Perrigo (PRGO) stock plunged Thursday after the company cut its outlook for the year and said it will separate its prescription drug business due to price erosion.
XThat prodded Perrigo stock to plunge 9.4% in high volume, near 71 in morning trading on the stock market today. Generic drug stocks dipped 0.4% on Perrigo's report, which followed a similarly disappointing report from Mylan (MYL) on Wednesday.
Perrigo's prescription drugs business chipped away at the company's top line in the second quarter. Board Chairman Rolf Classon says the unit could realize greater value outside of Perrigo. The board will consider a tax-efficient separation to shareholders, a sale or a merger.
"Perrigo's consumer and prescription platforms are both well positioned, but they are also navigating divergent industry dynamics with unique strategic, financial and operational opportunities and requirements," he said in a written statement.
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The board noted Perrigo has had limited options in efficiently separating its businesses after the acquisition of Elan in 2013. But those limitations are set to expire at the end of this year. The separation is now expected in the second half of 2019.
Prescription Drugs Tumble
The troubles in Perrigo's second quarter largely stemmed from the prescription drugs business. Sales in that unit declined 13.2% to $209 million. New product sales of $8 million couldn't offset $35 million lower sales of existing products, the firm said.
Perrigo cited price erosion for lower sales of existing products. The generic drugs firm also cited revised expectations for prescription drugs and unfavorable foreign currency translation of $65 million for its guidance cut.
For the year, Perrigo now sees $4.8 billion to $4.9 billion in sales, down from its prior view for $5 billion to $5.1 billion. Analysts had modeled $5.03 billion. The firm also cut its adjusted profit guide 40 cents at the midpoint to $4.75-$4.95 a share, missing estimates for $5.23.
Topline Light
Total sales declined 5.7% on a constant-currency basis to $1.19 billion. That missed the average of analysts polled by Zacks Investment Research for $1.23 billion. Adjusted earnings were flat at $1.22 per share and beat by a penny.
Consumer health care sales in the Americas fell 1.2%, excluding the impact of exchange rates, to $597 million. Perrigo noted strong sales of cold/cough/allergy/sinus products and infant formula, as well as $15 million in new product sales. But smoking cessation sales declined.
International health care sales declined 4.1% in constant currency to $381 million. The business saw lower sales for anti-parasite, lifestyle and analgesics. But new product sales of $19 million and higher net sales in diagnostics partially offset that.
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The post Perrigo Dives As Price Chips Away At Topline And Board Mulls Separation appeared first on Investor's Business Daily.
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