Sector News

Struggling Endo takes $3.5B body blow as generics pricing heads south

March 1, 2017
Life sciences

The pricing pressure that’s been tolling the generics industry has slammed into Endo.

On Tuesday, the company recorded a $3.5 billion write-down, with a generics charge making up the lion’s share.

The move reflects “the quickly evolving new realities of the U.S. generics external environment,” company CFO Blaise Coleman told investors on a conference call. And that includes “a change in the value derived from estimated future pricing levels.”

Translation? Generic drugs are suffering from a pricing squeeze similar to what’s happening in the branded market. And with their margins slim to begin with, copycat drugmakers have less of a buffer against shaved-down prices.

Undeniably, $3.5 billion is a hefty sum to pay, especially considering that Endo’s big generics buy—Par Pharmaceutical—cost it $8 billion.

But Endo is far from the only company that’s feeling the pricing burn. Generics leader Teva, for one, has been faulting generics price erosion for some of its own struggles, and unit head Dipankar Bhattacharjee recently forecast a decline in U.S. net prices of about 5% in the giant’s base business.

Endo, for its part, saw its generic base decline by 23% in the fourth quarter, and the Dublin drugmaker is estimating a further slide of about 30% in 2017. That figure “appears to capture high-single-digit price erosion along with other competitive events,” RBC Capital Markets analyst Randall Stanicky wrote in a note to clients.

And it’s not just pricing pressure that’s plaguing copycat drugmakers. Coleman also cited “increased buying power from the continuing consolidation of the customer base, increased levels of competition due to the new low-cost competitors,” and the FDA’s stepped-up pace on generics approvals.

Misery may love company, but generics trouble is the last thing struggling Endo needs as it struggles to turn itself around. While the drugmaker beat consensus with what Stanicky called a “solid” fourth quarter, “2017 guidance came in even below already diminished expectations,” Barclays’ Doug Tsao wrote in his own research note. Endo’s $3.45 billion to $3.6 billion revenue range fell far short of the consensus $3.83 billion estimate, while an adjusted earnings range of $3.45 to $3.75 per share didn’t come close to Wall Street’s $4.29 prediction.

That’s not to say the company’s new management—led by CEO Paul Campanelli, who took over for Valeant vet Rajiv de Silva last September—hasn’t been making moves. Endo kicked off three phases of restructuring since last May, cutting more than 1,000 jobs in the process. It’s also sidelined its long-core pain business to start down a new strategic path, and Tuesday it announced it would sell off its South African Litha Healthcare Group for $100 million, too.

With Endo transitioning “from a company that grew through debt-fueled M&A to one that will primarily focus on organic growth, … it will take some time to successfully address the challenges that our company faces today, and it will take time to reposition Endo for long-term success,” Campanelli stressed on the company’s earnings conference call. But “we are ready, and we have already begun to meet these challenges and are very excited about our future.”

By Carly Helfand

Source: Fierce Pharma

comments closed

Related News

January 29, 2023

Colorcon, Inc. signs Put agreement with intent to acquire controlled atmosphere packaging specialist Airnov Healthcare Packaging

Life sciences

Airnov provides critical healthcare industries with high-quality, controlled atmosphere packaging, to protect their products from moisture and oxygen. The business has manufacturing facilities in the USA, France, China and India and employs around 700 people.

January 29, 2023

Takeda pledges up to $1.13B for rights to Hutchmed’s cancer drug fruquintinib outside of China

Life sciences

Takeda of Japan has partnered with Hong Kong-based Hutchmed, gaining the commercial rights to colorectal cancer drug fruquintinib outside of China for $400 million up front, plus $730 million in potential milestone payments. Takeda also will help develop fruquintinib, which can be applied to subtypes of refractory metastatic colorectal cancer, regardless of biomarker status, the companies said.

January 29, 2023

Vir taps Bayer dealmaker Marianne De Backer as its next CEO

Life sciences

On April 3, Scangos, who’s been chief executive officer at Vir since the start of 2017, will hand over the reins to Marianne De Backer, Ph.D. De Backer comes over from Bayer, where she currently heads up pharmaceutical strategy, business development and licensing. Alongside her CEO appointment, De Backer is set to join Vir’s board of directors, the company said Wednesday.

How can we help you?

We're easy to reach