Drugmaker Endo International (ENDP) plunged 39% Friday after it delivered a hefty guidance cut driven by weakness in its generics business, dragging nearly every other generic-drug stock down with it.
Endo actually beat analysts’ consensus in Q1, but it cut its full-year earnings guidance by 23% — now $4.50 to $4.80 a share — and trimmed the revenue outlook by 11% to a range of $3.87 billion to $4.03 billion. In the company’s earnings release, CEO Rajiv De Silva blamed “new competitive entrants, including for Voltaren Gel; greater-than-expected price erosion across the Generics sector; and delays on regulatory actions related to certain Endo products.”
It was the second factor that rattled the rest of the generics industry. Teva Pharmaceutical Industries (TEVA) stock fell 6.8% to 50.22, and hit a 19-month low of 50.01. Allergan (AGN), already staggering from the cancellation of its buyout by Pfizer (PFE), hit a two-year low of 195.50 and ended the day at 201.63, down 4.1%, even though it’s selling its generics business to Teva.
Perrigo (PRGO), which cut its own guidance last month, fell 4.8%, to 92.42. Smaller drugmaker Akorn (AKRX), down as much as 20%, ended the day off 7.9%, at 22. Akorn, which has fallen way behind on its accounting due to internal issues, late Friday finally set dates for its Q4 and Q1 earnings releases, for May 9 and May 17, respectively.
Leerink analyst Joseph Schwartz wrote in a research note that Endo’s problems read through most directly to Teva, Akorn and Perrigo, and more moderately to Allergan. Essentially, whoever’s done the most price-hiking on products representing more than 5% of generic sales lately is in the most trouble.
Referring to industrywide data from IMS, Schwartz wrote: “Based on our analysis, Akorn has taken 13 price increases matching the above criteria (44% of IMS generic sales), Perrigo eight (18% of generic IMS sales) and Endo took 17 (17% of generic IMS sales).”
Teva, meanwhile, is due to report its own Q1 earnings and guidance on Monday morning, and Allergan is due before the open the following day.
Endo itself got at least four downgrades from Wall Street analysts Friday, mostly to neutral but one to underweight. It ended the day at 16.17, a seven-year closing low.