(BN) Perrigo Sees Economy Boosting Demand for Store Brands, Generics

June 25 (Bloomberg) -- Perrigo Co., the largest U.S. generic over-the-counter maker of drugs, expects a faltering economy to support the company's double-digit growth as consumers buy cheaper store-brand products, said John Hendrickson, the head of global operations.

"As economies get tighter, as consumers are thinking of every dollar they are spending on health care, it tends to support our business model," Hendrickson said in an interview in the company's plant in the southern Israeli town of Yeruham. "They tend to think, maybe I can buy a retail-brand product, or a generic product. As the economy struggles, our business does pretty well in those environments."

Perrigo is benefiting as slowing growth and U.S. unemployment above 8 percent have damped consumer confidence, which may restrain sales of higher-end advertised brands at drug stores such as Walgreen Co. and CVS Caremark Corp. The Allegan, Michigan-based company manufactures lower-priced, store-brand versions of advertised over-the-counter products such as Johnson & Johnson's Tylenol pain reliever for customers including Wal- Mart Stores Inc.

The company expanded in the generics prescription drug market in 2005 with the purchase of Agis Industries Ltd., an Israeli drugmaker. The company's generic drugs are 30 percent cheaper than brand-name products on average, according to Canaccord Genuity.

Second Market

Hendrickson visited Israel, Perrigo's second-largest operating and sales center after the U.S., to announce investments of $40 million over the next three years in its Yeruham and Ramat Hovav plants in the Negev desert.

Perrigo has boosted its workforce at the two plants 40 percent to 900 employees over the past three years. The company has invested 280 million shekels ($72 million) in the plants since six years ago, according to Hendrickson.

The company will probably say sales rose 22 percent to $857 million in the fourth quarter, according to the average estimate of 12 analysts surveyed by Bloomberg.

Perrigo is on track to introduce more than 45 new products, totaling about $190 million in sales in the year ending June 30, Joseph Papa, chairman and chief executive officer of the company, said on a May 8 conference call.