Perrigo Cuts 750 Jobs, Sells MS Drug Royalties for $2.85 Billion and Loses CFO to Amgen

Perrigo Cuts 750 Jobs, Sells MS Drug Royalties for$2.85 Billion and Loses CFO to Amgen February 28, 2017
By Alex Keown, Breaking News Staff

ALLEGAN, Mich. – Shares of Perrigo are down more than 11 percent in premarket trading following the company’s announcement it was terminating 750 employees and divesting its multiple sclerosis drug Tysabri as part of a strategic plan to improve operations.

In its earnings call on Monday, Perrigo, which has corporate headquarters in Dublin, announced it projected a preliminary loss for 2016 and also said it was initiating a plan to streamline its organizational structure to save $130 million by mid-2018. That restructuring will come with the cost of about 750 non-manufacturing positions, which is about 14 percent of those job types, MiBiz reported Monday afternoon.

During a conference call with investors, Chief Executive Officer John Hendrickson said the cuts will allow the company to be more streamlined and efficient. He said they are critical to Perrigo’s ability to “drive our business forward,” MiBiz reported.

In addition to the loss of those 750 jobs, Perrigo announced Chief Financial Officer Judy Brown was departing Perrigo for a role at Amgen. The company appointed Ron Winowiecki as acting CFO.

In addition to the job cuts, Perrigo said it signed an agreement with RPI Finance Trust worth up to $2.85 billion for the MS drug. Perrigo acquired a share of royalty rights to Tysabri in 2013 as part of the acquisition of Elan Corporation . Biogen owns the marketing rights to Tysabri as part of its own deal with Elan.

The deal with RPI includes $2.2 billion, plus $650 million in potential milestone payments based upon future global sales of the drug in 2018 and 2020, the company said. In a statement, Hendrickson said the decision to unload Tysabri was made in 2016 as part of a plan to sell-off non-core assets. Hendrickson also said the sale is part of a portfolio review process that will focus on Perrigo’s consumer-facing and drug business.

While losing Tysabri is something Hendrickson said will allow Perrigo to “de-lever” its balance sheet, the company said at the time of announcing the sale that it was reporting a preliminary share loss for 2016 between $28.85 and $29 due to “goodwill and intangible asset impairment charges of $5.4 billion for the calendar year 2016,” according to the company’s statement. The company also is projecting an operating loss of $4.65 billion to $4.68 billion. However, in its earning call Perrigo leadership said the earnings projections were preliminary and the company has delayed its plan to file its form 10-K until March 16.

Hendrickson said 2016 was a transitional year for the company, which included his assuming the role of CEO following the departure of Joe Papa to Valeant . The growing pains of 2016 will help 2017 be a stronger year with “continued growth in our consumer-facing businesses, with improved profitability in our CHCI segment,” Hendrickson said. Perrigo is projecting 2017 net sales of $5 billion to $5.2 billion with earnings of $3.39 to $3.74 per diluted share.

Perrigo’s transition has been spurred in part by activist investors Starboard Value, which controls about 6.7 percent of company shares. In September, Starboard sent the company a letter criticizing “operational and financial missteps’’ in the wake of Perrigo’s 2015 decision to spurn Mylan ’s takeover bid.

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