Consumer health and generics group Perrigo is reviewing strategic options for royalty rights from sales of its multiple sclerosis drug Tysabri after reporting a higher-than-expected adjusted quarterly profit.
Dublin-based Perrigo has been under pressure from activist investor Starboard Value LP to make changes in an effort to boost its stock price. That includes exploring options for Tysabri, the jewel in the crown when Perrigo acquired what was left of Irish pharma group Elan in a $8.6 billon deal in 2013. This corporate inversion deal also saw the Michigan company move its domicile to Dublin.
Starboard disclosed a 4.6 per cent stake in Perrigo in September.
The company’s stock has lost just about 40 per cent of its value this year and the company has cut its earnings forecast twice. On Friday, it was trading at $89.15 at noon having dipped below $80 in early trade.
Perrigo chief executive John Hendrickson said any decision on Tysabri would not impact on the company's operations in Ireland. Speaking to The Irish Times, he noted the company does not manufacture or distribute the drug, but merely retains a royalty interest in it.
‘Great product’
“Tysabri is still a great product for multiple sclerosis patients but, when we bought it, we were looking at some of the potential upsides for Tysabri, and most of those have not proven out,” he said.
He said new drugs coming to market would put more pressure on the royalty income stream. However, he stressed that no decision had yet been made and that it was likely to be the first quarter of next year before it was decided.
He said the company was not making decisions in consultation with any one shareholder or group of shareholders.
Perrigo has blamed much of its troubles on former chief executive Joseph Papa, who convinced investors to reject a $205 per share cash-and-stock bid from Mylan, worth about $26 billion when it was rejected last November.
Mr Papa, now CEO of Valeant Pharmaceuticals, said Perrigo would be better off on its own.
Perrigo recognised $93 million of royalty revenue in the third quarter related to global net sales of Tysabri. The drug is marketed through a partnership with Biogen, which paid more than $300 million in royalties to Perrigo.
Perrigo has hired Morgan Stanley as financial adviser to lead the review process for Tysabri.
Potential buyers
Royalty Pharma, a privately held company that specialises in acquiring drug royalties, is among potential buyers, Reuters reported in September, citing people familiar with the matter.
It was Royalty’s hostile approach for Elan back in early 2013 that saw the Irish company put itself on the market in a process that eventually saw Perrigo, under Mr Papa, take control. Royalty specialises in acquiring streams of patent revenue from drugs such as Tysabri, which was developed by Elan.
Perrigo reported a net loss of $1.26 billion, or $8.76 per share, for the third quarter to October 1st, compared with a profit of $113 million, or 77 US cents per share, a year earlier.
The net loss includes a goodwill impairment charge of $804 million and a brand intangible assets impairment charge of $866 million related to its $3 billion acquisition of Belgian over-the-counter drugmaker Omega Pharma.
On an adjusted basis, the company earned $1.80 per share, beating analysts’s average estimate of $1.58.
Revenue rose 1 per cent to $1.35 billion, including sales of $22 million from held-for-sale businesses. Analysts on average were expecting revenue of $1.28 billion.
The company said it expected to report a net loss of $9.04 to $9.34 per share for all of 2016. (– Additional reporting Reuters)
