What happened

Shares of Endo International (ENDP) jumped 37.9% in August according to data provided by S&P Global Market Intelligence after the biotech released second quarter earnings and raised its 2018 revenue and earnings guidance.

So what

Like other generic-drug companies, Endo's generic-drug segment is struggling. U.S. generic-drug sales came in at $241 million in the second quarter, compared with $383 million in the year-ago quarter. That's a 37% decrease. Yikes.

Fortunately, most of the rest of Endo's products are doing well. Sales of Xiaflex, which treats a pair of rare diseases called Dupuytren's contracture and Peyronie's disease, jumped 27% year over year. And sales of sterile injectable drugs were up 21%.

All told, revenue was down 18% year over year, but generic drugs tend to be a low-margin game, so the increase in mixture of branded products helped increase Endo's gross margin by 1 percentage point over the year-ago quarter. Endo still lost $52 million in the second quarter, but that was down from a $696 million loss in the year-ago quarter.

Doctor talking to patient in exam room

Image source: Getty Images.

Now what

With things appearing to turn around for Endo, management raised revenue guidance to a range of $2.75 billion to $2.85 billion, up from previous guidance of $2.6 billion to $2.8 billion. On the bottom line, management is looking for adjusted diluted earnings from continuing operations to be between $2.50 and $2.60 per share.

Endo continues to play into its new strength with the acquisition of Somerset Therapeutics that will boost the company's sterile injectables business when it closes in the fourth quarter; since the company announced plans to make the acquisition, Somerset has received six FDA approvals, highlighting the potential growth. During the quarter, Endo also struck a deal with Nevakar to develop five injectable products under the FDA's 505(b)(2) program that allows less clinical trial data to be generated for drugs being developed with a different route of administration.

Endo has a long way to go to get back to the heydays of 2015, but at least the second quarter was a turn in the right direction.