Perrigo: contract manufacturing down as OTC client restarts in-house

By Dan Stanton

- Last updated on GMT

Related tags Contract manufacturing

Johnson & Johnson's return to OTCs suggested by analysts as reason behind drop in Perrigo's sales
Johnson & Johnson's return to OTCs suggested by analysts as reason behind drop in Perrigo's sales
Perrigo Company has reported a 40% drop in contract manufacturing revenue year-on-year due to a key client, assumed by analysts to be J&J, returning to OTC in-house production.

For the second quarter 2014, the company reported net sales from its consumer healthcare business of $536m (€393m), down just 1% on the same period last year. Whilst revenue increased by $41m due to sales of smoking cessation and gastrointestinal OTCs as well as new product lines, this was offset by a $46m drop in existing sales, primarily in the contract manufacturing and analgesics categories.

“The biggest contributor of this decrease was a certain contract customer to whom we supplied significant product in the past year,”​ said CFO Judy Brown during a conference call to discuss results last week.

According to Brown, the client “resumed production at one of [its] own facilities”​ and thus reduced the need to outsource from Perrigo. “While we continue to supply a sizable amount of product to this customer, the volume of sales compared to last year is down significantly. Such is the nature of the contract manufacturing business.”

J&J’s returning OTCs

The client and product returning to in-house production were not named by Perrigo, but in a Q&A analysts David Buck from The Buckingham Research Group and Marc Harold Goodman from UBS Investment Bank both speculated that it was Johnson & Johnson, which Brown and CEO Joseph Papa did not deny.

“The expectation of the return to one of the large branded companies was something we fully expected, and that's really not something that has been a surprise,”​ Papa said. “I think I would say the return to that product category has gone well for the brand.”

J&J received a warning letter​ from the US Food and Drug Administration (FDA) in 2010 at its McNeil Consumer Healthcare Facility in Fort Washington, Pennsylvania, following a number of GMP violations. The facility – which manufactures Tylenol - temporarily closed and received a consent decree​ the following year.

However, speaking last month to discuss its own financial situation, J&J CEO Alex Gorsky said the firm had achieved certain success at both remediation and relaunch from the McNeil site, amongst a number of other troubled facilities.

“In OTC, our priority for the past several years has been to deliver a reliable supply of products to the marketplace,”​ he told stakeholders (transcript here), “and last year, very importantly, we met our objective of returning approximately 75% of our planned portfolio to the store shelves.”

Outsourcing-Pharma.com contacted Perrigo for further information but was told the firm does not comment on its contract business.

Related news

Show more

Related products

show more

Increasing the Bioavailability of Oncology Drugs

Increasing the Bioavailability of Oncology Drugs

Content provided by Lonza Small Molecules | 13-Nov-2023 | White Paper

Oral tyrosine kinase inhibitors (TKIs) are a class of cancer drugs that can be highly susceptible to issues with solubility in the gastrointestinal tract

Addressing Challenges with Clinical In-Use Testing

Addressing Challenges with Clinical In-Use Testing

Content provided by Lonza | 12-Oct-2023 | White Paper

Lonza Drug Product expert Léa Sorret PhD explores Clinical In-Use Testing of Biotherapeutics in this white paper. Léa shares her expertise and describes...

PBPK modeling that saves you time and money

PBPK modeling that saves you time and money

Content provided by Lonza Small Molecules | 09-Oct-2023 | White Paper

Understanding pharmacokinetic behaviors ahead of later-stage development means making informed decisions earlier. This enhanced capability helps your drug...

Related suppliers

Follow us

Webinars

Headlines