The only non-Israeli company on the Tel Aviv benchmark TA-25 stock index, Perrigo Co., is defying the market’s slump this year, surging the most since 2007 on speculation the maker of generic drugs will benefit as consumers switch from more expensive brand names.
Perrigo, the Allegan, Michigan-based company that joined the index after buying B’nei Brak, Israel-based Agis Industries Ltd. in 2005, has climbed 54 percent in 2011 while the TA-25 is down 22 percent. Perrigo was little changed at the 4:30 p.m. close in Tel Aviv after sliding 2.1 percent in New York on Oct. 7. The U.S. shares dropped 1.9 percent last week, while the Bloomberg Israel-US 25 Index of the largest New York-traded Israeli companies rose 0.6 percent, led by ClickSoftware Technologies Ltd. The TA-25 fell 1.4 percent today.
Perrigo, the biggest U.S. maker of generic over-the-counter drugs, is benefiting from rising demand for lower-cost medications amid sluggish economic growth and an unemployment rate that has been stuck at about 9 percent. The company sells its products to Wal-Mart Stores Inc., the world’s largest retailer, and CVS Caremark Corp., which has more than 7,000 stores across the country, according to its website.
“Perrigo has attractive growth within the current uncertain economic climate, especially with their offering of private label OTC drugs, which are often marketed as cheaper alternatives,” said Jonathan Kreizman, a Tel Aviv-based analyst at Clal Finance Brokerage Ltd.
The TA-25 Index, which entered a bear market in August, would have dropped 26 percent if Perrigo would have been excluded from the gauge, according to data compiled by Bloomberg last week.
Clal Finance raised its price estimate on the shares to $100 on Oct. 6.
Perrigo said last week that it received tentative approval from the U.S. Food and Drug Administration for its medicine that treats problems with the scalp. Sales for the equivalent Stiefel Laboratories foam were about $40 million in the 12 months ending September 2011, according to Wolters Kluwer.
The company expects 2012 fiscal year revenue to increase as much as 18 percent from this year, Chief Executive Officer Joseph Papa told investors on a Sept. 27 webcast. Sales rose 12 percent to $2.76 billion in the 12-month period ending June 25.
“We’re one of the few companies in healthcare that does not significantly get a majority of their business from products that are reimbursed by third-party and government,” Papa said.
The company will benefit from higher demand for store brands. Generic products make up 32 percent of over-the-counter drug sales in the U.S., up from 10 percent in 1990 and 25 percent in 2009, according to Deutsche Bank AG.
“Perrigo has demonstrated very impressive growth,” David Steinberg, a San Francisco-based analyst at Deutsche said in an e-mailed report last week. The company “is the dominant player in its primary market with no significant competitor,” he said.
The TA-25 Index is headed for its first annual decline in three years, with Discount Investment Corp., billionaire Nochi Dankner’s holding company with interests in telecommunications, manufacturing and retail, leading the drop. The benchmark entered bear-market territory after falling 20 percent from its record close on April 21.
About $10 trillion was wiped from global equity markets in the third quarter on concern that growth will abate in the wake of Europe’s debt crisis. Federal Reserve Chairman Ben S. Bernanke said Oct. 4 that the recovery will be “somewhat slower” in coming quarters.
The Bloomberg Israel-US 25 Index of the largest New York-traded Israeli companies fell 1.7 percent to 80.39 on Oct. 7.
The shekel was little changed at 3.7165 against the dollar in New York. The currency has dropped 3 percent in the past 12 months, the best performer among 10 emerging markets in Europe, the Middle East and Africa tracked by Bloomberg.
Israel, whose population of 7.7 million is similar to Switzerland’s, has about 60 companies traded on the Nasdaq Stock Market, the most of any country outside North America after China. It is also home to the largest number of startup companies per capita in the world.
ClickSoftware, the Petach Tikva, Israel-based company that counts EON AG and PG&E Corp. as customers for software that helps track orders, fell 0.8 percent to $9.03 on Oct. 7. That cut the company’s gain for the week to 16 percent, the most among the 25 largest New York-traded Israeli companies. ClickSoftware boosted its revenue forecast on Oct. 3 after announcing it received an order from a “multi-billion dollar” electricity generator.
Teva Pharmaceutical Industries Ltd., the world’s biggest maker of generic drugs, lost 2.2 percent to 136.8 shekels, or the equivalent of $36.81. The U.S. shares dropped 83 cents to $36.75 on Oct. 7 after a unit of the Petach Tikva-based company and two other drugmakers were ordered to pay at least $20.1 million for selling an anesthetic in a way that led three patients to develop Hepatitis C. The New York-listed American depositary receipts traded at an 87 cent discount to the Tel Aviv-listed shares in New York last week, the second largest in the Bloomberg index after EZchip Semiconductor.
Internet Gold-Golden Lines Ltd. declined 2.5 percent to 38.41 shekels, or the equivalent of $10.33. The U.S. shares fell 11 percent last week to $10.42, the biggest drop in the Bloomberg Israel-US 25 Index. The Internet provider, also based in Petach Tikva, said Oct. 3 that Chief Executive Officer Eli Holtzman retired.
Zachary Tracer in New York at email@example.com