Perrigo Soars After FDA Approves OTC Generic Omeprazole

December 11, 2007: 07:26 PM EST
NEW YORK (Associated Press, CNN) - Shares of Perrigo Co. rose sharply to a new 10-year high Tuesday, as analysts raised their estimates on the company in anticipation of the launch of generic over-the-counter omeprazole.
The generic drug and health care products maker said late Monday that the Food and Drug Administration granted final approval to its partner Dexcel Pharma Technologies Ltd. for over-the-counter generic heartburn drug tablets.
British drug maker AstraZeneca PLC makes Prilosec OTC, which in the generic form is known as omeprazole.
In May 2006, AstraZeneca filed a patent infringement suit to prevent Dexcel from marketing a generic version its product. Last month, Dexcel settled the patent litigation with AstraZeneca over Prilosec OTC.
Perrigo will be the exclusive marketer and distributor for the store brand over-the-counter market in the U.S. of Dexcel's product. Perrigo plans to begin shipments during the first quarter and forecasts full-year sales of the drug between $150 million and $200 million.
Omeprazole sales are expected to contribute between 20 cents and 25 cents per share in 2008, and Perrigo now forecasts full-year profit between $1.32 and $1.47 per share. In November, the company projected fiscal 2008 earnings between $1.12 and $1.22 per share, excluding omeprazole results.
Perrigo's stock rose $1.60, or 5.2 percent, to $32.55 Tuesday, after hitting a new 52-week high of $34.19. That level tops its 52-week high of $32.32 set on Nov. 28.
In a note to investors, Goldman Sachs analyst Randall Stanicky reiterated his "Neutral" rating on Perrigo and raised his price target to $31 from $29, saying the current valuation reflects further upside in earnings.
The analyst also raised his earnings per share estimates for 2008, 2009 and 2010 to reflect the over-the-counter drug.
In another note to clients, Oppenheimer & Co. analyst Linda Bolton Weiser bumped up her price target to $35 from $33 and kept a "Buy" rating on the shares.
While raising estimates on the company, Weiser also pointed out that Perrigo's competitor, privately held Leiner Health Products Inc., is facing a delay in sales of new over-the-counter products as well as increased costs. The company also said it is considering strategic alternatives