A major drugmaker is crashing nearly 40% because it's having to slash its prices
The generics drugmaker of such pharmaceuticals as Percocet painkillers, is facing a drop in pricing power and scrutiny over its business model, sending the stock sliding.
The company has drawn comparisons to troubled pharma company Valeant, which has caused its shares to already dive from $84.64 a share on May 6, 2015 to $26.59 as of Thursday's close.
This was driven by continued pricing and competitive pressures on our commoditized and pain products.
"To begin, I will provide a snapshot of our first quarter financial results, which despite some headwinds were largely in line with our expectations," said Endo CEO Rajiv De Silva on the company's quarterly earnings call. "However, these headwinds have created substantial challenges to overcome in the remainder of the year."
The biggest headwind that the company continually cited was pricing. Essentially, the company is having to lower prices on its generic drugs made by new acquits and special ity pharmaceutical firm Par Pharmaceuticals, causing profits to sink.
"There are rapidly changing market conditions that have affected both the broader generics sector and Par," said Par CEO Paul V. Campanelli during the earnings call.
"First, we have seen a steep and rapid price erosion caused by payor consolidation that has been more even profound than anticipated. Its effect has exceeded what might have been expected from an ordinary downturn in the industry's traditional pricing cycle."
The challenges led the company to report dismal guidance of earnings per share between $4.50 and $4.80 a share for the full year 2016 versus estimates of $5.69 per share. The company did beat on both first quarter earnings per share, ($1.08 a share against $1.05 a share expected.
The move Friday has dropped the stock by nearly 40% at $16.50 a share as of 11:03 a.m. ET.
