Flu season, ailing economy aiding Mich. drug maker

AP News
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Posted: Nov 20, 2009 2:20 PM

Record profits. Job openings. Shareholders making money. It's not what you might think in Michigan, home to the country's highest unemployment rate, but a century-old company is in robust health thanks to achy, thifty Americans.

Perrigo Co., the nation's largest manufacturer of generic over-the-counter medications, reported more than $61 million in profit during its last quarter _ a 60 percent spike from the same time last year. Its sales revenue hit $528 million, a 16 percent jump. It also adjusted its 12-month earnings forecast upward and boosted its shareholder dividend.

"We feel very good about what the potential is because, unfortunately, people still get sick," chief executive Joseph Papa said.

"We make over 40 billion tablets per year," he added. "That breaks down to every second, over 1,000 people take a Perrigo product."

With business expected to remain strong, the 122-year-old company wants to fill 60 positions with scientists, engineers and quality-control experts at its corporate headquarters and research and production site in Allegan, he said.

Although the state had the nation's highest unemployment rate in September at 15.3 percent, the health care and life sciences industries are thriving in southwestern Michigan. The region is home to Kalamazoo-based Stryker Corp., among the world's 12 largest medical device makers, and Michigan State University is building its new medical school in Grand Rapids.

Perrigo has a history of flourishing in tough times, said Daniel J. Farrell, a professor of management at Western Michigan University. Its store-brand products usually sell for 25 percent to 30 percent less than national brands, and tends to attract sniffling consumers.

"Flu season is traditionally a good time for them _ and this is a big flu season, so that helps," Farrell said.

Perrigo's growth also has been good for Allegan, a city of about 5,000 people about 140 miles west of Detroit. Allegan County's unadjusted unemployment rate was 13.1 percent in September. Allegan receives $1.1 million, or 38 percent, of its $2.9 million in annual property tax revenues from the company, whose facilities span said City Manager Rob Hillard.

"In terms of Perrigo's contributions to the community, it's vast from a tax-base standpoint," Hillard said.

Perrigo has 7,000 employees worldwide, up from 4,000 in 2003. There are 3,200 workers in Allegan and nearby Holland, where the company has production facilities.

Its primary markets and locations of manufacturing and logistics operations include the United States, Israel, Mexico and the United Kingdom. Much of its growth during the past decade came from its acquisition of pharmaceutical companies throughout the world, including Israeli drug giant Agis Industries Ltd. for $818 million in 2005.

Perrigo also has grown at home. In September 2008, the company agreed to pay $44 million for drug and vitamin maker JB Laboratories Inc. of Holland. A month later, Perrigo announced a $25 million plant expansion in Allegan.

Of the company's three business units, consumer health care is its largest with over-the-counter analgesics, cough and cold remedies, and gastrointestinal and feminine hygiene products. It also produces vitamins, dietary supplements and nutritional drinks.

Retailers contract with Perrigo to produce their bargain-priced store-branded medicines _ and it controls 70 percent of the store-brand market, said Dan Willard, a company spokesman.

The company also markets certain products under its own brand, Good Sense.

Another unit makes generic topical prescription drugs, such as ointments, lotions and nasal sprays. The third produces ingredients that other drug makers use in manufacturing.

"All three of the businesses have done extraordinarily well and we've been very pleased with the results," Papa said.

For its first quarter of fiscal 2010, which ended Sept. 26, Perrigo reported net income of $61.3 million, up 60 percent from the same quarter last year, and sales revenue of $528 million, up 16 percent. The performance led the company to adjust its 2010 earnings forecast to a range of $2.35 to $2.45 per share, up from the previously expected $2 per $2.12 per share.

A few days before releasing its earnings, the company announced that it was boosting its quarterly dividend to 6.25 cents per share, up from 5.5 cents per share.

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On the Net:

Perrigo Co.: http://www.perrigo.com

(This version CORRECTS profit to $61 million.)