Good News For Perrigo

Zacks Investment Research

Perrigo Company (NASDAQ:PRGO) recently received some good news when the U.S. Food and Drug Administration (FDA) cleared its generic version of Novartis(NYSE:NVS) heart burn drug Prevacid. Approval was granted to treat patients suffering from frequent heartburn (two or more days in a week).

Perrigo launched the drug in the U.S.  following the receipt of final approval from the U.S.  regulatory body of the abbreviated new drug application (ANDA) filed by Perrigo seeking approval to market its generic equivalent of Prevacid.  Perrigo further stated that Prevacid’s over-the-counter sales in 2011 came in at approximately $220 million.

We note that the approval of the generic version of Prevacid would be easy on the pockets of U.S. patients as generic drugs are much cheaper than their branded counterparts. By gaining the FDA approval of its generic equivalent of Prevacid, Perrigo has further strengthened its position as a dominant player in the store brand over-the-counter (OTC) market.

Perrigo’s broad line of store brand pharmaceutical products has the same active ingredients and comparable quality and efficacy as the national brands. This has helped the company become a dominant player in the store brand OTC drug market. Perrigo boasts of partnerships with retailers, pharmacies and mass merchandisers for whom it manages a broad range of activities including regulatory approvals, customized branding and packaging and in-store advertising. 

Our Recommendation

We currently have a Neutral recommendation on Perrigo. The stock carries a Zacks #3 Rank (short-term Hold rating).

We believe Perrigo has a sustainable and diversified product portfolio. The company’s strong position in the brand OTC pharmaceutical market and growing generics and active pharmaceuticals ingredient (API) businesses are expected to drive growth in the coming quarters. We are also impressed by Perrigo’s strong pipeline.

 
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