Shares of Perrigo Company (PRGO) soared to a 52-week high of $120.94 during the course of the trading session on Apr 2, 2013 buoyed by a series of positive developments. The closing price of the company on that day was $37.94, representing a solid 1-year return of 14.2% and an impressive year-to-date return of 12.3%.
Moreover, this Zacks Rank #2 (Buy) company has delivered positive earnings surprises in each of the last four quarters with an average beat of 6.09%. The long-term expected earnings growth rate for this stock is 13.8%.
Velcera Deal – A Smart Move
On Apr 1, 2013 Perrigo announced that it has completed the acquisition of companion animal health company, Velcera, Inc. for approximately $160 million in cash.
The deal, which has strengthened Perrigo’s position in the over-the-counter (:OTC) retail pet healthcare market, looks good to us. The acquisition adds the erstwhile Velcera’s PetArmor franchise of Flea and Tick therapies to Perrigo’s product portfolio.
Perrigo has lately been quite active on the acquisition front. In Feb 2013, Perrigo acquired UK-based privately held pharmaceutical company, Rosemont Pharmaceuticals Ltd. By acquiring Rosemont Pharma, Perrigo aims to strengthen 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, Perrigo 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, Perrigo acquired Paddock Labs to expand its generic Rx business. We are impressed by Perrigo’s growth-by-acquisition strategy.
Launch of Mucinex- Another Positive for Perrigo
In Mar 2013, Perrigo commenced the shipping of its generic version of Adams Respiratory Therapeutics’ expectorant Mucinex (600mg extended-release tablets). Adams Respiratory Therapeutics is a subsidiary of Reckitt Benckiser Group.
The launch of the store brand version of Mucinex further strengthens its dominant position in the store brand OTC drug market. Perrigo boasts partnerships with retailers, pharmacies and mass merchandisers for which it manages a wide range of activities including regulatory approvals, customized branding and packaging, and in-store advertising.
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 $150 million to revenues. The company’s fiscal year ends on the last Saturday of June every year.
Other Stocks to Consider
Apart from Perrigo, which develops, manufactures and distributes OTC and generic prescription pharmaceuticals, Mylan Inc (MYL) is another Zacks Rank #2 stock in the generic space. Meanwhile, stocks such as Athersys, Inc. (ATHX) and Osiris Therapeutics, Inc. (OSIR) carry a Zacks Rank #1 (Strong Buy) and are worth considering.
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