Perrigo Nutritional Portfolio Grows As Supplement Business Sale Proceeds

Perrigo launches the first generic of Abbott's Ensure Glucerna nutritional shake. The launch could be seen as another potential jolt to lift Perrigo's share price out of a year-long fall that began when Mylan opened its unsuccessful hostile takeover.

Perrigo Co. PLC fortifies its nutritional beverages business with a private label version of [Abbott Nutrition]'s Ensure Glucerna nutritional shake for adults with type 2 diabetes while continuing to shop its vitamin and dietary supplement business.

The launch also could be a potential jolt to lift its share price out of a year-long fall, which began when Mylan NV opened its hostile takeover bid and has continued since Perrigo shareholders rejected the tender.

Perrigo on April 12 said initial shipments have started for the product packaged and marketed as a store brand or as a retailer's own-label brand as a "value alternative to the Glucerna product," which had sales of around $120m through food, drug and mass merchants for the year ending in March.

President and CEO Joseph Papa noted in Perrigo's release that the launch "adds another important product to our adult nutritional portfolio."

And it’s a portfolio the private label leader plans to keep.

A spokesman said the sale of the VMS business "is in process" and the firm will announce a transaction "once the sale is complete."

Perrigo is making initial shipments of the first generic version of Ensure Glucnera packaged and marketed as a store brand or as a retailer's own-label brand.

Image courtesy of Perrigo Co. PLC

Papa in June 2015 said Perrigo was focused on increasing sales of its gummy vitamins to drive growth of its vitamins, minerals and supplements business, which was not taking market share from major firms operating only in the nutritional products space, but would consider divesting the unit unless it generated higher return on investment capital.

By October, Perrigo decided to look for a buyer for its VMS business to help boost its operating margins while cutting costs. But its nutritional beverages business, also including infant formula business, is not for sale (Also see "Supplements Part Of The Past As Perrigo Frames Future Around Rejecting Mylan Tender" - Pink Sheet, 26 Oct, 2015.).

The Dublin-based firm in 2015 began distributing generics of other Ensure products under a partnership it announced in October 2014 with KanPak LLC to make six store brand versions of the Abbott line (Also see "In Brief: Perrigo adult nutrition drink, InterHealth-Chick Cart deal, Russia-Ukraine influence" - Pink Sheet, 31 Mar, 2014.).

Launches Up, Shares Down

As part of its campaign to sway shareholders against accepting Mylan's tender, Perrigo also said it would look at selling other assets and eliminate redundant posts in its organizational structure by reducing its current global headcount by 6%. Its plans to reduce costs and increase margins also included consolidating its global supply chain in Ireland and a $2bn share repurchase plan through 2018.

However, Perrigo's share prices continue to fall six months after its shareholders rejected Mylan's tender of $75 cash and 2.3 Mylan shares for each Perrigo share. After around 40% of the shares were tendered by the mid-November deadline, the offer failed and the tendered shares were returned (Also see "Perrigo Stands Alone At Top OF OTC Private Label Market, In Hunt For More Deals" - Pink Sheet, 16 Nov, 2015.).

When Mylan announced its unsolicited bid in April 2015, Perrigo shares were trading at $198.70. The share price varied from as high as around $200 and as low as around $180 through mid-September before starting a steady slide that reached $146.90 the day Mylan's tender failed and has continued falling since. The shares closed at $125.76 on April 12, more than 20% down from six months ago.

The price has tumbled as Perrigo in April 2015 forecast Rx-to-OTC switches over the next five years generating $32bn in sales across the US industry and $1bn sales over the next year from its own product launches, including Rx drugs and branded OTCs by its European businesses, as well as private label nonprescription products (Also see "Perrigo Counts 32 Billion Reasons To Reject Mylan Offers" - Pink Sheet, 27 Apr, 2015.).

Perrigo over the past year has launched generics of OTC brands including RB's Mucinex D – guaifenesin 600mg/pseudoephedrine 60mg tablets manufactured by Allergan PLC– indicated for relief of chest and sinus congestion and pressure, and GlaxoSmithKline PLC's Flonase Allergy Relief (fluticasone propionate/0.05mg nasal spray) (Also see "Perrigo's 'Inversion' Of Flonase Trademark Cuts Too Close For Glaxo's Market Share Comfort" - Pink Sheet, 4 Mar, 2016.).

It also has received FDA’s approval for abbreviated new drug applications for the first private label OTC delayed-release proton pump inhibitor containing omeprazole and magnesium in the same formulation as Prilosec OTC marketed by Procter & Gamble Co., and for Pfizer Inc.’s Advil (200 mg ibuprofen sodium) tablet; the omeprazole/magnesium approval came with 180-day market exclusivity (Also see "Perrigo Gains 180-Day Exclusivity With ANDA Approval For Omeprazole Magnesium PPI" - Pink Sheet, 10 Aug, 2015.).

Additionally, Perrigo has eyed launching a generic of Oxytrol for Women since FDA in 2013 approved the 3.9mg oxybutynin transdermal patch, now marketed by Allergan, as a first-in-class nonprescription product indicated for overactive bladder. But Oxytrol for Women has not been a big OTC hit and Perrigo recently said it is more interested in other prescription OAB products that could be moved to OTC (Also see "Oxytrol For Women Exclusivity Ends Not With Competition, But Label Warning Change" - HBW Insight, 14 Mar, 2016.).