Perrigo’s Omega Pharma has underperformed since the Dublin drugmaker picked it up for $4.5 billion last March. Now, under activist pressure, the company is doing something about it.
Perrigo is planning to restructure its Omega Pharma Belgium business, it announced Thursday, a move it thinks will “improve the financial profile and enhance focus of the business on branded consumer OTC products”—but also put as many as 80 workers out of a job.
Among the changes: Perrigo plans to sell off Omega’s Etixx brand and business, and it will let a distribution pact with Sweden’s Meda expire.
Meanwhile, though, employees will be feeling the consequences. Perrigo’s Thursday announcement marked the beginning of a consultation period required by Belgian law when job cuts are imminent. The layoffs are slated to hit Omega Pharma Belgium, Etixx and Biover, another brand under the Omega umbrella.
“The number of employees impacted is expected to be in the 45 to 80 range,” a company spokesman said in an interview.
The layoffs in Belgium won’t be Perrigo’s first in recent memory. Last October, as part of an effort to dodge a takeover from hostile suitor Mylan, the company unveiled plans to slash 800 jobs and buy back $2 billion in stock.
But while those moves may have prompted shareholders to vote “no” on the Mylan offer, they didn’t get Perrigo up to where it should be, in part because of Omega’s lagging performance. The unit's shortfalls spurred investors to file a July lawsuit against the company for “misleading” them away from the Mylan merger.
Perrigo itself has blamed departed CEO Joseph Papa—now the head honcho at embattled Valeant—for some of the mess it’s in. Upon taking the helm, new chief John Hendrickson told investors that Perrigo’s “recent track record of performance against our own expectations is unacceptable,” stressing that he wants “the expectations we lay out to be realistic, numbers we feel we can deliver.”
Meanwhile, however, Perrigo also has some activists on its case, and they have their own set of priorities. In September, Starboard Value—new owners of a 4.6% stake in the company—slammed Perrigo's “woeful” performance, pointing to sinking operating margins in Perrigo’s consumer unit as proof of “a clear lack of focus and execution in the core business.”
Starboard also recommended that Perrigo sell off its royalty stream from Biogen multiple sclerosis treatment Tysabri, and the company may be trying to follow through on that advice. Perrigo is weighing a sale of the asset, according to September reports.