Perrigo Strives To Stand Out Against Incoming Private Label Competition
This article was originally published in The Tan Sheet
Executive Summary
Even as Perrigo products face the prospect of increasingly crowded segments, the company likes where it stands among private label competition
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Even as Perrigo products face the prospect of increasingly crowded segments, the company likes where it stands among private label competition. The firm reported its fiscal 2010 first-quarter net sales Nov. 2 - up 15.9 percent to $528 million - and raised its full-year earnings guidance to between $2.35 and $2.45 per share, from between $2 and $2.12 per share. Net income soared 61.5 percent to $61.3 million. CEO Joseph Papa discussed how Perrigo plans to maintain its dominance of certain generic OTC segments, including equivalents of Prilosec OTC (omeprazole), MiraLAX (polyethylene glycol) and Mucinex (guaifenesin). "I think most of the retailers respect the fact that Perrigo will put together a program that is not just manufacturing and having product available, but it will be a full turnkey program," Papa said. "We'll put together a full marketing program that helps to reinforce that this product is comparable" to its branded equivalent, he added. Papa gave the example of Reckitt Benckiser's expectorant Mucinex. Perrigo hopes to launch private-label extended-release guaifenesin in three to six months, pending FDA approval and the resolution of a patent infringement suit filed by the branded drug's sponsor. United Research Labs and Mutual Pharmaceuticals may have the first shot at the generic Mucinex market, thanks to a deal struck with Adams Respiratory Therapeutics, since acquired by Reckitt (1 (Also see "Watson Files ANDA For Mucinex DM, Gets In Line For Generic Guaifenesin" - Pink Sheet, 27 Apr, 2009.)). Aims For First To Market With private-label OTCs, Perrigo aims to be first-to-market, as it was with omeprazole. A competing version of the proton pump inhibitor being prepped by Dr. Reddy's is expected to hit shelves by the end of 2009 (2 (Also see "Perrigo Plots Nutritionals Turnaround Following Record Year" - Pink Sheet, 24 Aug, 2009.)). Because Dr. Reddy's omeprazole is a capsule while Perrigo's version is a tablet, Papa said he expects the competitor will not edge Perrigo's product from retail shelves, which likely will be able to accommodate both products. While Perrigo doubtlessly will lose some sales to Dr. Reddy's, Papa said the overall store brand share of the omeprazole segment will keep expanding, allowing Perrigo to continue chipping away at Prilosec OTC (3 (Also see "Sales & Earnings In Brief" - Pink Sheet, 11 May, 2009.)). The Allegan, Mich., company launched its version of Schering-Plough's MiraLAX in October, and Papa said he expects store brands to claim 40 percent of the laxative's sales - estimated at $200 million in 2009 and growing at 20 percent annually - within a year to 18 months. Perrigo aims to have at least 80 percent of that private label share, he added. A Perrigo equivalent of vaginal cream Monistat 1 (miconazole nitrate) also is slated for fiscal 2010. Papa estimated the Johnson & Johnson drug yields about $80 million each year in sales. The company plans at least 35 launches in fiscal 2010, and expects $120 million in new product revenues. Perrigo's Consumer Healthcare segment increased net sales 19 percent to $437 million in the quarter ended Sept. 26. In a release, the firm attributed the gains to $49 million from new products and increased sales of gastrointestinal, smoking-cessation, analgesic and cough/cold products. Another $36 million in incremental sales came from the recent acquisitions of JB Laboratories, Unico Holdings and Laboratorios Diba (4 (Also see "Perrigo’s Record OTC Sales Tempered By Rising Costs Of Doing Business" - Pink Sheet, 9 Feb, 2009.)). Nutritionals experienced growth within Consumer Healthcare, but Papa acknowledged that business lags in terms of gross margin. Perrigo does not break out sales figures for nutritionals. Perrigo also will have some capital to invest from the in-progress divestment of its Israeli consumer products business. A private equity firm in Israel has agreed to buy the segment for about $54 million, Papa said. Chief Financial Officer Judy Brown said tax considerations will factor in where the proceeds from the sale are invested. "While we may be able to repatriate some of that cash, there is also a list of opportunities we're looking at" internationally, she said, including expanding Perrigo's active pharmaceutical ingredient operations in Israel and India. - Dan Schiff ( 5 [email protected] ) |