Perrigo's (PRGO) heartbreaking. How could Joe Papa, the man who was so intertwined with Perrigo for so long, the man who came on Mad Money and argued there was so much more value to the company than the price Mylan put on it -- some 80 points higher than where it went out -- just leave for Valeant (VRX)? How could he leave with a huge shortfall and some weird impairment charge about an acquisition that Papa crowed about, Omega, as a way to get international exposure?
There wasn't a single thing that was kosher about what I heard from this company today even as the papers are filled this morning with how Papa is going to be an able ceo for Valeant establishing order. You mean order like the way he left Perrigo? How about disorder? How about disarray?
It made me so angry because I thought I knew Papa as a stand-up guy from his years of going on Mad Money. I thought that Papa had a good case for why Perrigo should have been valued much higher than where Mylan wanted to get it and that Perrigo was temporarily down on its luck.
I am indeed aghast that he fought against what would have been a great bid for shareholders. There's so many questions here. What is this potentially material charge? What happened with Omega? Why did the board withdraw Omega founder Marc Coucke's nomination for re-election to the board?
This is nothing less than a wholesale implosion of a company. Honestly, if you cut numbers from $9.52 to $8.20 to $8.60 but leave charges up in the air, why would anyone pay more than 10x earnings for this largely non-proprietary knock-off drugmaker? Mylan's at 9x earnings and that's a better company.
But you know what? As is the case with Valeant, everything that happened at Perrigo smacks of just a private company's whims even as both are very much public companies.
It stinks.
But I guess it doesn't matter. That's just the way the Perrigo crumbles.
As far as a read-through to other generic companies, that seems fanciful to me. The "old" Perrigo, before the mysterious "impairment" was largely a knock off company that thrived in cold and flu season and on vitamins that were made in America, as opposed to dumped Chinese competition.
To therefore hit Allergan (AGN), an Action Alerts PLUS portfolio stock, seems just ludicrous, especially given that it is selling its generic drug business to Teva.
Mylan was hit, but that might be a story of the company coming back with a stock-for-stock deal.
Ultimately, the real story about the earnings shortfall might be the relentless, inexorable share take by Johnson & Johnson (JNJ) against Perrigo. Remember, Perrigo was the real winner in the big McNeil labs recall. Their store brand competition to JNJ's once-pristine product line took a lot of share. But on the last quarterly conference call you saw a very robust JNJ taking back the shelves, with still a lot more to come.
I guess it was a pretty opportune time for Papa to jump ship, opportune for all but the shareholders of this once very good growth company that is now in tatters.
