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Endo Health Falls As It Lowers 2013 Forecasts

From Associated Press (January 4, 2013)

NEW YORK -- Endo Health Solutions Inc. shares fell to their lowest point in more than two years on Friday as the company provided a revised 2013 forecast below Wall Street’s expectations.

THE SPARK: Endo now foresees 2013 adjusted earnings in a range of $4.40 to $4.70 per share on revenue of $2.8 billion to $2.95 billion.

The company said in December that it didn’t expect to reach its initial 2013 guidance of $5.20 to $5.40 per share in adjusted net income and $3 billion to $3.2 billion in revenue. Analysts surveyed by FactSet forecast earnings of $5.05 per share on revenue of $3.05 billion.

Endo expects sales of pain drug Opana ER will fall by 20 percent from 2012’s projected $300 million.

The company still expects 2012 adjusted earnings at or below the low end of its outlook for $5 to $5.10 per share. Analysts expect $5 per share.

THE BIG PICTURE: Over the last few years Endo has expanded from a drug company into a larger conglomerate that sells both branded and generic drugs, develops medical devices, and makes urology products and software to manage medical practices.

In November the company reported disappointing third-quarter pharmaceutical sales and last month it announced that President and CEO David Holveck will retire in 2013. It has revised forecasts for 2012 and 2013 over the past few weeks.

THE ANALYSIS: Stifel Nicolaus’ Annabel Samimy said in a client note that Endo is finally providing a realistic outlook for 2013 and the company could make a strategic shift once it gets a new CEO in place.

Samimy kept a "Buy" rating on Endo shares and reduced his price target to $38 from $40.

Irina Rivkind of Cantor Fitzgerald said that most of Endo’s bad news is accounted for now that it has provided more conservative guidance, its CEO is set to retire and it’s given more near-term visibility on Opana ER and its Lidoderm pain patch.

Rivkind kept a "Hold" rating on Endo with a $26 price target.

SHARE ACTION: Shares of Endo fell $1, or 3.8 percent, to $25.25 in afternoon trading. The stock dropped to $25 earlier in the session, its lowest level since August 2010.

Posted: January 2013