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Perrigo to Sell Tysabri Royalties; Issues Tepid 2017 View

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Perrigo Company Plc (PRGO - Free Report) recently reported preliminary numbers for 2016 and issued a lackluster guidance for 2017. The company also announced that it has signed an agreement to divest the royalties it receives in multiple sclerosis drug, Tysabri, in order to monetize the asset. The company now expects to file its annual report on or before Mar 16, 2017.

Perrigo’s share declined 12.3% in after-market trading. In fact, the stock underperformed the Zacks classified Medical-Products industry year to date. The company’s shares lost 10.8%, whereas the industry registered an increase of 10.1%.



2016 Preliminary Results

The company reported preliminary 2016 earnings in the range of $7.10–$7.25 per share. The Zacks Consensus Estimate stood at $6.95 per share. The preliminary earnings is higher than the 2016 guidance of $6.85–$7.15 per share announced at the third quarter earnings call.

Preliminary net sales were $5.6 billion. The Zacks Consensus Estimate was pegged at $5.44 billion.

2017 Outlook

The company expects 2017 net sales in the range of $5.0–$5.2 billion, including contributions from Tysabri and the Active Pharmaceutical Ingredients (API) unit. The expected net sales are, however, lower than Zacks Consensus Estimate of $5.51 billion.

The company expects adjusted earnings per diluted share in the band of $6.30–$6.65 in 2017.

Selling Tysabri Royalty Stream

The company announced that it has signed an agreement to sell the royalty stream that it receives on net sales of Biogen Inc.’s (BIIB - Free Report) multiple sclerosis drug, Tysabri, to Royalty Pharma for up to $2.85 billion. This will comprise $2.2 billion in cash at closing and up to $650 million in potential milestone payments.

The royalty divestment of Tysabri was one of the actions proposed by New York-based activist investor Starboard Value LP, in a letter issued in Sep 2016, wherein it revealed its 4.6% stake in Perrigo and suggested steps to improve the company’s dismal operating and financial performance.

Restructuring Initiatives

Perrigo also announced the commencement of a restructuring program to find strategic alternatives for its API unit (which is focused on making drug ingredients) and said that it expects to reduce its global non-production workforce by 14% or 750 employees. This program is expected to yield more than $130 million in annual savings by mid-2018.

Moreover, Perrigo announced that it has appointed Ron Winowiecki as its Chief Financial Officer. Winowiecki has replaced Judy Brown. Additionally, Svend Andersen has been appointed to the position of Executive Vice President and President, Consumer Healthcare International (CHCI).

Perrigo Company Price, Consensus and EPS Surprise

 

Perrigo Company Price, Consensus and EPS Surprise | Perrigo Company Quote

Zacks Rank & Key Picks

Perrigocurrently carries a Zacks Rank #4 (Sell). A couple of better-ranked stocks in the health care sector include Celgene Corporation and Sunesis Pharmaceuticals, Inc. . Each of these stocks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Celgene’s earnings estimates increased from $6.55 to $6.60 for 2017 and from $8.13 to $8.16 for 2018 over the last 30 days. The company posted positive earnings surprises in three of the four trailing quarters with an average beat of 5.08%.

Sunesis’ loss estimates narrowed from $2.57 to $2.44 for 2016 and from $2.16 to $1.97 for 2017 over the last 60 days. The company posted positive earnings surprises in three of the four trailing quarters with an average beat of 0.54%.

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