Perrigo surfs recession with strong results from OTC products

January 23, 2010
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ALLEGAN — Perhaps it's fitting that Allegan's Perrigo Co., the generic and over-the-counter drug-maker, has its headquarters near Lake Michigan, because the publicly held company surfed through 2009's rough economic waters.

Taking advantage of its market position of having more of the right products at the right time than its competitors, Perrigo hit financial records, made money for investors and added jobs.

In the annual report filed with the Securities and Exchange Commission for its fiscal year that ended in June, Perrigo was upbeat: "An aging global population, combined with rapidly rising health care costs in most developed countries, provides, in management's view, the ideal landscape for the cost savings offered by the company's product portfolio," the report stated.

"The economic uncertainty of recent times has encouraged more consumers to switch to high quality store brand OTC products and has accelerated discussions at the governmental level around greater use of generic prescription pharmaceuticals as a way to reduce health care spending. Despite the global slowdown, the company continues to see opportunities for future growth while saving consumers more money at the same time."

Perrigo has quietly carved a niche for itself that continues to pay off. It works in three business sectors.

The Consumer Healthcare segment makes a variety of over-the-counter pharmaceutical and nutritional products, often sold as store brands. The products are attractive to retailers, which generally make more money on them, and they are attractive to recession-weary consumers who want a quality product without paying for a national brand name. Perrigo provides more than 1,300 store-brand products to more than 900 customers.

In the Pharmaceuticals segment, Perrigo offers more than 250 generic prescription medications to more than 110 customers. While the products include items such as tablets and sprays, the focus is on generic prescription topical applications, such as creams, ointments, lotions, gels, shampoos, foams, suppositories, sprays, liquids, suspensions and solutions.

The company also has an Active Pharmaceutical Ingredients division, which sells to manufacturers of generic and brand-name drug companies. Perrigo has announced its plans to shut down an API plant in Germany by the first quarter of fiscal 2011, which occurs in late 2010. In August, Perrigo acquired an 85 percent in an API manufacturer in India and is building a new plant outside Mumbai.

The store-brand over-the-counter and generic medicine manufacturer also sold its Israel Consumer Products and related production assets to Emilia Group, a subsidiary of O. Feller Holdings Ltd. for approximately $54 million.

Closer to home, Perrigo forged ahead with a manufacturing expansion in Allegan. The $25 million, 62,000-square-foot expansion of Perrigo's tablet-manufacturing space is expected to increase the company's capacity to produce 35 billion tablets annually by 10 percent, and new jobs are being filled.

The public company said last summer that it also would invest $10.5 million into 30,000 square feet of new conference rooms, offices and a wellness center at its headquarters and a 20,000-square-foot employee training center.

The company expects to add a total of 400 employees over the next four years, thanks to those expansions. About 2,800 of Perrigo's 6,000 employees world wide are located in Michigan. The company already has 1.8 million square feet in Allegan, mostly for manufacturing and distribution, as well as offices.

Since fiscal 2010 began, Perrigo provided a quarterly report in November and covering the first quarter: Revenue is up 16 percent to $72 million, and guidance on per-share earnings from continued operations moved up from $2 to $2.12 to $2.35 to $2.45.

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