In its conference call on Monday, Perrigo Company (NYSE:PRGO; TASE:PRGO) announced that as part of its cutbacks, it was looking for strategic alternatives to Israel for the production of its active ingredients. Most of this production takes place at Perrigo's plant in Ramat Hovav, where hundreds of its 1,100 employees in Israel work. In response to a question yesterday from "Globes," the company said that it preferred to sell its Ramat Hovav plant as a single unit, including the employees, to shutting it down. Perrigo said, "The plant is currently profitable, and closing it down is not urgent. It is very likely that a buyer will be found, and the plant will continue to operate and prosper."
Perrigo has five production, marketing, and R&D centers in Israel. The two main ones are in Yeruham and Ramat Hovav. Various parties in Perrigo Israel have begun looking for work at the company's competitors in recent days, so it appears that the message that the company is planning a major closing down of its business in Israel has gotten through.
In its conference call, Perrigo mentioned the possibility of selling only its business in Ramat Hovav. It appears that layoffs in Yeruham will be limited in scope; the company said it was cutting its staff by 14% worldwide. Perrigo has made extensive investments in its two main plants in Israel in recent years. In 2012, Perrigo announced an additional $40 million investment in the plants and the hiring of 100 more employees for them, after the number of employees had already grown by 40% in years preceding that. On the same occasion, Perrigo announced that it had invested over $280 million in its business in Israel in the preceding years. Perrigo launched its new plant in Yeruham in 2016.
Perrigo's employees, both those with academic degrees and those without any, underwent lengthy training for working with Perrigo's pharmaceutical production technologies, usually in chemical generics. There are very few other place at a reasonable distance from their homes in which they can find work using these skills. When the company decided to expand its plant in 2012, Perrigo CEO John Hendrickson, then the company executive VP global operations and supply chain, said that the employees at the plant were diligent, committed, and educated workers, and that the government incentives "make it easier" to decide to keep hundreds of workers in the Middle Eastern desert.
Responding to the company announcement, MK Shelly Yachimovich yesterday said, "Perrigo's managers cheated us when they enlisted us to help fight against a hostile takeover by Mylan N.V. (Nasdaq: MYL; TASE: MYL) by promising to keep their Israeli workers. The company's Israeli and international managers made an effort to persuade me personally that if Mylan took over Perrigo, it would sell its business in Israel piece by piece to the highest bidder, leading to mass layoffs, while Perrigo was supposedly committed to the Israel market and keepings thousands of workers, mainly in Yeruham and Ramat Hovav.
"I demand that Perrigo keep its promise, or at least to make any sale contingent on keeping the workers and a promise to continue employing them. They should remember that the Israeli market is what prevented the hostile takeover. We won't ignore such malign intentions."
Perrigo, however, prefers to find a buyer for the plant. Teva Pharmaceutical Industries Ltd.'s (NYSE: TEVA; TASE: TEVA) plants in Ramat Hovav, located near Perrigo, have surplus production capacity, so Teva, which could be the natural candidate to buy this business, is not expected to do so, but it is certainly possible that an international generics company, or a medium-sized Israel generics company such as Dexcel Pharma or Taro Pharmaceutical Industries Ltd. (NYSE: TARO), will do it.
Another possibility is the acquisition of the company's plant by a biomed company in the advanced stages of entering the market with its products. Building an initial production plant for non-biotech drugs costs $20-30 million, and it is possible that in a fire sale, Perigo could offer its large renovated plans at a worthwhile price, possibly together with the employees.
Companies that might take an interest such a plant include Foamix Pharmaceuticals Ltd.(Nasdaq:FOMX), Kitov Pharmaceutical Holdings Ltd. (TASE: KTOV), Kamedis, Intec Pharma Ltd. (TASE: INTP) (which recently finished building its own plant), PolyPid, MediWound Ltd. (Nasdaq:MDWD), RedHill Biopharma Ltd. (Nasdaq: RDHL); TASE: RDHL), and others.
Published by Globes [online], Israel Business News - www.globes-online.com - on March 1, 2017
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