On July 27, 2018, the Honorable Madeline Cox Arleo of the United States District Court for the District of New Jersey entered an opinion and order sustaining the most significant parts of plaintiffs’ Amended Complaint in Roofer’s Pension Fund, et al. v. Papa, et al., Civil Action No. 16-2805 (D.N.J.), a securities class action lawsuit for which Pomerantz serves as plaintiffs’ co-lead counsel. The action is brought on behalf of investors who purchased or otherwise acquired Perrigo Company plc (“Perrigo” or the “Company”) shares between April 21, 2015 and May 3, 2017, inclusive (the “Class Period”), or who held Perrigo shares on November 13, 2015. The action seeks to recover damages against Perrigo and certain of its officers and directors for violations of the Securities Exchange Act of 1934.
Perrigo is a global manufacturer of over-the-counter consumer healthcare products, generic drugs, and branded pharmaceuticals. The Amended Complaint alleges that defendants made materially false and misleading statements regarding the Company’s business and competitive environment, first to defeat a hostile tender offer from its competitor Mylan, then to stem the decline in its shares after the Mylan tender offer expired unsuccessfully on November 13, 2015. Among other things, the Amended Complaint alleges that defendants misrepresented Perrigo’s integration of Omega Pharma N.V. (“Omega”), its largest acquisition, and competition in the Company’s most profitable division, generic drugs, which was inflated by anticompetitive practices.
Judge Arleo’s opinion denied in part and granted in part defendants’ motions to dismiss. It held that the Amended Complaint adequately alleged claims under Sections 10(b), 14(e) and 20(a) of the Exchange Act related to Omega and generic drug misrepresentations against the three core defendants in this litigation: Perrigo, former Perrigo CEO Joseph Papa, and former Perrigo CFO Judy Brown. It also declined to dismiss parallel claims brought under Israeli law. However, the opinion dismissed claims related to less-important misrepresentations involving organic growth and royalty accounting, and dismissed claims against outside directors and Omega’s former CEO, Marc Coucke.
The complaint alleges that throughout the Class Period, Defendants made materially false and misleading statements regarding the Company’s business, operational and compliance policies. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) Perrigo as a standalone entity would be unable to achieve organic revenue growth of 5% to 10%; (ii) Perrigo’s competitive position and growth strategy were not “durable” but were in fact eroding; (iii) Perrigo was facing serious issues integrating the acquisition of Omega Pharma N.A. (“Omega”) into the Company and had significantly overpaid for Omega; (iv) for the foregoing reasons, among others, Mylan’s offer did not undervalue Perrigo; and (v) as a result of the foregoing, Perrigo’s public statements were materially false and misleading at all relevant times.
On April 21, 2015, Perrigo publicly rejected Mylan’s offer. Touting Perrigo’s purportedly “durable competitive position and compelling growth strategy,” the Company advised investors that the Mylan offer did “not take into account the full benefits of the Omega Pharma acquisition” and “substantially undervalues Perrigo and its growth prospects.” Even after Mylan raised its offer to $235 per share, over the next six months Perrigo continued to publicly urge the Company’s shareholders to reject Mylan’s offer. Perrigo cited as reasons the 5% to 10% annual organic revenue growth that Perrigo would achieve as a standalone entity and the synergies of the Company’s recent acquisition of Omega.
On November 13, 2015, swayed by Perrigo’s public opposition to Mylan’s offer, the majority of the Company’s shareholders declined to tender their shares, causing the failure of the tender offer. As a result, Perrigo’s share price fell $9.65, or 6.16%, to close at $146.90 on November 13, 2015.
On February 18, 2016, Perrigo issued a press release and filed a Current Report on Form 8-K with the SEC announcing its net sales and adjusted net income for the quarter and year ended December 31, 2015 (the “2015 8-K”). The 2015 8-K reported lower fourth quarter revenue, margins, earnings and cash flow than investors had been led to expect and lowered the Company’s earnings guidance for 2016. Perrigo also disclosed in the 2015 8-K an asset impairment charge of $185 million related to the recently acquired Omega assets.
On this news, Perrigo’s share price fell $14.77, or 10.17%, to close at $130.40 on February 18, 2016.
Thereafter, on April 22, 2016, Reuters reported that Perrigo’s CEO, Defendant Papa, had been named CEO of Perrigo’s competitor, Valeant Pharmaceuticals.
On this news, Perrigo’s share price fell $7.33, or 5.7%, to close at $121.35 on April 22, 2016.
On April 25, 2016, Perrigo confirmed Defendant Papa’s resignation from the Company. Concurrently, Perrigo significantly lowered its earnings guidance for 2016 and reported weak preliminary first quarter results, citing increased competitive pressures and weaker than expected performance by the Company’s Omega segment. Perrigo reported issues with the integration of Omega and announced that the Company was contemplating another impairment charge related to the acquisition, just two months after announcing the earlier $185 million impairment charge.
On this news, Perrigo’s share price fell $21.95, or 18%, to close at $99.40 on April 25, 2016.
On May 12, 2016, Perrigo issued a press release and filed a Current Report on Form8-K with the SEC announcing the Company’s financial and operating results for the quarter ended March 31, 2016 (the “Q1 2016 8-K”). In the Q1 2016 8-K, the Company reported a net loss of $0.93 for the quarter, citing an additional $467 million impairment charge relating to the Omega acquisition. Discussing Perrigo’s performance on a conference call, the Company’s new CEO, John Hendrickson, stated that Perrigo’s “recent track record of performance against our own expectations is unacceptable” and indicated that he intended to target “realistic” forecasts that the Company could meet—thereby acknowledging that Perrigo, in its effort to thwart Mylan’s takeover proposal, had previously asserted unrealistic and unattainable financial goals.
On these disclosures, Perrigo’s share price fell $3.71, or 4%, to close at $89.04 on May 12, 2016.