VRX Bausch Health Cos

By Anne Steele 

Perrigo Co. shares tumbled Monday as the company slashed its guidance for the year while announcing the departure of its Chief Executive Joseph Papa, who is moving to lead Valeant Pharmaceuticals International Inc.

The company, principally a maker of store-brand versions of cold and allergy medicines, now expects adjusted earnings to be between $8.20 and $8.60 a share, down sharply from its previous guidance for $9.50 to $9.80 a share.

Shares of the company slid 14% to $104.83 in midday trading.

Perrigo cited a reduction in pricing expectations in its prescription segment "due to industry and competitive pressures in the sector." The company also pointed to weaker-than-expected performance within its new branded consumer health-care segment for the next three quarters and lower expectations for new product launches.

Mr. Papa's departure comes just months after he successfully beat back a $26 billion hostile takeover bid from Mylan NV by convincing shareholders that Perrigo's growth prospects were brighter as a standalone company.

Since then, though, Perrigo has reported disappointing quarterly results and chipped away at its outlook.

Its stock is down by roughly one-fourth since shareholders rejected the offer, and shares have lost about half of their value over the past year. Still, in the time since Mr. Papa became CEO in 2006, the company's value has risen sharply.

"In hindsight, Perrigo management set unrealistic and aspirational earnings guidance in its effort to defend against Mylan's hostile bid," said Wells Fargo analyst David Maris.

Despite Perrigo's recent stumbles, Mr. Papa is well-known among investors, more so since the highly public Mylan campaign, in which he met extensively with shareholders to lobby for their support.

In 2013, he led the drugmaker, then based in Michigan, through a merger with an Irish rival that moved its legal home overseas in a deal known as an inversion, typically used cut a company's taxes. Perrigo bought Dublin-based biotech firm Elan Corp. for $8.6 billion, then established a holding company under its name in Ireland to take advantage of the comparatively low 12.5% corporate tax rate.

But Perrigo trimmed its yearly earnings outlook in February after swinging to a loss in the fourth quarter, dragged by legal fees and a disappointing performance in its branded consumer health-care segment. During the quarter, the company booked $71.3 million in fees stemming from its defense of the Mylan takeover attempt -- an amount that surpassed the prior year's profit and offset a 33% jump in sales.

Since the conclusion of the eight-month battle, Perrigo has made a number of moves to expand its business, including the purchase of U.S. rights to Crohn's disease treatment Entocort from AstraZeneca PLC, and the acquisition of a generic portfolio of the Retin-A acne treatment. Perrigo has long used acquisitions to power growth; last summer, the company agreed to buy a portfolio of over-the-counter brands from GlaxoSmithKline Consumer Healthcare in a move to beef up international revenue.

On a call with analysts and investors after its latest quarterly results were released in February, Mr. Papa said the results from the branded consumer health-care business were "a personal disappointment to me" and pointed to particular weakness in Spain and Germany.

"I recognize my actions will speak louder than my words so I am committing a significant allocation of my time over the six months to be in Europe," he said on the call.

On Monday, Perrigo said it may have to write down the value of the business while reporting results for the quarter that ended April 2. Perrigo acquired the consumer health-care business, previously Omega Pharma NV, in March 2015. The company said it is in the process of assessing whether an impairment exists and said it couldn't estimate charges or whether and any such charges could have a significant impact on the company's financial results.

Write to Anne Steele at anne.steele@wsj.com

(END) Dow Jones Newswires

April 25, 2016 12:02 ET (16:02 GMT)

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