The Endo a CEO

If only all pharmaceutical stock price gains were so easy. Shares of Endo Pharmaceuticals (NYSE: ENDP  ) rose more than 7% yesterday after its CEO Peter Lankau resigned.

Lankau had been with Endo since 2000, serving as its CEO for almost three years. Under his tenure, Endo successfully launched or acquired several pain-related drugs, including opioid compound Opana ER and pain patch Synera. Unfortunately, Endo's pipeline hasn't been performing up to snuff recently, after several lead drugs either did poorly in clinical testing, such as its ketoprofen pain patch, or failed to gain additional FDA approvals, like potential menstrual migraine drug Frova.

All these setbacks have prevented Endo's stock from performing up to my previous hopes last year. While 365 days generally don't make or break a drugmaker, Endo has enjoyed few successes on any fronts outside its Lidoderm and Opana sales growth in 2007.

Lankau's resignation could signal any number of things. With more than $880 million in cash and equivalents in the bank at the end of the third quarter, Endo has to do something with its war chest. Many investors and analysts (like myself) were concerned about Lankau's announced intentions to diversify Endo away from its traditional focus on pain drugs and into new therapeutic areas. Lankau never got the chance to make such a diversifying acquisition, and he did sign a sensible development deal recently with Alexza Pharmaceuticals (Nasdaq: ALXA  ) . But perhaps the activist investors calling for a better use of Endo's cash convinced the board of directors that a change in management was overdue.

Sure, a new CEO will probably do things differently operationally, or change the financial structure of Endo. But the company's pipeline won't magically get restocked with new drugs, nor will Lidoderm's sales growth change overnight, just because there's a new CEO at the wheel. Let's at least wait and see who takes Lankau's spot (and more importantly, what this person does with all of Endo's cash) before calling this a coup or defeat for Endo shareholders.


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