Perrigo Ends 2017 As It Started: Earnings Results Delayed

Perrigo Co. PLC ended 2017 as it began the year, with its latest quarterly earnings results delayed. It put its fourth-quarter results on hold to figure out its taxes while its first-quarter results were delayed to restate some revenues.

The OTC drug, adult and infant nutritional products and Rx specialty topical generics manufacturer on Feb. 27 reported interim and unaudited results for the full year and said it will release its complete earnings statement for the October-December period and the year on a date yet to be determined.

The Ireland-incorporated firm said "it needs additional time to complete its final income tax review procedures related to reconciliations of specific non-cash items."

Perrigo delayed posting its complete and final 2017 first-quarter results until May. It needed additional time to restate several years of financials following a third-party audit of its reporting of royalty revenues for the multiple sclerosis treatment Tysabri (natalizumab), an asset it divested during the year.

While there are no indications yet that the latest delay suggests any serious issues, the pattern may reflect growing pains as Perrigo moves from being a narrowly focused OTC private label marketer to a more diversified company – challenges that newly minted  President and CEO Uwe Rohrhoff will need to address. Rohrhoff is viewed as particularly adept at leading a large global organization and setting long-term strategy. (Also see "Perrigo Taps CEO With Global Operations Expertise At Pharma Packaging Firm" - Pink Sheet, 8 Jan, 2018.)

Sales for Perrigo's core business, its North American private label OTC drug and nutritional unit, in 2017 were down 3.1% to $2.4bn, though on a constant currency basis the results were up 1.4%, according to the firm, which maintains its primary operations in Allegan, Mich.

Full-year results for its consumer health product international segment, which markets branded nutritional products and OTC drugs in Europe, also were helped by a constant-currency adjustment, up 2.6% to $1.5bn, which was down 9.8% with foreign-exchange rate changes included.

Perrigo's RX segment reported net sales $970m, flat from 2016.  billion, and the firm's reported consolidated net sales of $4.9bn were down 6.3%, but up 1.3% adjusted on constant currency. It reported consolidated operating income of $600m, or $1bn adjusted.

Consumer Sales Better Than Consensus

Market analysts noted Perrigo delayed its full Q4 and full-year results without commenting on any potential significance, and said the revenues and income the firm reported were above consensus expectations.

In same-day research notes, Morgan Stanley and Leerink analysts extrapolated from the firm's interim full-year results to estimate its likely fourth-quarter results.

Leerink's Ami Fadia said "implied" fourth-quarter revenues for Perrigo's North America consumer health were $23m above consensus at $643.4m, for its international consumer business were $6m better than consensus at $374.2m and for its Rx unit were $261.3m, $5m above consensus.

At Morgan Stanley, David Risinger said Perrigo's fourth-quarter consumer product sales in North America were 4% past consensus and 2% better in Europe, but he found the firm's Rx business 1% short of consensus at $254m.

Risinger also noted that continued pricing pressure on Rx generics could further limit Perrigo's sales growth while also discouraging investors about the firm's future in the sector.

Like other Rx generics manufacturers, Perrigo during 2017 acknowledged that pressure from payors is forcing down prices and cutting into their earnings. (Also see "Private Label Nexium OTC Buoys Perrigo As Pricing Trims Rx Revenues" - Pink Sheet, 10 Nov, 2017.)

Rohrhoff has other problems to address as CEO, too. He succeeded John Hendrickson in January at the helm of the firm that once steadily climbed in earnings and share price but has been slumping in both since the management, headed by Hendrickon's predecessor Joseph Papa, convinced shareholders to reject a hostile takeover bid by Mylan NV. Entering the European branded consumer health market was a big piece of Perrigo's strategy to fend off Mylan's tender, but the investment has yet to pay off for the firm. (Also see "Outgoing CEO: Perrigo Outfitted To Sail On OTC, Rx And Euro Growth" - Pink Sheet, 10 Jan, 2018.)

From the editors of the Tan Sheet.