Perrigo Company (PRGO), Elan Corporation, plc (ADR) (ELN): Will This Be the Next Irish Biotech Acquisition?

Page 1 of 2

Perrigo Company (NYSE:PRGO)’s acquisition of Elan Corporation, plc (ADR) (NYSE:ELN) for $8.6 billion has been widely criticized by many as a way for Perrigo to avoid paying a high U.S. corporate tax rate. Analysts believe that Perrigo’s acquisition represents a shift where companies are seeking assets in low taxed countries to increase profitability. According to analysts, there were several companies that were bidding to acquire Elan, but with Elan acquired, which Irish company might be next?

Why is Ireland attractive?

Perrigo Company (NYSE:PRGO) is a $12 billion company that has increased 260% over the last five years. The company generated $3.4 billion in sales over the last 12 months and has an operating margin of 19.7%. The company is based in the U.S., therefore pays a 35% corporate tax rate. However, with the acquisition of Ireland’s Elan Corporation, plc (ADR) (NYSE:ELN), the company’s tax rate drops to 12.5%, and earnings could increase more than $700 million annually over a course of several years — due to the tax savings.

Perrigo Company (NASDAQ:PRGO)Not to mention, Perrigo Company (NYSE:PRGO) gains $2 billion in cash that was on Elan Corporation, plc (ADR) (NYSE:ELN)’s balance sheet, and a 50% market share of its multiple sclerosis drug Tysabri. Biogen Idec Inc. (NASDAQ:BIIB) markets Tysabri and pays a double-digit royalty on annual sales, which Perrigo will now receive. The drug has peak sales potential of $3 billion annually. Once the drug’s annual sales exceed $2.5 billion, Perrigo’s share will rise from 18% to 25%, which could equate to $750 million if peak sales are reached.

Looking at Perrigo Company (NYSE:PRGO) as a company, the benefit of tax savings plus the top line benefit from Tysabri makes the acquisition of Elan Corporation, plc (ADR) (NYSE:ELN) a wise long-term move. In fact, with other opportunities in Ireland, this one acquisition could lead to more just like it.

The best available target

In my opinion, while there are several acquisition opportunities based in Ireland, including Alkermes Plc (NASDAQ:ALKS), but I think that Jazz Pharmaceuticals plc – Ordinary Shares (NASDAQ:JAZZ) is the most intriguing.

Jazz Pharmaceuticals plc – Ordinary Shares (NASDAQ:JAZZ) is a company that should be on your radar as a potential takeover target. Unlike Elan Corporation, plc (ADR) (NYSE:ELN), Jazz markets its own drugs, including 10 total and a large pipeline. During Jazz’s last quarter, revenue grew 91.4% year-over-year as its narcolepsy drug Xyrem continues to grow: Xyrem accounted for 60% of the company’s $196 million in quarterly sales.

Jazz Pharmaceuticals plc – Ordinary Shares (NASDAQ:JAZZ) has annual sales of $680 million and trades with a market cap of $4.6 billion. To the naked eye, its 6.6 times sales valuation might appear pricey, but with an operating margin of 39.5%, Jazz trades at just 10 times next year’s earnings.

The reason that Jazz Pharmaceuticals plc – Ordinary Shares (NASDAQ:JAZZ) produces such great profits is because it is based in Ireland. Therefore, Jazz enjoys the same 12.5% tax rate that made Elan Corporation, plc (ADR) (NYSE:ELN) so attractive, and also has explosive growth and a bright future with its pipeline.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 44 percentage points in 21 months Learn how!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!