interim analyses, it was determined that no sample size adjustment will be necessary to the opioid naive study.  Additional patients will be added to the ongoing opioid experienced trial to maintain appropriate power to allow for the detection of a statistically significant difference between BEMA Buprenorphine and placebo based on the primary efficacy endpoint.

 

"We are encouraged by the outcomes of the interim analyses which were conducted to determine if the original sample size assumptions were appropriate and to allow for adjustments to the study sample size to preserve appropriate study power," stated Dr. Ivan Gergel, executive vice president of research & development at Endo.  "As a leader in the treatment of chronic pain we are excited about the potential for BEMA Buprenorphine as one of our lead development programs for our branded pharmaceuticals business."

 

"The outcomes of the interim analyses are significant because they utilized actual study data to confirm or adjust sample sizes, and importantly, maintain probability of a successful outcome," said Dr. Mark A. Sirgo, President and CEO of BDSI. "Data from the opioid naive study appear consistent with our original assumptions and no additional patients are required. This study has completed patient enrollment, and we continue to anticipate the study results early next year. We expect that the additional patients required for the opioid experienced trial will result in a slight adjustment to the timing for the completion of that study to mid 2014.  While no major impact is anticipated for the timing of the NDA submission, which was scheduled for the second half of 2014, more definitive timing will be provided when patient enrollment is completed."

 

giofranchi

[giofranchi]

 

MALVERN, Pa., Sept. 9, 2013 /PRNewswire/ -- Endo Health Solutions Inc. (Nasdaq: ENDP), a U.S. based specialty healthcare company, announced today that it had appointed Suketu "Suky" Upadhyay as executive vice president and chief financial officer of Endo, effective September 23, 2013.

 

"We are delighted to have Suky join the Endo team at this pivotal time," said Rajiv De Silva, president and chief executive officer of Endo. "He brings significant healthcare industry experience and a track record of delivering value that will be instrumental in the execution of our new growth strategy. His breadth of experience will be an asset to the company as we chart our course forward."

 

Prior to joining Endo, Mr. Upadhyay served as principal accounting officer and interim chief financial officer of Becton, Dickinson & Company (BD).  In addition to other executive finance roles at BD, he served in various finance leadership roles at Astra Zeneca and Johnson & Johnson. Mr. Upadhyay spent the early part of his career in public accounting with KPMG and received his MBA from The Fuqua School of Business at Duke University.

 

"I am thrilled to join Endo at such an exciting time," said Mr. Upadhyay.  "The company has made significant progress in transforming its business and is well positioned for its next phase of growth. I look forward to working with Rajiv and the team to shape Endo on its path to become a top tier specialty healthcare company."

 

http://www.endo.com/news-events/press-releases

 

giofranchi

[giofranchi]

Goldman makes bullish calls on Auxilium, Jazz, Valeant, Endo - 10:35 AM

•Goldman is out resuming and starting coverage on a bevy of healthcare names. Here are the bullish calls.

•Auxilium Pharmaceuticals (AUXL +2.9%) started at Buy (price target $23) as "very positive feedback from urologists [makes the firm] more comfortable that [AUXL] will be a solid growth story over the next several years." (see recent Xiaflex coverage)

•Endo Pharmaceuticals (ENDP +0.7%) resumed at Buy (price target $52) as new CEO Rajiv De Silva "has a strong track record of delivering value to shareholders." (see coverage of shareholder value initiatives/ restructuring)

•Jazz Pharmaceuticals (JAZZ +0.9%) initiated at Buy (price target $105) as the company's focus on "niche specialty areas that require limited investment, have significant pricing flexibility and have substantial barriers to entry" is underappreciated. Also, Goldman thinks JAZZ is an "attractive acquisition candidate." (see coverage on Irish domiciled takeout chatter)

•Valeant Pharmaceuticals (VRX +1.2%) resumed at Conviction Buy (price target $130) as investors "have not fully recognized the incremental value from its recent strategic acquisition of Bausch & Lomb."

 

giofranchi