Perrigo's generics split is back on the docket, thanks to $1.55B Altaris offer

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Perrigo in August delayed the sale of its prescription generics business, citing strong second-quarter sales, but analysts suggested a lack of suitors might have prompted the move. (Pixabay)

Perrigo pumped the brakes on its prescription generics hive-off last year, but, now, it has a buyer locked in and expects the split to go through by summer's end.

Perrigo clinched a deal to sell its prescription generics business to Altaris Capital Partners for $1.55 billion—a price analysts deemed "pretty good" under the circumstances. Once the sale closes, Altaris is set to assume more than $50 million in potential milestones and purchase pacts with third-party prescribers, the companies said Monday.

Perrigo’s generics business specializes in “extended topical” medications, like creams, foams, mousses, gels, liquids and inhalable products—including a copycat of Teva’s tricky-to-make ProAir HFA inhaler for chronic obstructive pulmonary disease and asthma.

With the selloff, Perrigo takes a major step toward completing its transformation into a “pure play” consumer self-care company, President and CEO Murray Kessler said in a release. The deal will leave Perrigo with a self-care portfolio with some $4 billion in revenues—plus, it’ll have more than $2 billion in cash to build out that business, “preferably” through M&A, Kessler said.

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Under the Altaris banner, Perrigo’s generics business will establish itself as a standalone company, Garikai Nyaruwata, managing director of Altaris, said in a release. Perrigo and Altaris didn’t say whether they’d be reorganizing factories or cutting costs, and the companies weren’t immediately available for comment.

The sale is expected to go through by the end of the third quarter, Perrigo said. Financial planner Centerview is advising Perrigo on the deal, while law firm Wachtell, Lipton, Rosen & Katz provided Perrigo with legal counsel. JPMorgan is on deck as the lead financial adviser to Altaris with Goldman Sachs acting as financial adviser, too.

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Dublin-based Perrigo makes and sells a suite of generic drugs in the U.S. such as testosterone creams, topical steroids, nicotine gum, acne treatments and more.

The company charted a major win in February 2020, when it won approval for a generic version of Teva’s ProAir HFA inhaler. At the time, Perrigo and its CDMO, Catalent, said they would start turning out limited supply immediately, while scaling up production for steady supply by the fourth quarter.

It was a bumpy road to the finish line for the Perrigo product, which was rejected by the FDA three times—in 2016, 2017 and 2018—as it worked to get the generic up to agency standards.

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Then, in August, Perrigo said it would indefinitely delay plans to split off its generics business, thanks to strong sales in the second quarter. On the whole, Perrigo raked in $1.15 billion in net sales for the period, with prescription generics coming in at $239 million, up 3.4% from the previous year.

Analysts figured the delay could be tied to a lack of suitors, however. “Holding off on the Rx ‘separation’ shouldn't be a surprise and we had been skeptical a deal could be done at all,” RBC Capital Markets analysts wrote to clients at the time. “[Perrigo] is weighing several options. One of those now appears to be holding on to the business until conditions improve.”

With the Altaris deal on the docket, Perrigo's plan is advancing once more, and its sale price is "pretty good all things considered," SVB Leerink analysts wrote Monday. They pointed to the juggling act between bustling generic competition and the self-care ambitions Perrigo had to perform to hit that figure.

The company’s generic prescriptions ginned up $236 million in sales for the fourth quarter of 2020, marking a 7.7% decrease from the same quarter in 2019. Overall, the company pulled in $5.1 billion for the year, up 5% from 2019.