Perrigo Vaults Into Rx Generics

January 14, 2005
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ALLEGAN — Perrigo announced its intention to branch into the generic prescription drug market less than 18 months ago. The company started in fiscal 2004 by investing $5 million in internal research and development of generic prescription products and later partnering with Bentley Pharmaceuticals to co-develop more. 

That strategy for future growth took a big leap forward in November when Perrigo announced it was acquiring Agis Industries Ltd., Israel’s second largest maker of generic pharmaceuticals.

With its $818 million purchase of Agis — a deal that’s expected to close during the second quarter — Perrigo immediately launches into a market that has great growth potential for the company, as well as great potential to offer consumers significant savings in this day of burgeoning health-care costs.

The global generic drug market is estimated between $19 and $22 billion, with compound annual growth rate of 11 to 12 percent. The U.S. Congressional Budget Office estimates generic drugs save U.S. consumers alone an estimated $8 billion to $10 billion a year at retail pharmacies and that even more billions are saved when hospitals use generics.

That bodes well for Perrigo.

“This is the launch into generics that we’ve been looking for and talking about,” Gibbons said upon announcing the acquisition plans.

“This transaction joins Perrigo’s leadership in store-brand over-the-counter pharmaceuticals and nutritional products and our outstanding customer relationships and distribution network with Agis’ strong position in topical generic products and the growing active pharmaceutical ingredients business. It gives us a generic platform with a broad topical drug portfolio and really jumpstarts Perrigo’s entry into generics.”

Ernest Schenk, manager of investor relations, said Perrigo intends to spend $10 million to $12 million on R&D this year for its generic prescription business.

Perrigo currently markets two generic prescription products and has Abbreviated New Drug Applications (ANDAs) pending with the Food and Drug Administration for three more. Schenk said Perrigo anticipates filing eight to 10 ANDAs this year.

Agis has seven ANDAs pending, he said, noting that the regulatory filing process can take anywhere from nine to 12 months to 18 to 20 months. The combined company, he said, will have 37 generic prescription products with annual sales of more than $100 million, a combined pipeline of 17 ANDAs pending and 65 products under development.

Gibbons referred to the combination of Perrigo and Agis as a coming together of the best of consumer health care and the best of pharmaceuticals.

“It’s a logical extension of our existing business,” he remarked. “This is a great opportunity for us to leverage our core capability in a category that is growing at a faster rate than Perrigo’s existing categories.”

Agis has invested about $100 million in R&D over the last four years, as has Perrigo, Schenk said. Both companies have consistent track records of growth, too. Perrigo’s operating income has grown at a compound rate of 41 percent over the last four years, while Agis has grown at a compound rate of 33 percent.

The combined company will retain the Perrigo name, remain headquartered in Allegan, and will have nearly 6,000 employees across operations in the United States, Israel, Europe and Mexico.

With the absorption of Agis, Gibbons said, Perrigo will have excellent R&D capability, an experienced global management team, broader capabilities for growth in the global generic pharmaceutical market, and added synergies in both its generic prescription and over-the-counter businesses.  

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