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Perrigo CEO John Hendrickson Perrigo CEO John Hendrickson

Perrigo to cut 750 positions, sell MS drug royalty stream for up to $2.85B; CFO departs for Calif. pharma company

BY Monday, February 27, 2017 09:10pm

ALLEGAN — Perrigo Co. plc’s drive to improve operations and earnings includes the elimination of 750 non-manufacturing positions globally.

The job cuts, which equal 14 percent of non-production positions worldwide, are part of a restructuring to save $130 million annually in operating costs at Perrigo, which seeks “to optimize our cost structure in order to better align expenses with our current and future market dynamics,” CEO John Hendrickson told investors Monday.

“At this time, while I believe Perrigo has maintained a lean cost base, there are always ways to be more efficient,” Hendrickson said in a conference call. “These decisive actions, while difficult decisions for our board and management, are critical to our ability to drive our business forward.”

Perrigo initiated the “cost optimization strategy across the company” to offset what Hendrickson called “significant industry price challenges.” The company, which is domiciled in Dublin, Ireland but operated from Allegan, did not say where the job cuts may occur.

Word of the reductions came on Monday as Perrigo announced the departure of long-time CFO Judy Brown, who’s joining Thousand Oaks, Calif.-based Amgen Inc. on April 1. Perrigo also said it sold the royalty rights to the multiple sclerosis drug Tysabri to an affiliate of New York City-based Royalty Pharma for $2.2 billion and up to another $650 million in future royalty payments. The company also detailed preliminary results for 2016.

[RELATED: Brown navigated unprecedented challenges to help Perrigo fend off hostile takeover]

Perrigo named Ron Winowiecki, senior vice president of business finance, as acting CFO and is searching for a permanent successor to Brown. The search will include Winowiecki “as a key candidate,” Hendrickson said.

Perrigo said it delayed filing an annual financial report with federal securities regulators as it reviews past accounting practices that include impairment calculations tied to the sale of Tysabri, and that it may also sell its Israel-based active pharmaceutical ingredients business. The company is already looking at potential options for its prescription generic drug business.

The sale of Tysabri, which is expected to close within 30 days, “enables Perrigo to continue to focus on our other businesses while deleveraging the balance sheet, creating more flexibility for growth,” Hendrickson said.

In preliminary results, Perrigo reported net sales of $5.5 billion for 2016. An assortment of impairment charges drove the company to a net loss of $28.85 to $29 per diluted share, with a preliminary operating loss of $4.65 billion to $4.68 billion.

Perrigo projects 2017 net sales of $5 billion to $5.2 billion with earnings of $3.39 to $3.74 per diluted share.

“Calendar year 2016 was a transitional year for Perrigo, as we took decisive action focused on growth, leadership and cost,” Hendrickson said. “The board and management are working diligently and expeditiously to advance our strategic roadmap, including an enhanced review of the (generic drug) business, to drive value for shareholders.”

Hendrickson expects to complete the strategic review of the company’s assets  in 2017 “to ensure we have the right model in place to drive both top line and bottom line growth.”

The moves by Perrigo come a month after settling with an activist shareholder, New York City hedge fund Starboard Value LP, which gained three seats on the company’s board of directors and will soon gain two more.

[RELATED: Perrigo agrees to give activist shareholder three board seats]

Starboard Value holds a 6.7-percent stake of Perrigo, or 9.64 million shares. The hedge fund last fall sent a letter to Hendrickson in which it urged Perrigo to hire an investment bank to look at selling “non-core assets” and to turn around a sagging stock price after fending off Mylan NV’s $26 billion hostile takeover bid in 2015. Since that time, Perrigo’s shares have fallen nearly 50 percent.

The news sent shares down 10 percent, or more than $9 per share, in after-hours trading as this report was published.

Read 2788 times Last modified on Monday, 27 February 2017 21:32
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