QUOTE AND NEWS
Market Intelligence Center  Aug 26  Comment 
MarketIntelligenceCenter.com's patented trade-picking algorithms have identified an attractive covered-call trade on Endo Pharmaceuticals Holdings Inc (ENDP). Look at the Oct. '14 $65.00 covered call for a net debit in the $62.64 area. This trade...
SeekingAlpha  Jul 31  Comment 
Endo International (NASDAQ:ENDP) Q2 2014 Earnings Call July 31, 2014 8:30 am ET Executives Blaine T. Davis - Senior Vice President of Corporate Affairs and President of Endo Ventures Rajiv Kanishka Liyanaarchchie De Silva - Chief...
MarketWatch  Jul 7  Comment 
BioDelivery Sciences leaps 22% on positive trial data
StreetInsider.com  Jul 7  Comment 
Visit StreetInsider.com at http://www.streetinsider.com/Corporate+News/Endo+%28ENDP%29%2C+BioDelivery+Sciences+%28BDSI%29+Report+BEMA+Buprenorphine+Met+Primary+Efficacy+Endpoint+in+Phase+III/9640543.html for the full story.
MedPage Today  Jul 3  Comment 
(MedPage Today) -- Epidural glucocorticoid-lidocaine injections for lumbar spinal stenosis did not improve pain or functioning at 6 weeks compared with epidural injections of lidocaine alone.
Forbes  Jun 27  Comment 
Prescription and OTC mouth anesthetics should not be used in infants and small children because of the potential for seizures, brain injury, and heart disturbances. Cold, not frozen, teething rings or gum massages are best, and most effective.
MedPage Today  Jun 26  Comment 
WASHINGTON (MedPage Today) -- Topical viscous lidocaine should not be used to treat infants' teething pain, the FDA said Thursday, emphasizing that teething pain generally needs no medicinal treatment.
StreetInsider.com  Jun 26  Comment 
Visit StreetInsider.com at http://www.streetinsider.com/Corporate+News/Endo+Int%27l+%28ENDP%29+Prices+%24750M+Senior+NOtes+Offering/9615892.html for the full story.
MarketWatch  Jun 25  Comment 
Whistleblower Peggy Ryan is about to receive millions for blowing the whistle on her employer’s health-care fraud, but she didn’t do it for the money, writes Al Lewis.
StreetInsider.com  Jun 24  Comment 
* Validus Holdings, Ltd. (NYSE: VR) announced the signing of a definitive agreement to acquire Western World Insurance Group, Inc. (“Western World”). Western World, through its subsidiaries, is a specialty lines insurance company with a 50...




 
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Endo Pharmaceuticals Holdings is a pharmaceutical company that specializes in prescription pain relief medication. Their best-known brand-name drugs are Lidoderm (lidocaine), a patch designed for post-shingles pain, and Percocet (oxycodone) and Opana (oxymorphone), opioid pain medications taken orally. Endo Pharmaceuticals earns revenues from sales of their drugs and licensing of patents, but contracts the manufacture of its drugs to third parties.

A single drug, Lidoderm, accounted for nearly two thirds of the company's total revenues in the first quarter of 2008.[1]Lidoderm, which was released in 1999, has driven the majority of the growth of the company's total revenues, from $615 million in 2004 to $1.085 billion in 2007.[2]Endo's other brand-name medications, including Opana and Percocet, accounted for no more than a combined 27% of revenues in the same year.[3]Analysts predict that Lidoderm could face generic competition as early as 2013.[4] As of September 2008, Endo is also engaged in Phase II and Phase III clinical trials for several new pain medications, including medications for pain in cancer sufferers.

Company Overview

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Endo Pharmaceuticals owns the rights to several prominent brand-name pain relieving medications, most notably Lidoderm, a pain-relief patch developed primarily for post-shingles pain, but also prescribed "off-label", meaning for non-shingles related pain. The company also has patents for such brand-name pain medications as Percocet and Opana. Lidoderm is the main source of Endo's revenue: in the first quarter of 2008, Lidoderm sales were $180 million and accounted for 62% of total sales.[6]

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As a holding company, Endo Pharmaceuticals manufactures its drugs through third party entities rather than in-house, and its research and development capabilities are limited.[8] The company instead focuses on acquisitions, licensing, collaboration on patents, and reformulating existing drugs and delivery systems rather than discovering new ones. For instance, in March of 2008, Endo reached an agreement with Novartis AG (NVS) for the exclusive marketing rights of the anti-arthritic pain medication Voltaren Gel. Endo purchased a five-year license to market the drug at an upfront cash payment of $85 million plus guarantee of royalties to Novartis.[9]


Trends and Forces

Market Conditions Have Constrained Endo's Access to Capital for Clinical Trials and Acquisitions

The company's 10-Q, issued in June of 2008 attributed a constraining of liquidity to $317 million of illiquid auction-rate securities, which the company has been unable to sell off during worsening credit markets. Endo holds these securities with long-term maturity rates, which are unable to be auctioned off as short-term investments and remain on the balance sheet until market conditions improve. As of September of 2008, these assets remain illiquid on the company balance sheet.[10]


Endo's business strategy is maintain to a large amount of liquid assets for the purposes of acquisitions of patents obtained by other companies. They also require liquid assets on hand for the funding of human clinical trials. For the pharmaceutical industry, drug research and development represent a risky and expensive, but necessary, investment.[11] As of September of 2008, Endo Pharmaceuticals has two products in Phase III clinical trials and four in Phase II trials, including several drugs to treat cancer. While representing an area of expansion for company revenues, Endo has yet to conclude trials or to receive FDA approval for a finished product. [12]

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Generic Competition Poses Threat to ENDO’s Highly Concentrated Drug Portfolio

The patent for Endo’s top selling drug Lidoderm (62% of revenue) has not been challenged by generic companies yet, but the company anticipates that a filing will be made between 2008-2009.[14] However, Opana, the company’s second best selling drug (X% of revenue) is facing patent challenges filed by both IMPAX and Activis, two generic pharmaceutical companies. These applications were still pending as of Q3 2008.[15]

Additionally, Endo has not (as of September 2008) faced any ANDA filings on behalf of a generic version of Lidoderm, but the company anticipates that a filing will be made between 2008-2009.[16]

Regulators are Investigating Endo for "Off-Label" Prescription of Lidoderm

Endo has been implicated by federal drug regulators for involvement in the "off-label" prescription of its largest brand, Lidoderm. To prescribe a label "off-label" means to illegally issue a drug for a treatment other than the disease for which it has been developed. The Office of Inspector General issued a subpoena to Endo Pharmaceuticals in January of 2007, alleging that Endo's sales and marketing of Lidoderm was encouraging the illegal prescription of the patch to people without shingle-related pain.[17]The company claimed in its 10-Q of March 2008 that it is cooperating fully with the subpoena. As of September of 2008, the investigation into Endo Pharmaceuticals by the federal government is ongoing, and no fines or penalties have been issued.[18]

Competition

As a pharmaceutical holding company focused specifically in the area of pain medication, Endo Pharmaceuticals competes against any number of other pain relief drugs, including generics of its own brand names. The number of other pain medications and their patent owners are too great to list. However, there are some some direct competitors to Endo Pharmaceuticals' drugs, in terms of chemical similiarity, produced by pharmaceutical industry players like DuPont (DD) and Abbott Laboratories (ABT). Endo only has a few companies who compete directly with products such as Percocet, and Endo's main moneymaker, Lidoderm, currently does not have any competition, generic or brand name. Morningstar has anticipated that a generic Lidoderm will debut on the market within 2013, slashing an anticipated $1 billion dollars in annual revenue in half.[19]

Oxycodone Brands

Purdue Pharma patented and co-promotes the prescription drug OxyContin (oxycodone) in tandem with Abbott Laboratories for the treatment of pain relief. Oxycodone is an opioid analgesic with chemical similarities to heroin and morphine.[20]This drug competes directly with Endo's brand-name opioid analgesic Percocet (oxycodone and acetaminophen). The difference is that Percocet is not time-released and contains an extra active ingredient, acetaminophen, which limits its potential for abuse more than Oxycontin.[21]

Purdue Pharma LP has received particular criticism for the dangers posed by its Oxycontin brand. In May of 2007, Purdue Pharma executives pled guilty to knowingly falsifying information of Oxycontin's addictiveness and potential for abuse to the public. [22]

Oxymorphone Brands

Oxymorphone is a semi-synthetic opioid substitute marketed for prescription pain relief. Like oxycodone, it is a powerful drug with a potential for abuse. DuPont Pharmaceuticals, a subsidiary of DuPont (DD), manufactures and markets the brand name oxymorphone medication Numorphan.

This competes directly with Endo Pharmaceuticals' Opana and Opana Extended Release, which received FDA approval in 2006. The only difference is that Endo's Opana, a relatively new drug on the market, is the only oxymorphone medication available by tablet, whereas previous delivery systems were limited to injection.[23]




References

  1. ENDP, 2008 10-Q, Item 2: Management's Discussion, Page 51
  2. ENDP Annual Financial Statements, Google Finance
  3. ENDP, 2008 10-Q, Item 2: Management's Discussion, Page 51
  4. Morningstar Analyst Report, July 22, 2008; Thesis, Page 1
  5. ENDP, 2008 10-Q, Item 2: Management's Discussion, Page 51
  6. ENDP, 2008 10-Q, Item 2: Management's Discussion, Page 51
  7. Google Finance, ENDP Income Statement, Fiscal Year 2007
  8. Morningstar Analyst Report, July 22, 2008; Valuations, Page 3
  9. ENDP, 2008 10-Q, Item 1: Financial Statements, Page 14
  10. ENDP, 2008 10-Q, Part 1: Financial Information, Page 13
  11. "What's my metric?" by David Katz, November 2005, www.CFO.com
  12. ENDP, 2008 10-Q, Item 1: Financial Information, Page 12
  13. ENDP, 2008 10-Q, Part 1: Financial Information, Page 13
  14. ENDP Annual Financial Statements, Google Finance
  15. ENDP, 2007 10-K, Item 1: Risk Factors, Page 4
  16. "Endo: The Pain and the Gain", November 2005, www.businessweek.com
  17. ENDP, 2007 10-K, Item 1: Risk Factors, Page 8
  18. ENDP, 2008 10-Q, Part 1: Financial Information, Page 26
  19. Morningstar Analyst Report, July 22, 2008; Thesis, Page 1
  20. U.S. Drug Enforcement Administration, August 2006
  21. Center for Substance Abuse Research, May 2, 2005
  22. "Purdue Frederick Pleads Guilty in Oxycontin Case", Reuters, May 10, 2007
  23. "FDA OKs the Pain Drug Opana", WebMD News, June 2006, www.webmd.com
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