Perrigo to split off generic drugs unit
- Perrigo plans to split off its generic prescription drug business from the company's larger consumer healthcare division, mulling shedding the unit in a sale, merger or separation to shareholders.
- The decision follows a strategic portfolio review aimed at addressing a steady downward slide in the company's stock price. Investors, however, didn't take to Perrigo's plans, sending shares in the drugmaker down more than 10% Thursday.
- Price erosion in the market for knockoff drugs has hurt sales at generic drugmakers, including Mylan and Teva Pharmaceuticals. On Wednesday, Mylan said it would weigh its options as it copes with struggles in its North American business.
Over the past 18 months or so, Perrigo has made several changes in an apparent effort to placate shareholders. The drugmaker restructured its board in early 2017, handing to seats to activist investor Starboard Value.
Then, in January of this year, Perrigo announced Uwe Roehrhoff would take over as CEO from John Hendrickson, who retired. Hendrickson had taken over when former CEO Joseph Papa left to run Valeant Pharmaceuticals, now Bausch Health Company.
Separating Perrigo's generic drug division is expected to take place during the second half of next year. A spinout had reportedly been in discussion for some time, but Perrigo has yet to settle on how it will separate the unit.
In addition to topical generics, the company also sells over-the-counter drugs and infant nutrition products.
Its consumer healthcare division is about a $4 billion a year business, while generic drugs brought in just under $1 billion over the past 12 months.
Sales of pharmaceuticals have fallen in recent quarters, totaling $209 million in the second quarter — a 13% drop from a year ago. In a statement, company CEO Roehrhoff said the unit fell short of earnings expectations due to a shortfall in new product launches as well as challenging dynamics in the generic drug market.
On Thursday, Perrigo explained its decision to move forward with a spinout as the best path to unlock value for shareholders, allowing it to focus on consumer health.
"Committing our energy and capital to the healthcare needs of consumers and our retail and pharmacy partners better positions Perrigo to drive long-term growth," Roehrhooff said.
Perrigo expects to give further details on September 25 when it holds a conference call on its consumer business.
- Perrigo Statement