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Analyst Blog

Perrigo Company (PRGO - Analyst Report) recently announced that it has won a summary judgment in the patent case involving the generic version of Adams Respiratory Therapeutics’ drug Mucinex.  Adams Respiratory Therapeutics is a subsidiary of Reckitt Benckiser Group. Perrigo had received approval for its generic version of Mucinex in December 2011. It plans to launch the drug within the next 90 days. Mucinex indicated to relieve chest congestion has been identified as one of the important product launches for the company in fiscal 2012.

In another recent development Perrigo announced that it has signed a definitive agreement to acquire the assets of Georgia based private company CanAm Care. A distributor of diabetes care products, CanAm Care will expand Perrigo’s presence in the diabetes care market.

Our Recommendation

We currently have a Neutral recommendation on Perrigo. The stock carries a Zacks #3 Rank (short-term “Hold” rating).

We believe Perrigo has a sustainable and diversified product portfolio. Besides, Perrigo’s strong position in the brand over-the-counter (OTC) pharmaceutical market and growing generics and active pharmaceuticals ingredient (API) businesses can help it deliver solid top- and bottom-line growth in the coming years. Perrigo also has a very strong and impressive pipeline which could drive growth in fiscal 2012 and beyond.

We are, however, concerned about the competitive pressures faced by the Consumer HealthCare (CHC) segment which accounts for a majority of the company’s revenues. Moreover, the benefits that the CHC segment reaped in the last few quarters due to product recalls at rival Johnson & Johnson (JNJ - Analyst Report) may not continue in 2012 with J&J expected to be back in the market soon.

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