European-branded OTC market
Post-completion of its March 2015 acquisition of Omega, one of the largest healthcare companies in Europe, Perrigo (PRGO) has actively entered the European-branded over-the-counter (or OTC) market.
Perrigo manufactures and markets Europe’s well-known OTC brands in natural health, vitamins, minerals, and supplements (or VMS), cough, cold, allergy, personal care, dermatological, and anti-parasite categories.
Perrigo currently markets over 5,200 products in the branded OTC business, a majority of which are European-branded OTC products. In this segment, the company outsources 70% of production as well as the majority of research and development (or R&D) activities to third parties. Branded OTC products are then distributed through pharmacies in 36 countries in the world.
Branded OTC market strategy
Perrigo is focused on building strong brands in the branded OTC market and sells products from more than 300 brands. However, the company targets the majority of its resources to the top 20 brands, selected on the basis of growth potential.
These resources enable the top brands to establish their positions in strong, profitable market segments as well as to maintain leadership in smaller markets. Perrigo’s key customers include pharmacies, drug stores, and grocery stores across Europe
At the end of June 2015, the company had 50 new product developments across five product categories in the OTC brands segment. Despite strong competition from peers such as Novartis (NVS), Johnson & Johnson (JNJ), and Eli Lilly (LLY), strong sales strategy and continual innovation have enabled Perrigo to enjoy a dominant position in the branded OTC market.
Perrigo has planned to acquire Naturwohl and its dietary supplement brand Yokebe for 130 million pounds sterling. Additionally, the company entered into an agreement with GlaxoSmithKline to acquire its OTC brands business for 200 million pounds sterling. These acquisitions are expected to strengthen Perrigo’s global footprint in the OTC brand business.
Investors can get exposure to Perrigo’s strong branded OTC market while controlling excessive risk by investing in the Health Care Select Sector SPDR ETF (XLV). Perrigo accounts for 0.90% of XLV’s total holdings.