Bloomberg News

Tylenol Copycat Outlook Boosts Perrigo: Israel Overnight

October 06, 2013

Perrigo Co. (PRGO:US), the largest maker of generic over-the-counter medicines in the U.S., posted the biggest weekly rally in seven months in New York on prospects sales will rise to a record.

Shares of Perrigo, which entered the Tel Aviv’s benchmark index after buying B’nei Brak, Israel-based Agis Industries Ltd. in 2005, jumped 4.3 percent to $129.05 for the week in the U.S. The stock advanced 3.3 percent to 460.90 shekels, or the equivalent of $129.86, at the close in Tel Aviv. The Bloomberg Israel-US Equity Index of the most-traded Israeli companies in the U.S. had the biggest weekly advance in two months, led by Mellanox (MLNX:US) Technologies Ltd.

Sales for the maker of lower-priced, store-brand versions of products such as Johnson & Johnson’s Tylenol pain reliever will rise (PRGO:US) to $4.1 billion in fiscal year 2014, according to the average estimate of 14 analysts surveyed by Bloomberg. The Allegan, Michigan-based company said in July it agreed to buy Irish drugmaker Elan Corp., gaining a low-tax base for international expansion. The deal should close by the end of the year, Perrigo and Elan said.

“It’s a good business that they are in and they have a dominant position in a business that has high barriers to entry,” Jason Gerberry, analyst at Leerink Swann & Co. said by phone from Boston on Oct. 4. “A factor that could provide upside to sales this year is if the Elan deal closes earlier than expected.”

Perrigo sells non-prescription products for conditions such as acid indigestion and nasal congestion, as well as generic drugs, nutritional supplements and animal treatments, according to its website.

Tax Savings

Elan’s purchase allows Perrigo to move its domicile to Ireland, where the corporate income-tax rate is 12.5 percent. The acquisition will result in more than $150 million of recurring after-tax annual operating expense and tax savings, the company said in July. It also gives the acquirer royalties on the multiple sclerosis drug Tysabri, which Elan discovered and sold to Biogen Idec Inc. (BIIB:US) on Feb. 6.

A 24 percent rally in Perrigo this year has driven its valuation to 18.8 times, according to data compiled by Bloomberg. While that’s almost in line with the three-year average, 11 out of the 16 analysts tracked by Bloomberg recommend buying the stock.

The Bloomberg Israel-US gauge jumped 2 percent to 100.83 for the week. The measure capped its fifth weekly advance in the longest winning streak since 2011.

Mellanox, the Israeli maker of equipment that speeds data transfers, surged 11 percent to $39.80 in the biggest weekly increase since July 2012. Rajesh Ghai, an analyst at Craig-Hallum Capital Group LLC raised his rating on the stock to buy from hold on prospects the company will benefit from cloud demand.

ClickSoftware Technologies Ltd. (CKSW:US), the Israeli developer whose largest investor is George Soros’s fund, sank 6.2 percent to $5.89, the biggest drop in the Bloomberg Israel-US Index.

To contact the reporter on this story: Matthew Kanterman in New York at mkanterman2@bloomberg.net

To contact the editor responsible for this story: Tal Barak Harif at tbarak@bloomberg.net


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Companies Mentioned

  • PRGO
    (Perrigo Co PLC)
    • $155.33 USD
    • 4.24
    • 2.73%
  • MLNX
    (Mellanox Technologies Ltd)
    • $38.11 USD
    • 0.83
    • 2.18%
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