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Perrigo Company’s (PRGO - Analyst Report) dominant position in the store brand over-the counter (OTC) drug market was further strengthened when it gained tentative approval from the US Food and Drug Administration (FDA) to market its store brand version of Merck & Co.'s (MRK - Analyst Report) Zegerid OTC. Perrigo intends to launch the drug immediately after its market formation.

We note that Zegerid OTC (omeprazole and sodium bicarbonate capsules 20mg/1100mg), which is approved for relieving frequent heartburn, recorded sales of approximately $42 million for the last 12 months. The  FDA tentative approval of Perrigo’s store brand version of Merck’s  Zegerid OTC comes close on the heels of the FDA approval of Perrigo’s abbreviated new drug applications (ANDAs) to market its OTC version of nicotine polacrilex mini lozenge, 2 mg (mint flavor) and 4 mg (mint flavor). Perrigo expects to start shipping the product by year end.

Perrigo’s broad line of store brand pharmaceutical products has the same active ingredients and comparable quality and efficacy as the national brands. This has helped the company become a dominant player in the store brand OTC drug market. Perrigo boasts of partnerships with retailers, pharmacies and mass merchandisers for whom it manages a wide range of activities including regulatory approvals, customized branding and packaging and in-store advertising.

Our Recommendation

We currently have a Neutral recommendation on Perrigo. The stock carries a Zacks #2 Rank (short-term Buy rating).

We believe Perrigo has a sustainable and diversified product portfolio. The company’s strong position in the brand OTC pharmaceutical market and growing generics and active pharmaceuticals ingredient (API) businesses are expected to drive growth in the coming quarters. We are also impressed by Perrigo’s strong pipeline.

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