Shares of Perrigo Company (PRGO) soared to a 52-week high of $123.95 during the second half of the trading session on Jul 5, 2013 buoyed by a series of positive developments. The closing price of the company on that day was $123.77, representing an impressive year-to-date return of 16.2%.
Moreover, Perrigo has delivered positive earnings surprises in three of the last four quarters with an average beat of 1.61%. The long-term expected earnings growth rate for this stock is 12.8%.
Acquisition of Fera’s Eye-care Portfolio- A Smart Move
Last month, Perrigo purchased the ophthalmic sterile ointment and the solution product portfolio from the privately-held Fera Pharmaceuticals, for approximately $93 million in cash.
The deal, which has strengthened the company's eye-care portfolio, looks good to us. The acquisition has added nine generic prescription drugs to its portfolio. The addition of the generic prescription drugs has further strengthened the company's Rx Pharmaceuticals segment.
Perrigo expects the acquisition to boost its adjusted earnings per share in fiscal 2014 by 12 cents. The company’s fiscal year ends on the last Saturday of Jun every year.
Perrigo has lately been quite active on the acquisition front. On Apr 1, 2013, the company announced that it has completed the acquisition of companion animal health company, Velcera, Inc. for approximately $160 million in cash.
In Feb 2013, the company acquired UK-based Rosemont Pharmaceuticals Ltd. By acquiring Rosemont Pharma, Perrigo has strengthened its position in the UK oral liquid formulations space.
In Dec 2012, Perrigo acquired privately held Cobrek Pharmaceuticals, Inc. for approximately $45 million in cash. In Jan 2012, the company inked a deal to acquire the assets of Georgia-based private company CanAm Care, thereby expanding its presence in the diabetes care market. In Jul 2011, it acquired Paddock Labs to expand its generic Rx business. We are impressed by Perrigo’s growth-by-acquisition strategy.
We are also impressed by Perrigo’s strong pipeline. Perrigo has a strong pipeline and expects to launch more than 60 new products in fiscal 2013 contributing approximately $130 million to revenues.
Other Stocks to Consider
Perrigo, which develops, manufactures and distributes OTC and generic prescription pharmaceuticals, carries a Zacks Rank #3 (Hold) in the short run. Stocks such as Mylan Inc (MYL) appear to be more attractive in the generic space with a Zacks Rank #2 (Buy). Meanwhile, stocks such as Biogen Idec Inc. (BIIB) and Jazz Pharmaceuticals Public Limited Company (JAZZ) appear to be more favorably placed. Both companies carry a Zacks Rank #1 (Strong Buy) and are worth considering.
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