Perrigo slashes guidance on weakness in prescription business

Perrigo, the Irish-domiciled over-the-counter drug company, slashed its earnings guidance for 2018 and announced it will separate out its prescription pharmaceuticals business following a strategic review of its portfolio.

In an announcement accompanying the Dublin company’s second-quarter results it said separation of the prescription business will better enable Perrigo focus on expanding its consumer business.

That particular segment performed below expectations, the company said, and “experienced weakness due primarily to a shortfall in new product launches coupled with challenging market dynamics”, something expected to continue into the second half of the year.

As a result, the company pulled back its earnings per share guidance to a range of $2.11 to $2.31 versus previous guidance of $2.90 to $3.30.

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"I am extremely disappointed in this development and want to reinforce that my primary focus is to create value for shareholders," said Perrigo president and chief executive Uwe Roehrhoff.

The company’s board approved the separation plan and said it would analyse value-enhancing options for shareholders including a possible tax-efficient separation to shareholders, a sale or a merger.

Elan acquisition

Although the company was subject to certain limitations to efficiently separate the business since its 2013 acquisition of Elan in Ireland, those limitations expire in 2018 with the separation expected to complete in the second half of 2019.

Perrigo’s prescription business serves patients and health systems with topical medication - or medication applied to a particular place on the body - and its portfolio includes generics in multiple dosage forms.

The group’s reported net sales fell 4.2 per cent to $1.18 billion, not including the effect of the company’s exit from its unprofitable Russian distribution business and favourable foreign currency movements.

Nonetheless, reported net income for the second quarter swung to a profit of $36 million from a net loss of $70 million in the same period of 2017.

Perrigo became domiciled in the Republic after completing the acquisition of Elan for $8.6 billion in 2013.

The company is one of a number of generics manufacturers in Ireland, specialising in affordable healthcare products. Earlier this year it agreed a to rent 45,000sq ft in a McGarrell Reilly Group building at Hogan Place in Dublin 2.