A pharmaceuticals sector exchange traded fund perked up Friday after Endo International (NasdaqGS: ENDP) Chief Executive Rajiv De Silva stepped aside to be replaced by generics division head Paul Campanelli.
The SPDR Pharmaceuticals ETF (NYSEArca: XPH) rose 0.8% Friday. Meanwhile, ENDP shares jumped 16.1% on the shift in management.
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XPH follows a more equal-weight indexing methodology and includes a 4.3% weight in ENDP. Consequently, the pharma EF has a larger tilt toward smaller companies, including 16.2% micro-caps, 31.1% small-caps and 17.9% mid-caps, along with 8.9% large-caps and 26.0% mega-caps.
Under De Silva, a former senior executive at Valeant Pharmaceuticals (NYSE: VRX), Endo’s business model centered around acquisitions to fuel growth, Reuters reports.
Endo shares have declined 67% this year, among the worst performer in the broader health care index. The company also maintained its profit and revenue forecasts for the year.
Analysts argue that Campanelli’s appointment revealed the growing importance of Endo’s generics business.
“We are not surprised by this transition as De Silva’s skill-set may not be helpful to the new direction of this company,” Mizuho analyst Irina Koffler said in a note.
Campanelli served as president of Endo’s generic and OTC drugs business, Par Pharmaceutical, which makes up about 60% of Endo’s total revenues through the first half of 2016, 24/7 Wall St. reports.
“Given the continued evolution of Endo’s business and Paul’s impressive track record of delivering strong operating results, the Board concluded that Paul is the right leader for Endo at this juncture as we focus on execution and increasing the value of our attractive U.S. Branded, U.S. Generic and International pharmaceutical assets,” Roger H. Kimmel, board chair at Endo, said.
ENDP also makes up 1.1% of the Market Vectors Generic Drugs ETF (NasdaqGM: GNRX), the only generics-focused U.S.-listed ETF. GNRX tries to reflect the performance of the Indxx Global Generics & New Pharma Index, which tracks a number of global drug makers that generate significant revenue stream from generic drug sales.
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