Perrigo Company plc (PRGO) Tanks As CEO Leaves For Valeant (VRX)

Perrigo Company plc (PRGO) Tanks As CEO Leaves For Valeant (VRX)
Perrigo Company plc

Perrigo Company plc (PRGO) Tanks As CEO Leaves For Valeant (VRX) – it was a decent day to be a VRX shareholder and a bad day to be a PRGO and if your initials are JP it was a really bad day … being shareholders of both companies..  As JPMorgan notes: This morning, Perrigo announced the appointment of John Hendrickson
(former President) as CEO, replacing Joe Papa who is set to become the CEO of Valeant. The company also provided disappointing preliminary 1Q results and significantly lowered full year 2016 EPS to $8.20-$8.60 (vs. prior range of $9.50-$9.80) due to Rx pricing pressure, continued underperformance of the Branded Consumer business, and lower expectations for new product launches.

Perrigo Company plc CEO leaves for VRX analysts react


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There will be several who focus on recent challenges and the need for someone from the outside to come in and help turn PRGO around. But on the other hand, John Hendrickson has been with PRGO since 1989 and led key
operations including VP of Manufacturing to EVP and General Manager of Consumer Health to its current President among others and this should minimize any
disruption at a time where operational focus is critical. He also understands the Consumer Health business well which is the highest value part of PRGO’s
business. PRGO also mentioned that Omega head Marc Coucke’s Board nomination has been withdrawn by the nominating and governance committee.

Morgan Stanley

New CEO has strong experience at Perrigo Company plc. Mr. John Hendrickson has served as President of PRGO since October 2015, following his prior roles as EVP, Global Operations & Supply Chain (2006 -2015) and the head of US Consumer Healthcare (2003-2006) . A 27-year veteran at Perrigo, he joined the company in 1989. With the resignation of current Chairman and CEO Joseph Papa, the role of Chairman will now be separated from the CEO role. The board has elected Independent Director Laurie Brlas as PRGO new Chairman.

Goldman Sachs

PRGO announced the resignation of former CEO Joe Papa and promotion of former President John Hendrickson as new CEO. Mr. Hendrickson has been at PRGO since 1989 in various roles including leading the US Consumer Healthcare business from 2003 to 2006. In addition to the leadership change, PRGO pre-announced 1Q EPS of $1.71-$1.77 which is well below our $1.88 estimate and $1.89 consensus. 1Q revenues of $1.33- $1.35bn missed our $1.38bn estimate and $1.39bn consensus.

Management also lowered 2016 EPS guidance to $8.20-$8.60 (from $9.50- $9.80 prior) with an $8.40 midpoint that is 12% below our $9.51 estimate and $9.52 consensus. PRGO identifies the majority of the guidance reduction as a result of lower pricing in the Rx business due to industry and competitive pressures. The other source of downside is cited as weakness in the Omega business which former CEO Joe Papa had committed to turn around on the previous earnings call (2/18). The company is considering taking an impairment charge on intangible assets associated with the Omega acquisition and will decide by 5/12.

William Blair

Mr. Hendrickson is long tenured with Perrigo—most recently as president since October 2015—and should be an able steward. He was formerly executive vice president–global operations and supply chain between 2006 and 2015 and has held numerous other management and operational leadership roles at Perrigo since he joined the company in 1989, including leading the U.S. consumer healthcare business from 2003 to 2006.


Perrigo announced (1) Joe Papa resigned as Chairman and CEO, which shouldn’t be surprising to the Street given the media reports last week, (2) John Hendrickson is appointed as the new CEO, (3) the Board separated the roles of CEO and Chairman of the Board and, in doing so, elected Laurie Brlas as Chairman, (4) preliminary 1Q16 sales of $1.33-$1.35B (vs. UBSe $1.37B and $1.39B) and EPS of $1.71-1.77 (vs UBSe and Street $1.89), (5) and lower 2016 EPS guidance of $8.20-8.60 (vs prior guidance of $9.50-9.80).


As much as we dislike “reactive” downgrades, we are lowering our rating on PRGO to Hold from Buy. We still see PRGO as a unique company with a growing and durable core Consumer Healthcare business, but we believe that it will take some time for investors (and us) to better understand how to model growth and margins for the Branded Consumer (Omega) and Rx Pharma (generics) segments. Recurrent challenges, especially associated with the recently-acquired Omega business, are especially disappointing in light of PRGO’s decision (lead by then Chairman/CEO Joe Papa) to fend off MYL’s attempt to acquire PRGO.


We note that with Papa entering to take over VRX from Michael Pearson, the 10-K is likely nearing completion as we think it unlikely that Papa would sign-on without this key financial requisite being settled. We look for this release by its committed date of 4/29/16, but note the deadline of 5/27/16.



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