Ahead of the Bell: Analyst downgrades Endo Health

The Associated Press
Associated Press

Endo Health Solutions Inc. is heading into a prolonged restructuring period when the drug developer and medical device maker needs a more dramatic shake-up, according to a Cantor Fitzgerald analyst who lowered her rating on the stock.

The Malvern, Pa., company said Wednesday it will explore strategic options for two businesses and eliminate almost 700 jobs, an announcement that followed several years of expansion.

The company said it will consider options for its HealthTronics urology business and for its branded drug development platform. It also plans to eliminate about 15 percent of its staff positions and reduce annual spending by about $325 million. Endo had 4,629 employees as of Feb. 20.

Endo plans to focus on branded drugs, generic drugs made by its Qualitest unit, and its American Medical Systems business, which sells urology products and services. The company also wants to make its research and development more efficient, focusing on developing drugs that will bring it more revenue in the near future like generic drugs and lower-risk projects.

Analyst Irina Rivkind said in a Thursday morning research note the company needs to take bolder steps to counter competition from cheaper generic drugs for several of its products, including the pain drug Opana ER. Rivkind wrote that the company's management doesn't seem eager for a "larger, more transformative transaction."

The analyst said she thinks investor money should be spent elsewhere during the expected lengthy restructuring.

"We prefer a simpler story, period," she said.

Rivkind downgraded the shares to "Sell" from "Hold" and set a $30 price target.

The stock slipped a penny to $35.95 Thursday before markets opened. Endo Health shares closed Wednesday at $35.96, up about 37 percent so far this year after closing 2012 at $26.23.