ALLEGAN — Sales are not a problem for Perrigo Co. plc.
The lack of a robust new product pipeline and pricing pressures as more competitors enter the market have been the primary issues ailing the company, along with customer service issues, CEO Murray Kessler told investor this week.
In a presentation at the annual JPMorgan Healthcare Conference in San Francisco, Kessler outlined a new vision to turn around Perrigo and shift back to a consumer-focused company involved in “self-care.”
“It’s a great company ripe for a turnaround and that’s got great bones. We know what we need to do to get it fixed,” said Kessler
Kessler took over in October at Perrigo, which is based in Ireland but operated from Allegan. He’s the corporation’s third CEO in a year and the fourth in four years.
Kessler used the JPMorgan presentation to roll out Perrigo’s new vision: “To make lives better by bringing quality, affordable self-care products that consumers trust everywhere they are sold.” He called that an “evolution” from the prior vision of providing “quality, affordable health care.”
Under that new vision, Perrigo will look to expand into new product categories such as oral care, probiotics, therapeutic-based skin care, and nutraceuticals, which are food or food components that have health benefits.
“We will turn this vision into our playbook,” Kessler said. “We want to open up our portfolio of products and categories into areas that we wouldn’t have traditionally looked at.”
A former tobacco executive with 35 years of leadership experience in consumer product companies, Kessler attributed Perrigo’s revenue decline in part to pricing pressures that stem from drug makers moving into over-the-counter medications to grow volumes.
At the same time, there’s been a slowdown in the medications coming off patent protection and transitioning to over-the-counter status, resulting “in a new product pipeline that isn’t nearly as robust and contributing the way it had in prior years,” Kessler said.
“In the absence of that very robust new product pipeline, you see the sales get softer and a little bit lackluster,” he said.
Online sellers such as Amazon.com that take away sales of OTC medication from the likes of Walmart and CVS stores also contribute to pricing pressure that affects revenues, Kessler said.
Perrigo in November reported lower revenues of $1.13 billion for the third quarter, down 8 percent from the $1.23 billion in the same period a year earlier. The company recorded a quarterly net loss of $68 million, or 49 cents per diluted share. That compares with net income of $45 million, or 32 cent per diluted share, in the third quarter of 2017.
Nine-month revenues declined 3.6 percent to $3.66 billion with net income of $49.6 million.
Kessler said Perrigo would provide analysts with sales and earnings guidance for 2019 at the company’s annual investor day in April.
Brokerage analysts presently expect Perrigo to report net sales of $1.18 billion for the fourth quarter of 2018, versus $1.28 billion a year earlier, when it reports results in the coming weeks.
Analysts project flat net sales of $1.2 billion for the current first quarter of 2019 and $4.69 billion for the full year. A year ago, the company recorded first quarter net sales of $1.22 billion.
As Perrigo faltered, its share price has been hit hard this, falling by 55 percent.
Despite the revenue declines of late, Perrigo’s core U.S. consumer business continues to grow volumes and gain market share in “almost every” product category, Kessler said.
“We have no problem with consumers buying our products,” he said. “Our brands are healthy.”
Kessler intends to roll out far more detail for Perrigo’s turnaround plan in April. That plan will hinge on pivoting Perrigo to focus on consumer products as the company plans to sell or spin out its generic drug business. The company will invest in more technology such as business intelligence, innovate faster, evaluate bolt-on acquisitions, and expand capacity, he said.
Perrigo’s production facilities are now running 24 hours a day, seven days a week.
“Volume is up and we have pressed them to the max,” Kessler said. “We are not meeting certain amounts of demand, which is crazy, so we will open up those opportunities.”
Kessler pointed to a November 2018 IRI Worldwide report that pegged the global “self-care” market at $450 billion. The Chicago-based IRI’s report defines self-care as including as “all decisions people make or activities they participate in to ensure health and wellness for themselves and their families.”