With CEO Papa headed to Valeant, Perrigo faces new challenges
- When Perrigo announced the resignation of long-time CEO Joseph Papa on Monday, the Irish company also disclosed lower-than-expected preliminary Q1 earnings figures. The double blow sunk Perrigo stock by over 18% Monday, compared to last week's close.
- Perrigo cut its FY 2016 earnings per share forecast to between $8.20 and $8.60, down from $9.50 to $9.80 previously. This reduction was mostly due to "reduction in pricing expectations" in Perrigo's prescription drug business, the company said.
- The lower numbers suggest Papa's departure could be coming at an inconvenient time. Papa had been instrumental in navigating a merger with Elan, allowing the company to relocate its headquarters to Ireland, and helpd stave off a hostile takeover effort by Mylan NV last year.
Perrigo also announced it expected Q1 revenues to come in between $1.33 billion and $1.35 billion. Industy competition in the pharmaceutical and branded healthcare spaces, along with lower expectations for new product launches, combined to dampen earnings guidance.
Furthermore, the company might need to write down assets from its acquisition last year of Omega Pharma NV.
Papa had been a point of reassurance for investors, who may now be taking a harsher look at the company. Mylan's failed pursuit of Perrigo unfolded over several months last year. During that time, Papa forcefully defended Perrigo, citing its potential and determination to create shareholder value. Investors stood behind Perrigo and Papa.
Since then, however, Perrigo's stock has lost a third of its value, including the huge hit it took yesterday on the news of Papa's departure.
On the upside for Perrigo, the company still has two legacy leaders in place, as noted by Bloomberg. Perrigo promoted its current president, John Hendrickson, to CEO. Hendrickson brings management experience across different executive and operational roles at Perrigo. In addition, Judy Brown, who has been Chief Financial Officer for the last 10 years, will stay on in her position.
As for Valeant, investors' first reaction was positive sending the stock higher in initial Monday trading. But Papa has his hands full as he moves into his new position at Valeant, facing an overdue annual report, notices of default from company bondholders, and continued scrutiny from Congress over pricing.
- Bloomberg Valeant Infects Perrigo
- Wall Street Journal As Its CEO Leaves for Valeant, Perrigo Continues to Struggle