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Thursday, 09 August 2018 12:37

Perrigo to sell off underperforming generic drug business

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ALLEGAN — Perrigo Co. plc plans to “separate” its generic drug business that’s faced significant price pressure and generated lower sales.

The company hired Barclays as a financial adviser to lead the move, which Perrigo (NYSE: PRGO) aims to complete by the second half of 2019. Separating the division would allow Perrigo to focus on its consumer business segments that produce over-the-counter, store-brand medications.

“Perrigo’s consumer and Rx platforms are both well positioned, but they are also navigating divergent industry dynamics with unique strategic, financial and operational opportunities and requirements. For these reasons, the board believes the differentiated and diversified Rx business has the potential to realize greater value outside of Perrigo,” Rolf Classon, chairman of Perrigo’s board of directors, said in a statement.

“After a rigorous analysis of the Rx business, we believe that fully pursuing this separation is in the best interest of Perrigo shareholders. We intend to begin the preparations for a separation of the Rx business to shareholders as we continue to analyze numerous value-enhancing options including a possible tax-efficient separation to shareholders, a sale or merger.”

Known formally as Prescription Pharmaceuticals, or Rx, the generic drug division produces topical medicines that include creams, foams, mousses, gels, liquids and inhalable products.

The division recorded sales of $209 million for the second quarter, down 13.2 percent from the $240 million a year earlier. The division recorded operating income of $57 million, versus $69 million in the first half of 2017.

In reporting second quarter results this morning, Perrigo CEO Uwe Roehrhoff said the division “performed below our expectations and experienced weakness due primarily to a shortfall in new product launches coupled with challenging market dynamics, which is expected to carry forward into the second half of the year.”

“I am extremely disappointed in this development,” he said.

Perrigo, which has its corporate headquarters in Dublin, Ireland but operates from Allegan, overall reported second quarter sales of $1.18 billion, down 4.2 percent from $1.23 billion in the same period of 2017.

Quarterly net income was $36 million, or 26 cents per diluted share, versus a $70 million loss a year earlier. Minus one-time charges, Perrigo recorded $169 million in adjusted net income for the quarter.

Midyear sales declined slightly to $2.40 billion from $2.43 billion in the first half of 2017. Net income for the first six months of 2018 totaled $117 million, or 84 cents per diluted share.

Perrigo expects 2018 sales of $4.8 billion to $4.9 billion with adjusted operating income of $960 million to $980 million.

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