Perrigo F2Q12 – Management characterizes diabetes platform as exciting opportunity for the future – February 7, 2012

Perrigo announced its F2Q12 financial results this morning in a call led by CEO Joseph Papa. As background, in February 2011 Perrigo acquired exclusive rights from AgaMatrix to distribute and market its blood glucose meters and test strips through store-brand retail channels, and more recently, in January 2012 the company acquired CanAm Care. The CanAm Care acquisition gave Perrigo diabetes products assets that include Dex4 hypoglycemia products, Monoject insulin delivery syringes and Clickfine pen needles, lancing products (Universal-1 lancets, Renew lancing system), and Kendall wound care and compression stockings, which are expected to generate sales of ~$40 million in 2012, as stated by company management during the 2012 JP Morgan Healthcare conference (see our January 9, 2012 Closer Look at http://bit.ly/wzSmBu). During Q&A, management noted that Perrigo now has the broadest store-brand offering for any company in diabetes; management sees its diabetes platform as an exciting opportunity going forward. We believe “storebrand” strips will grow strongly in 2012.

Questions and Answers

Q: Could you make some comments around the diabetes acquisitions and businesses? When I think of those ultimately, can they be as large in aggregate from a product standpoint as maybe your cough/cold or your gastroenterology businesses that are about 13% to 15% of your sales? Do they have that growth potential, and if so, do you have everything you need or are there more acquisitions or more needs to fill out your diabetes product portfolio?

A: Great question – it really speaks to the future and what we’re really excited about for diabetes. Some people view, well, we bought a business say, you know, $40 million of revenue, so that’s good. But what’s really much more important to me is that we’ve created a platform. The platform we created for diabetes, which unfortunately, I think we all know, is growing by double-digit numbers in terms of the number of patients with diabetes. And so the products they consume, the demand they have for products, are growing very quickly. We look as this as a platform. For example, we now have the broadest store-brand offering for any company in diabetes. We have obviously the blood glucose monitors, the meters and strips, but we also now have the glucose tablets, glucose gels, lancets, syringes, needles, and pen needles. We have a broad category. To this though, I believe this is a future platform for us as a company. As an example, we can now add to that, just simply as an example, a sugar-free nicotine lozenge that patients don’t have today. That’s something that we could be unique in and get out there, and really bring in as something as a value-add to our customers. Another very easy example to understand is the sugar-free cough syrups. And putting it all into what I would call a display, a point-of-purchase for our retailers in the entire category of diabetes. That to me is a really exciting platform opportunity – that this begins to shape for the future. Yes, it’s a $40 million acquisition, but more importantly, it gives us an entire platform for the diabetic patient, who unfortunately continues to grow very quickly, and is utilizing a lot of pharmaceuticals, and we want to make sure that we’ve got the best quality affordable healthcare offering available. So, it is a platform that I think is really exciting for the future.

--by Vincent Wu and Kelly Close