Perrigo sells off Tysabri in push for cash
- Amidst some rather turbulent times, Dublin-based company Perrigo has signed an agreement with RPI Finance Trust, an affiliate of the privately-held Royalty Pharma, that will help the company fill its cash coffers.
- Perrigo is divesting all rights to royalty payments for multiple sclerosis drug Tysabri (natalizumab) to the intellectual property company in return for $2.2 billion cash and up to $650 million in milestone payments, based on sales in 2018 and 2020.
- Perrigo shares have dropped by nearly 55% since former CEO Joe Papa defected to lead beleaguered Valeant Pharmaceuticals last year, and preliminary 2016 earnings show an operating loss of $4.65 billion. The company did not file its 8-k with the Securities and Exchange Commission and will wait until the close of the Tysabri sale.
In an effort to gain a more favorable tax-rate, Perrigo acquired Elan in 2013 for $8.6 billion. The deal provided the healthcare company with a tax-efficient Irish base, and also gave Perrigo royalties on Elan's multiple sclerosis drug Tysabri (natalizumab), which the Irish company developed before licensing to Biogen. Royalty Pharma had been a bidder for Elan in 2013, hoping to get access to the Tysabri royalty then.
While Tysabri, as a branded prescription drug, is well out of Perrigo's comfort zone of generics, over-the-counter drugs, supplements, consumer goods and animal medicines, the Irish company takes no part in its marketing or commercialization. Even though Tysabri provided Perrigo with a cost-free revenue stream, its divestment isn't surprising; the company has been shopping around the royalty for several months in hopes of gaining more near-term cash. The generics company determined that near-term cash flow was greater than the carrying value of the product.
Perrigo is also reviewing strategic alternatives for its active pharmaceutical ingredients (API) business.
"Today's announcement is the result of Perrigo's review of strategic alternatives for the Tysabri royalty stream announced in November 2016. While dilutive to adjusted EPS, the significant upfront cash component will allow us to de-lever our balance sheet, which supports our investment grade financial policy, and better positions Perrigo to pursue our strategic plan. This transaction also furthers our stated strategy to enhance our portfolio and focus on our consumer-facing and Rx businesses," said Perrigo's CEO John Hendrickson.
Perrigo has also announced a leadership change, with Ron Winowiecki, SVP of business finance taking over the role of acting CFO. This follows the surprise resignation of Judy Brown, who is moving to head up the global business services unit at Amgen as of April 1. This is the second key role change at the head in the last year, with Joseph Papa jumping ship last April to switch to Valeant. This reduces the number of legacy leaders to one; the CEO John Hendrickson still remains at the helm. Activist investor Starboard also stirred things up earlier this month, resulting in the change of almost half the board.
- Perrigo Earnings Statement
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