Market Overview

Barclays Sees 44-48% Upside In Perrigo Shares; Co. Remains Vulnerable To Activist Investors

Barclays Sees 44-48% Upside In Perrigo Shares; Co. Remains Vulnerable To Activist Investors
Related AGN
The Market In 5 Minutes: McDonald's, Halliburton Ramp Up Q4 Earnings Season
Wall Street's M&A Chatter From January 20-22
Allergan, Endo sued by FTC; Endo tumbles 5%, Teva 3% (Seeking Alpha)
Related MYL
Wall Street's M&A Chatter From January 19
The Difference Between Mylan's EpiPen And Generic Offerings
Teva's Got Potential - And The Complexity To Go With It (Seeking Alpha)

Barclays said in a research note that it sees 44–48 percent upside in Perrigo Company plc Ordinary Shares (NYSE: PRGO) to $131–$138, given its view that a more focused company could optimize performance of its consumer healthcare and branded healthcare business. The firm sees $1.60–$1.65 in incremental earnings per share out of the approach.

Noting that activist investor Starboard Value disclosed a 4.6 percent stake in the company last week, Barclay's specialty pharma analyst Douglas Tsao said he sees significant value in the company's core CHC and BHC businesses. Tsao also noted that Starboard is pressuring the company to divest its specialty sciences, consisting of the Tysabri royalty, and Rx generics segments in order to sharpen focus on its U.S. store-brand CHC and European BHC businesses.

Related Link: Deutsche Bank Echoes Starboard's Sentiment: Perrigo Is Undervalued

Barclays noted with the guidance revision due to the headwinds facing the Rx generics segment, talks of divesting the segment will gain ground. Although Barclays gives good marks for Perrigo's management team for its accessibility to investors, it believes some activist investor could pull it up based on some corporate governance metrics. The most likely issue, according to the firm, could be the average tenure of a directors, which is very high compared to peers like Teva Pharmaceutical Industries Ltd (ADR) (NYSE: TEVA), Allergan plc Ordinary Shares (NYSE: AGN) and Mylan NV (NYSE: MYL).

Despite Perrigo's contention that there is R&D synergy between the CHC and Rx businesses, Barclays thinks the synergy is limited due to the rarity of Rx-to-OTC switches. Barclays is of the view that Perrigo pure-play valuation should offset any dilution.

At time of writing, Perrigo shares were up 1.33 percent at $94.54.

Full ratings data available on Benzinga Pro.

Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!

Latest Ratings for AGN

Nov 2016Morgan StanleyMaintainsOverweight
Oct 2016BarclaysAssumesEqual-Weight
Aug 2016MizuhoUpgradesNeutralBuy

View More Analyst Ratings for AGN
View the Latest Analyst Ratings

Posted-In: Analyst Color Biotech Long Ideas News Guidance Health Care Analyst Ratings Trading Ideas Best of Benzinga


Related Articles (MYL + AGN)

View Comments and Join the Discussion!