Product Recall Flu Hurts Perrigo

February 4, 2005
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ALLEGAN — Perrigo Co.’s net sales for the second quarter of fiscal 2005 increased 2 percent to $251.7 million, up from $247.4 million a year ago. Net income for the quarter was $15.8 million, or 22 cents per share, compared with $38.2 million, or 53 cents per share, for the same period in fiscal 2004.

The November 2004 retail level recall of loratadine syrup, combined with lower than anticipated sales of cough and cold and pain relievers, reduced sales by $6.3 million for the year and reduced after-tax income by $5.3 million, or 7 cents per share, according to the company.

The predictions had been that the shortage of flu vaccine would result in more sickness, but 30 percent fewer people reported cold and flu symptoms through December than during last year’s flu season, noted Chairman, President and CEO David Gibbons.

“Tracking service data suggests that this is one of the weakest December quarters on record. Even though we’re becoming less of a seasonal business each year, we can still be impacted by the seasonal pattern of the cough, cold and flu season.”

Similarly, the demand for analgesics is “extremely low” compared to the past 10 years, added Douglas Schrank, executive vice president and CFO.

The company’s consumer health-care segment saw a 3 percent decrease in second quarter sales to $218.8 million as a result. Countering that was a one-time income tax benefit of $13.1 million, or 18 cents per share, last year.

All totaled, net income for the quarter was $21.1 million, or 29 cents per share, compared with $25.1 million, or 35 cents per share, a year ago.

Net sales for the six months ended Dec. 25 were $479.5 million, compared with $459.2 million reported for the first six months of fiscal 2004. Net income was $33.4 million, or 46 cents per share for the period, compared with $54.7 million, or 76 cents per share, a year ago.

Schrank said Perrigo saw strong gains in its core vitamin product category in both the last two quarters. While sales in the vitamin market were down 4 percent in the second quarter, and store brand vitamins were down 8 percent, Perrigo vitamin sales were up 30 percent, he pointed out.

The company’s pharmaceutical segment began shipments of the first generic prescription drug products marketed by Perrigo, which included ibuprofen oral suspension and citalopram tablets. Operating expenses for that segment were $2.3 million for the quarter and $3.6 million for the first half as the company continued to invest in its new pharmaceutical business, Shrank said.

Gibbons reiterated that Perrigo filed seven ANDAs (Abbreviated New Drug Applications) for new generic prescription products during the second quarter and expects to file three more in the second half of the year.

On the over-the-counter side of the business, Perrigo began shipping nicotine gum in January.

“This is a large market. Early indications are very good for us, with more of an opportunity than we anticipated. We can’t meet the demand in the short term,” Gibbons said. He sees the smoking cessation category as having a potential for sales and profits similar to loratadine, one of the key products for Perrigo in fiscal 2004.

United Kingdom second quarter net sales increased $9.5 million to $24.5 million, with the 2003 acquisition of Peter Black Pharmaceuticals accounting for about $8 million of the increase. Sales for Mexico operations increased 12 percent to $8.2 million during the quarter.    

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