Endo Health Solutions Signs R&D Agreement with Israel’s Trendlines Group (ENDP)

The lower-than-expected fiscal 2012 third-quarter results reported a week ago continue to haunt the share price of pharmaceutical company Endo Health Solutions (NASDAQ: ENDP). Endo continued its unabated downward trend yesterday even after the announcement of an R&D agreement with The Trendlines Group.

The Pennsylvania-based Endo Health Solutions offers products in both branded and generic segments. Apart from that, Endo Health also operates in the device and service sphere. The company’s branded pharmaceuticals segment offers products in the areas of pain management, urology, endocrinology and oncology, while the generic segment offers products in the areas of pain management, urology, central nervous system disorders, immunosuppression and oncology. The devices segment provides technology solutions to physicians providing pelvic health treatment. The services segment primarily offers products and support systems to urologists.

After beginning the 2012 at around $34.00, the share price of Endo Health soared to $37.48 on January 23 owing to a deal with BioDelivery Sciences (NASDAQ: BDSI). The fiscal 2011 fourth-quarter results that beat estimates, followed by a “buy” initiation of Endo Health by Cantor with a target price of $50.00, inspired another uptrend that saw a new 52-week high of $39.29 per share. The uptrend was also aided by the patent protection received for oxymorphone hydrochloride, which is the key ingredient in the company’s pain killer drug Opana. In early May, Endo Health settled a lawsuit with Watson Pharmaceuticals allowing the latter to launch a generic version of Lidoderm in return for one fourth of the profit as royalty. The unimpressive fiscal 2012 first-quarter results followed by a downgrade by “The Street Ratings” from “buy” to “hold” dragged the share price to around $33.00 by mid-May. Endo Health, previously known as Endo Pharmaceuticals Holdings, slid further to $29.03 on June 14 on concerns of deteriorating net income, poor debt management and disappointing return on equity. After hovering around $29.00 until July, the share price exhibited a trend reversal on the basis of fiscal 2012 second-quarter results that beat both top line and bottom line estimates. By mid-August, the share price touched $32.28. However, the dismal guidance below estimates for fiscal 2013 placed the share price once again in the declining orbit. A week prior, Endo Health reported its fiscal 2012 third-quarter results.

Endo Health reported fiscal 2012 third-quarter revenue of $750.5 million and a net income of $54 million, or $0.45 per share. Excluding certain items, Endo Health earned $1.25 per share for the third quarter. Analysts on average expected Endo Health to earn $1.28 per share on revenues of $788.3 million. The results led the share price down to a new 52-week low of $25.71. However, “The Street Ratings” upgraded the stock from “hold” to “buy” on November 7.

Yesterday, The Trendlines Group announced that it has entered into an R&D agreement with Endo Health to co-develop novel medical devices and technologies within the areas of pain and urology. Under the agreement, Trendlines Labs, the technology development arm of The Trendlines Group, will conduct the work.

Commenting on the agreement, Todd Dollinger, Chairman and CEO of Trendlines, stated, “Our work with Endo furthers our market reach and is instrumental to our achieving our mission of creating and developing businesses to improve the human condition.”

Sujat Sukthankar, Endo Vice President, Device R&D, said, “The Trendlines-Endo agreement is in line with our stated vision of sourcing innovation globally.  This partnership complements and bolsters our own internal innovation and product development efforts in the areas of pain and urology.  Through this partnership, we are excited to participate in the vibrant medical technology community in Israel. ”

Endo Health also announced that its subsidiary, Endo Pharmaceuticals, has supplemented its OPANA ER Citizen Petition to include emerging safety data that demonstrate lower abuse rates for the reformulated OPANA ER (oxymorphone HCl).

Endo Health ended yesterday’s trading session at $26.48 per share, down $0.44 or 1.6% on a volume of 2.22 million shares.

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Published by Steve Hackney

Steve Hackney is a corporate finance professional with over 14 years of experience in cash management and investing. He earned a Bachelor of Science in Finance from Florida State University and holds a Certified Treasury Professional certification. Steve lives in Orlando, Florida with his family.