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Perrigo to take action over Omega Pharma deal

10 November 2016 • by Deborah Wilkes

Perrigo to take action over Omega Pharma deal

Perrigo's Branded Consumer Healthcare business remains "a top priority" for the team, says chief executive officer John Hendrickson

Perrigo plans to file an "arbitral claim" against the sellers of Omega Pharma before the end of this year. The company said it would not provide further details at this time, as it was company policy to not comment on legal matters.

The news came as Perrigo recorded an impairment charge of US$1.67 billion related to its Branded Consumer Healthcare business – formerly the Omega Pharma European OTC business – in the third quarter of 2016. As a result, Perrigo reported a net loss of US$1.26 billion in the three months.

Perrigo said the US$1.67 billion consisted of a goodwill impairment charge of US$804 million plus a brand intangible assets impairment of US$866 million. 

In the first nine months of 2016, Perrigo recorded an impairment charge of US$2.13 billion related to Branded Consumer Healthcare, resulting in a net loss of US$1.40 billion.

Ireland-based Perrigo acquired Belgian OTC company Omega Pharma on 30 March 2015 in a cash and shares transaction worth around EUR3.8 billion (US$4.2 billion) including the assumption of EUR1.3 billion in debt.

Perrigo purchased Omega from Marc Coucke – Omega's founder and chief executive officer – Waterland Private Equity Fund V CV and co-investors of Waterland. Coucke joined Perrigo as part of the deal.

In April 2016, Perrigo announced that Coucke had resigned from the company. Around the same time, Perrigo said it was assessing a "possible impairment" involving the Branded Consumer Healthcare business in connection with its financial results for the three months ended 2 April 2016.

Results for the third quarter of 2016

Reporting its results for the three months ended 1 October 2016, Perrigo said sales at the Branded Consumer Healthcare business had increased by 1% to US$304 million. The rise at constant currencies was 2%.

Perrigo said new product sales and acquisitions had contributed US$26 million and US$18 million respectively. However, these contributions had been offset by lower sales in the lifestyle and natural health/vitamins categories, added the company.

Recent acquisitions include the Yokebe brand in Germany and a portfolio of OTC brands from GlaxoSmithKline Consumer Healthcare. The latter deal included the NiQuitin nicotine-replacement therapy (NRT) business in Europe, Brazil and Turkey, as well as the Nicotinell NRT business in Australia.

Branded Consumer Healthcare reported an operating loss of US$1.68 billion. Adjusted operating income was US$30 million, giving an adjusted operating margin of 10.0%.

Perrigo expects Branded Consumer Healthcare's sales for the full year to be around US$1.3 billion.

Chief executive officer John Hendrickson said Branded Consumer Healthcare remained "a top priority" for the team.

Performance in the US

Meanwhile, sales at Perrigo's Consumer Healthcare business, which includes its store-brand OTC products in the US, were down by 1% as reported to US$669 million. The company said the fall reflected the divestment of its vitamins, minerals and supplements (VMS) business during the quarter.

Excluding the VMS business, adjusted sales were up by 2% to US$648 million.
Consumer Healthcare's reported operating margin was 15.0% and its adjusted operating margin was 19.8%.

Sales by Perrigo's two consumer-facing businesses totalled US$0.97 billion as reported, accounting for 71.8% of group sales up by 1% to US$1.36 billion.

As part of its ongoing business portfolio review, Perrigo is reviewing strategic alternatives for the rights to the royalty stream from sales of the multiple sclerosis drug Tysabri (natalizumab).

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