FDA Rejects Perrigo's Generic Version of Teva's ProAir Inhaler


Shares of Perrigo have yet to rebound following the company’s weekend announcement that it expects the U.S. Food and Drug Administration to issue a Complete Response Letter for its generic version of Teva’s ProAir asthma inhaler.

The company announced the FDA’s intentions late Friday. Shares immediately plunged in late trading to $72.60. The stock has rebounded slightly and closed at $74.94 on Monday.

Ireland-based Perrigo said the FDA notified the company of its decision on May 10 via a teleconference. Why the FDA will reject the ProAir generic was not disclosed in the company’s brief announcement. Perrigo said when the CRL is received it will evaluate the FDA’s comments and determine how to best address them.

The company had hopes of launching the generic asthma medicine by the fourth quarter of the year. The failure to launch a generic ProAir inhaler will negatively impact the company’s bottom line. Perrigo said the company “no longer expects to achieve the approximately $0.09 per share benefit that was included in its 2018 reported and adjusted earnings per share guidance range.”

Dewey Steadman, an analyst with Canaccord Genuity, said the delay for Perrigo’s generic is disappointing for the company, but he lauded Perrigo’s quick disclosure of the looming CRL. However, Steadman said he sees “no meaningful impact” to the Canaccord’s valuation of the company, given “Perrigo’s broad portfolio spanning private-label OTC in the US, branded OTC in Europe and other OUS markets, infant nutritionals, and animal health products as well as generic pharma products." Steadman said in his note that they are adjusting their model to assume a 2020 launch for the Perrigo ProAir product.

“We continue to have faith in Perrigo’s ability to deliver and grow revenue through product launches outside of ProAir and in continued execution from the new management team; maintain BUY rating and $105 PT (price target),” Steadman said in a note to investors.

Steadman noted that it’s been tough for generic drug makers to develop inhaled products that have the same efficacy as branded asthma and COPD drugs.

While the news is rough for Perrigo, it’s a shot in the arm for Teva, which has been going through a restructuring program that includes the cutting of approximately 14,000 jobs as it grapples with massive debt and lagging sales of its generic drugs in the United States. ProAir brought in about $500 million in 2017 for the company. Teva’s stock jumped about 5 percent following Perrigo’s announcement.

The expected CRL is a tough blow to Perrigo, which is already having a turbulent year. In January the company announced Uwe Röhrhoff would take over as chief executive officer following John T. Hendrickson’s decision to leave the company after 14 months on the job. The company has also been working on a plan to streamline its organizational structure to save $130 million by the middle of this year. Part of that streamlining included the divesture of its pharmaceutical ingredients division, Perrigo API and its Russia consumer business. Last year the company also initiated a strategic portfolio review that included the divesture of the company’s rights to the royalty stream of multiple sclerosis drug Tysabri. 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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