Endo Pharmaceuticals (NASDAQ:ENDP)

Aggressive expansion into urology and generic drugs. Have been expanding with the purchase of smaller companies. Forward P/E of 5.5. Excellent stock price at this level.

The last patent for Lidoderm expires in 2014. Lidoderm is responsible for aroung 35% of current revenues, but more importantly, around 50% of gross profit.
Bracing itself for the Lidoderm's patent expiration, the management started a serious of acquisitions, most notably Qualitest in November 2010, for about 1.2 Billion. Qualitest is a generic drugs company. While this acquisition boosts revenues, it doesn't boost profits as much, since the generics is by nature an industry with lower margins.
Meanwhile, the company's debt went out of control, with net tangible assets of about -3.5 Billion.
In the post Lidoderm era, the companies profits are expected to decline, and this high debt may prove to be a problem.
If one of their current pipeline products will boom, Endo may thrive, but there can be no guarantee for such a scenario.
For now, Endo is a poor value play.