Shares Pull Back As Problems Pile Up At Perrigo

Following the departure of CEO Joseph Papa, along with the subsequent 17 percent cut in the 2016 earnings guidance and the associated uncertainty regarding its strategy, Perrigo Company plc Ordinary Shares PRGO have taken a hit.

Argus’ Jacob Kilstein maintains a Hold rating on the company.

The Problems

“Pricing pressures in generics and competition in specialty medicines also present headwinds,” Kilstein mentioned, while adding, “We believe that PRGO’s premium is unwarranted given the company’s weak outlook.”

According to the Argus report, “CEO Papa left after waging a costly legal battle to ward off a takeover from Mylan. He called the $26 billion offer too low and said Perrigo would do better on its own.”

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However, given the significant decline in the share price, Perrigo is currently valued at $14 billion. In hindsight, the analyst believes it was a mistake to reject the deal.

Some Positives

On a more positive note, hedge fund Starboard Value has taken a 4.6 percent stake in Perrigo, following which the shares rose, driven by the prospects of the company’s non-core businesses being sold, including the lucrative royalty payment stream from Tysabri, the MS drug, and the prescription pharmaceuticals business.

“Perrigo has a leading position in private-label over-the-counter (OTC) pharmaceuticals, which are rapidly taking market share from brand-name OTC products. The company is expanding into Europe via its acquisition of Omega, one of the largest European OTC companies,” Perrigo noted.

At time of publication, Perrigo was down 0.75 percent on the day at $95.01.

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