Bloomberg News

Perrigo Premium Rises on Bets OTC Sales Gained: Israel Overnight

November 06, 2012

Perrigo Co. (PRGO) climbed in New York to widen the spread versus its Tel Aviv shares by the most in six weeks on prospects the largest U.S. maker of generic over-the- counter drugs will post faster sales growth after adding new store-branded products.

The U.S. drugmaker that listed in Israel after buying B’nei Brak, Israel-based Agis Industries Ltd. in 2005, rose 0.9 percent to $116.05 yesterday, extending its 2012 gain to 19 percent. The advance boosted the spread (PRGO:US) to the shares in Tel Aviv to $1.34. The Bloomberg Israel-US Equity Index (ISRA25BN) of the largest New-York traded Israeli companies fell 0.5 percent to 84.16. SodaStream International Ltd. (SODA:US) sank after competitor Primo Water Corp. entered into a licensing deal with Cuisinart.

Perrigo, scheduled to report fiscal (PRGO:US) first-quarter earnings tomorrow, started selling the store-branded equivalent of cough reliever medicine Delsym, which has an estimated $100 million of annual sales, according to a PRNewswire statement on Aug. 27. The Allegan, Michigan-based company also received approval from the U.S. Food and Drug Administration for a copy of GlaxoSmithKline Plc (GSK)’s Nicotine-replacing gums last month, with revenue of $30 million.

“The prescription drug business continues to shift to OTC as it’s more affordable, and because of that we’re very comfortable with Perrigo,” Susan McDonald, a fund manager for the Aberdeen Israel Fund (ISL:US), which oversees about $63 million, said by phone from London. “Perrigo is the leader in many of the aspects of its industry, and with increased attention on health care costs, the company is in a very strong position.”

Israel’s TA-25 Index (TA-25) added 0.5 percent to 1,229.66, the highest since Oct. 17. The gauge has added 13 percent this year. This compares with a 3.6 percent advance for the Bloomberg Israel-US Index.

‘Huge Pipeline’

Perrigo shares in Tel Aviv dropped 1.2 percent today to 453.20 shekels, or the equivalent of $116.19. The arbitrage between the U.S. and Israeli stock yesterday was the highest since Sept. 21.

The drugmaker will probably say that revenue for the quarter ended Sept. 30 increased 14 percent to $825.7 million, beating the previous year’s 13 percent growth, according to the mean estimate of 13 analysts surveyed by Bloomberg.

“There’s this huge pipeline of store-brand switches that will take place in which drugs move to over-the-counter,” Randall Stanicky, an analyst at Canaccord Genuity Inc., said by phone from New York yesterday. “As opportunities come to market, so do the opportunities for Perrigo.”

Earnings will compare with results from a year ago of “weak cough and cold season,” he said.

Pet Care

Perrigo said on Oct. 1 that it completed the acquisition of Sergeant’s Pet Care Products Inc. for $285 million in cash, according to a statement distributed by PRNewswire. The purchase will help the company save $50 million in tax payments for the next 15 years, it said.

“The latest acquisition of Perrigo in the pet product treatment sector is a positive development for the company,” Sabina Podval, an analyst at Leader & Co. in Tel Aviv, wrote in an e-mailed report yesterday. “It’s a purchase that will have important synergies on the sales side and will also provide a different source of revenue than the consumer health care.”

Israel, which has a population of similar size to Switzerland, has about 60 companies traded on the Nasdaq Stock Market, the most of any country outside the U.S. after China. The nation is also home to more startup companies per capita than the U.S.

SodaStream Plunges

SodaStream, the maker of soda machines, dropped 4.6 percent to $34.82, the lowest since June 15.

Primo Water (PRMW:US) said Cuisinart will sell the Winston-Salem, North Carolina-based company’s existing line of sparkling beverage appliances and gas cylinders.

Airport City, Israel-based SodaStream will probably say tomorrow that third-quarter sales increased (SODA:US) 26 percent to a record $103.6 million, according to the average estimate of nine analysts surveyed by Bloomberg.

Yields on Israel Electric Corp. bonds due in 2017 climbed 26 basis points in New York to 5.12 percent yesterday, the highest level since Aug. 21.

Israel’s Finance Ministry said it’s seeking a solution to the company’s cash flow gap, according to an e-mailed statement yesterday. The ministry is meeting with the state-controlled company to follow auditing activities, it said.

To contact the reporter on this story: Leon Lazaroff in New York at llazaroff@bloomberg.net

To contact the editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net


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Companies Mentioned

  • PRGO
    (Perrigo Co PLC)
    • $165.96 USD
    • -0.15
    • -0.09%
  • SODA
    (SodaStream International Ltd)
    • $20.99 USD
    • -0.16
    • -0.76%
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