ALLEGAN — Perrigo Co. plc intends to restate financial reports for two previous fiscal years and 10 quarterly periods after agreeing to reclassify royalty revenues from the multiple sclerosis drug Tysabri that it sold two months ago.
President and CEO John Hendrickson said Tuesday that financial reports for fiscal years 2015 and 2014, plus a three-month period between December 2013 and October 2016 “can no longer be relied upon.”
In a conference call with brokerage analysts, Hendrickson emphasized that the need to restate financial reports “is not the result of any misconduct” but the sale of the Tysabri drug.
Perrigo sold Tysabri, which it acquired in February 2014 as part of the $8.6 billion deal for Dublin, Ireland-based Elan Corp. plc. Perrigo sold the royalty rights to Tysabri on Feb. 22 this year to Royalty Pharma for up to $2.85 billion. Perrigo plans to use the proceeds from the sale to pay down debt.
The need to restate financial statements stems from a correction in how Tysabri royalties are accounted for by independent auditor Ernst & Young, Chief Financial Officer Ron Winowiecki said. After the deal closed, Ernst & Young sought to re-classify Tysabri from an intangible asset to a financial asset, resulting in a need to restate financial reports, which Perrigo’s board agreed to do last week, Winowiecki said.
The accounting change will not materially affect Perrigo’s cash flow, he said.
“Cash is still cash,” Winowiecki said.
In announcing the need to restate financial reports, Perrigo reported preliminary net sales of $1.2 billion. The company expects full 2017 sales to $4.6 billion to $4.8 billion, minus the $359 million from Tysabri royalty revenues that had previous sales guidance at $5.0 billion to $5.2 billion.
“We posted a good start to the year,” Hendrickson said in Tuesday’s conference call.