Post by
kayaman on Mar 29, 2016 6:59am
Bull turned Bear
After reading the MDandA and listening to the questions on the conference call.. (I suggest everyone do the same) The main issue is currency and a possible Brexit. Their reaffirmed guidance is based on an exchange rate of 1.53. We currently stand at 1.42 and most analysts predict 1.20-1.30 on a Brexit. That's potentially 20% less cash flow coming from AmCo in USD if it happens.. The Euro is predicted to rise against sterling.. so what is that going to do to costs? UKers living in the Eurozone are worried their health benefits will change. What will that do to sales? There are a lot of what ifs.. too many considering the debt load and the narrative of quickly paying off the debt. AMco will reach its milestones so we have to pay Cinven $200 mil. We also have to payoff Amco's commitments of 50 mil. Not to mention the $250 mill in interest payments. The wiggle room is getting kind of small.
We trade at 8x EBITDA to EV (expensive compared to ENDP, MNK..) which was fine if there was confidence in the EBITDA projections. At 5.5 times debt and with Donnatal and Plaquenil weak last quarter and currency headwinds, and every pharma looking wobbly in the US.. this is a scary stock to own short term. If we can navigate this period, and the UK stays in the Eurozone.. long term the bull thesis remains intact. I think the referendum will hold the key to this stock price.
Comment by
Lattice on Mar 29, 2016 7:38am
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