For a company specializing in pain relief, Endo International (ENDP) does seem rather fond of testing investors’ limits of suffering. However, it could be the company has located the spot where the pain is acute enough for investors to take flight.
Shares took a beating last Friday, falling by 40%, after news circulated that Endo had contacted Alvarez & Marshal. By tapping the financial restructuring adviser, it seems the company is exploring different options on how to handle its ongoing opioid litigation. A chapter 11 filing could be on the table, as the drugmaker is not only currently flooded with 3,000 outstanding lawsuits concerning its Opana pain medicine – which is alleged to have played a big part in the opioid crisis – but has a debt load of over $6.5 billion.
Management has so far remained schtum on the matter, and as has become customary, refused to divulge any new info on the 2Q21 earnings call on August 6.
The company did recently agree on a $35 million settlement with the state of Tennessee, and factor in the anxiety around manufacturers being left out of the talks on a global opioid settlement, Raymond James’ Elliot Wilbur says the general market sensitivity to management opening talks with an adviser is “not necessarily a surprise.”
“We believe that this move suggests that there is no pending near-term solution on the table for ENDP,” the analyst further said, “And the company exploring restructuring options indicates that any potential near-term resolution has not yet eliminated the possibility of meaningful cash costs.”
It’s not unreasonable for a company in Endo’s position to be exploring such a possibility, Wilbur believes, and until any further news emerges on the matter, the analyst remains on the sidelines with a Market Perform (i.e., Hold) rating and no fixed price target in mind. (To watch Wilbur’s track record, click here)
All in all, ENDP gets a Moderate Buy consensus rating, based on an even split among 4 reviews, of 2 Buys and 2 Holds. Risk tolerant investors will probably take note here; going by the $5 average target, shares could be staging a big comeback. The figure indicates potential one-year gains of ~89%. (See ENDP stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
