Endo Buys American Medical - Analyst Blog
22 June 2011 - 3:56AM
Zacks
Recently, Endo Pharmaceuticals Holdings Inc.
(ENDP) completed the purchase of American Medical Systems, a
leading pelvic-health device provider, in an all cash deal worth
approximately $2.9 billion.
By acquiring American Medical, Endo Pharma, a US-based specialty
healthcare solutions company that develops branded products and
specialty generics, diversified its business and bolstered its
urology portfolio.
Endo Pharma, while announcing the deal in April 2011, stated
that it expected the deal to be accretive to its adjusted earnings
with immediate effect following the closure. Endo Pharma had also
announced that it expected its 2012 and 2013 adjusted earnings to
be boosted by $0.60 and $0.80 per share respectively, as a result
of the merger.
We note that the purchase of American Medical is the fourth
major acquisition for Endo Pharma over the last one year. Endo
Pharma completed three major acquisitions in 2010 to bolster its
business.
In December 2010, Endo acquired privately held generic company
Qualitest Pharmaceuticals for $1.2 billion. During 2010, Endo
Pharma also bought Penwest Pharmaceuticals Co. and HealthTronics
Inc., a provider of urology products and services.
We believe that these acquisitions are steps towards countering
the loss of revenues due to the generic threat hanging over Endo
Pharma especially on its lead pain drug Lidoderm. Endo Pharma’s
pain products compete with players such as Pfizer
(PFE) and Cephalon Inc. (CEPH).
Apart from announcing the completion of the American Medical
deal, Endo Pharma stated that it will come up with detailed
financial guidance with the announcement of financial results for
the second quarter of 2011 in August.
Our Recommendation
We have a ‘Neutral’ stance on Endo Pharma. The stock carries a
Zacks #3 Rank (Hold rating) in the short run.
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