Endo Products Thumb

Source: Endo International

What: Despite reporting third quarter financial results that were better than hoped, shares in specialty healthcare company Endo International plc(NASDAQ:ENDP) dropped by 14.6% earlier today.

So what: In the third quarter, Endo International reports that sales grew 14% year-over-year to $746 million, leading to adjusted EPS of $1.02 that was a penny lower than the third quarter last year.

Take Long View

U.S. sales of branded drugs climbed 27% to $305 million due to the inclusion of revenue from Auxilium Pharmaceuticals, a company that Endo International bought earlier this year that markets testosterone products.

U.S. generic sales also improved in the quarter, climbing 15% to $368 million from last year. Endo International closed on its acquisition of Par Pharmaceutical in September, which means that Par should begin making a more meaningful contribution to Endo International's generics business in the fourth quarter.

Additionally, Endo International delivered international sales of $73 million in Q3, and it affirmed its previously announced full year sales and profit forecast for revenue of between $3.22 billion and $3.27 billion and adjusted, diluted EPS of between $4.50 and $4.60.

Now what:  Overall, Endo International's adjusted results appear to be solid, suggesting that investors are focusing on the fact that the company recorded $240 million in pre-tax, non-cash impairment charges during the quarter, including a $150 million charge resulting from lackluster sales of Stendra. Stendra, an erectile dysfunction drug, also resulted in Endo International recording a $680 million charge-off in its Urology, Endocrinology, and Oncology business unit. Overall, Endo International's various charge-offs resulted in a reported GAAP net loss of $3.84 per share in Q3.

The amount of the charges taken by Endo International may have surprised investors because Endo International invested in a relaunch of Stendra to boost scripts in Q2. However, Endo International had indicated that it would evaluate its spending in support of Stendra to determine whether or not it would make future investments. Given these charge-offs, it appears Endo International is ready to shift its attention from Stendra to other more promising drugs, including Belbuca and Xiaflex.

Although Stendra has been a disappointment, the Par Pharmaceutical deal and Endo International's third quarter guidance for mid to long range double digit revenue growth may make this company worth keeping an eye on over the coming quarters, especially given that its shares are trading at just 8.3 times forward EPS estimates. 

 

Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.