We continue to have a Neutral recommendation on
Perrigo Company plc
). Dublin, Ireland-based Perrigo Company plc was formed following
the Dec 2013 merger of Allegan, MI-based Perrigo Company and Elan
Corporation. The merged entity, with a diversified revenue
stream, is a global healthcare company with an attractive growth
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Why the Reiteration?
On Oct 31, Perrigo reported higher-than-expected earnings and
revenues in the first quarter of fiscal 2014 (ended Sep 28,
2013). Net sales in the quarter climbed 21.3% to $933.4 million.
Revenues increased $64 million due to the inclusion of results of
Sergeant's Pet Care Products, Inc. (assets acquired by Perrigo in
Oct 2012), Rosemont Pharma (acquired by Perrigo in Feb 2013),
Velcera (acquired in Apr 2013) and Fera's ophthalmic product
portfolio (acquired in Jun 2013). Newly launched products boosted
revenues by $54 million.
This was the fifth straight earnings surprise delivered by the
company. The acquisition of Elan, completed in Dec 2013 for
approximately $8.6 billion, has boosted Perrigo's revenue stream
further as it is now eligible to receive significant royalties on
multiple sclerosis drug Tysabri from
Moreover, Perrigo has reduced its tax liability by shifting its
base to Ireland from the U.S. Through the deal, Perrigo expects
to generate post-tax annual operating expense and tax savings in
excess of $150 million. The acquisition has also expanded its
geographic reach. The deal is expected to boost Perrigo's
adjusted earnings per share in fiscal 2014.
We expect investor focus to remain on the performance of the
merged entity and hence retain our Neutral view on the stock. Our
investment thesis is supported by a Zacks Rank #3 (Hold).
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