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What happened
Shares of Endo International plc (ENDP), a global specialty pharmaceutical company, gained 19.2% in August, according to data from S&P Global Market Intelligence. A stronger-than-expected second-quarter earnings report provided investors some much-needed pain relief.
So what
The troubled purveyor of pain meds Opana and Percocet finally has something to feel good about. Second-quarter revenue rose 25% compared to the prior-year period, mostly due to the $8.05 billion acquisition of Par Pharmaceuticals last September.
Bottom-line results provided further encouragement. The company reported a gain of $1.54 per share in the second quarter. This was a vast improvement over the loss of $1.35 per share in the prior-year period, and the more recent loss of $0.60 per share during the first three months of the year.
Now what
A positive bottom line is something Endo International investors haven't seen in a while, but it isn't out of the woods just yet. Adjusted pre-tax profit from its U.S.-branded pharmaceutical segment, which includes Lidoderm, Opana ER, and Percocet, plummeted 27.6% over the prior-year period to $122.42 million. The recent withdrawal of an application to include specific abuse deterrent labelling for Opana ER following discussions with the FDA doesn't bode well for the segment's future.
Despite last month's lift, Endo International stock is still about 72% lower than where it stood a year ago. It may be trading at an ultra-low price of about 4.5 times this year's earnings estimates, but I wouldn't recommend trying to catch this falling knife just yet.
ENDP Total Interest Expense (Quarterly) data by YCharts.
Last year's share dilution and increased debt load used to acquire Par Pharmaceutical may have diversified its revenue stream somewhat, but Endo's operations are still posting losses. The company finished June with about $667 million in unrestricted cash on the books, but servicing its debt load is awfully expensive. Further share dilutions may be necessary just to keep the lights on if its performance doesn't improve drastically in the quarters ahead.
