Perrigo Joining S&P 500 Spurs Biggest Premium: Israel Overnight

Perrigo Co. (PRGO) posted its biggest two- week gain since September 2010 after shares of the largest U.S. maker of generic over-the-counter drugs were added to the Standard & Poor’s 500 and Nasdaq 100 indexes, increasing the premium relative to the Tel Aviv-traded stock.

Perrigo advanced 11 percent to $99.63 in the past two weeks in New York. The Tel Aviv shares climbed 8.3 percent in the same period to 369 shekels, or the equivalent of $97.95. The Israeli shared gained 1.8 percent to 375.8 shekels at the 4:30 p.m. close in Tel Aviv today. The Bloomberg Israel-US 25 Index of the largest Israeli companies listed in New York rose last week to the highest level since Nov. 16, led by SodaStream International Ltd. (SODA)

Perrigo, the Allegan, Michigan-based company that bought B’nei Brak, Israel-based Agis Industries Ltd. in 2005, is benefiting as consumers switch form more expensive brand names amid sluggish economic growth. The company was added to the S&P 500 (SPX) last week, which is tracked by investors with about $1.25 trillion in assets.

“There’s a larger pool that is indexed to the S&P 500, so Perrigo is probably going to be something that will have to be bought,” said David Buck, an analyst at Buckingham Research Group in New York, who recommends buying the shares. “It’s a reflection of the earnings growth” and the company’s diversification into selling generic prescription medications.

Concern among investors that Europe’s debt crisis will curb demand for Israeli exports has pushed the Tel Aviv’s TA-25 Index (TA-25) 18 percent lower this year. The Bloomberg Israel-US 25 Index rose 0.5 percent to 84.70 last week, paring its annual drop to 19 percent.

Mellanox, MagicJack

Mellanox Technologies Ltd. (MLNX), the Israeli adapter maker that’s partly owned by Oracle Corp., will join the benchmark TA-25 Index on Dec. 15, the Tel Aviv Stock Exchange said in an e-mailed statement last week.

Mellanox’s market value has surged to $1.38 billion from $877 million at the end of the first quarter as it benefits from increased demand for cloud computing and customers including International Business Machines Corp. (IBM) seek to move data more easily over networks.

Mellanox shares in Tel Aviv declined 2 percent to 131.4 shekels, or the equivalent of $34.93. The New York shares fell 2.8 percent to $35.18 last week.

MagicJack VocalTec Ltd. (CALL), the Israeli company whose founders invented the technology used for making telephone calls over the internet, dropped 4.6 percent to $24.59 on Dec. 9, making it the only company to retreat on the Bloomberg Israel-US 25 Index.

Share Offering

MagicJack plans to offer 1.2 million of its ordinary shares and certain shareholders may offer 300,000 additional shares in an underwritten public offering, according to a statement last week. The company said it will use the proceeds for additional advertising costs.

SodaStream posted its biggest weekly gain since July on speculation sales will jump after Bed Bath & Beyond Inc. (BBBY) put the Israeli soda machine maker’s products on the cover of its Christmas circular.

The shares (PRGO) added 20 percent to $36.35 in the past five days, the biggest weekly advance since July 1.

SodaStream forecasts rising demand in the U.S. after it boosted the number of stores that carry its carbonation machine and flavor packets. Bed Bath & Beyond, the Union, New Jersey- based home-furnishings retailer, has more than 1,000 locations in the U.S.

Consumers spent a record $52.4 billion during Thanksgiving weekend in the U.S., or an average of $398.62 each, up 16 percent from a year earlier, according to the National Retail Federation.

Earnings Triple

The $1.53 premium for Perrigo’s New York-traded shares was the biggest on Dec. 9 among all companies traded in U.S. and Israel.

The company’s stock will be included in the S&P 500, the benchmark index for the largest U.S. equities, on Dec. 16, according to a statement from the index provider last week. Perrigo was added Dec. 6 to the Nasdaq 100 Index (NDX), which is tracked by investors with about $400 billion in assets.

Earnings will triple this year to $4.75 a share from $1.58 in 2008, according to the average estimate of 14 analysts surveyed by Bloomberg.

Perrigo said on Nov. 28 that it received final approval from the U.S. Food and Drug Administration for a generic over- the-counter drug that will compare to Mucinex tablets for the relief of chest congestion.

The company, whose products are sold at CVS Caremark Corp. (CVS) and Walgreen Co. (WAG), also sells store-branded versions of AstraZeneca Plc’s Prilosec OTC heartburn medicine and Johnson & Johnson’s Zyrtec allergy treatment.

‘Under Pressure’

“In an environment of economic challenges, consumers are under pressure and Perrigo is very well positioned for that,” said Randall Stanicky, an analyst at Canaccord Genuity in New York. “Perrigo is part of the market that has really attractive long-term growth.”

Perrigo makes about 70 percent of store-branded over-the- counter medicines in the U.S., Stanicky said.

Perrigo shares in Tel Aviv are headed for their biggest annual gain since 2007, rising 65 percent this year.

Israel, whose population of 7.7 million is similar in size to Switzerland’s, has about 60 companies traded on the Nasdaq, the most of any country outside the U.S. after China. It’s also home to the largest number of startup companies per capita in the world.

Plan B

The shekel gained 0.1 percent to 3.7613 per U.S. dollar in New York. The Israeli currency declined 1.3 percent over the past three months, the second-best performer among 10 emerging markets in Europe, the Middle East, and Africa tracked by Bloomberg.

Teva Pharmaceutical Industries Ltd. (TEVA), the world’s largest maker of generic drugs, rose 1.1 percent to 151.7 shekels, or $40.33 in Tel Aviv. The U.S. shares advanced 1.3 percent to $40.20 last week.

Teva’s shares were rated “equalweight” in initial coverage at Barclays Plc.

President Barack Obama backed his health secretary’s decision last week to overrule U.S. drug regulators and deny Teva’s request to sell its emergency contraceptive pill Plan B over the counter.

Secretary of Health and Human Services Kathleen Sebelius ordered Margaret Hamburg, the Food and Drug Administration chief, to reject the application by Petach Tikva, Israel-based Teva, citing potential sales to girls younger than age 17.

“When it comes to 12-year-olds or 13-year-olds, the question is: Can we have confidence that they would potentially use Plan B properly?” Obama said at a press conference.

To contact the reporter on this story: Tal Barak Harif in New York at tbarak@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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