• Starboard has called for sale of prescription drugs unit
  • Shares gain Monday, had lost 40% since Mylan bid failed

Perrigo Co. Chief Executive Officer John Hendrickson said he’s still conducting a strategic review and that decisions about the drugmaker are coming, after activist fund Starboard Value LP took a 4.6 percent stake in the company.

Starboard is run by investor Jeff Smith and has a history of agitating for changes at target companies. In a letter dated Monday, he criticized “operational and financial missteps’’ by Perrigo after it rebuffed Mylan NV’s takeover attempt last year. The fund’s position is worth about $585 million, as of Friday’s closing price.

“When I came on board, we immediately started the process, frankly because of the circumstances of with where we are at,” Hendrickson said. The CEO said he’s dividing assets based whether they generate or lose cash, and will likely divest the losers.

He spoke at an investor conference in New York hosted by Morgan Stanley. He wouldn’t comment directly on Starboard’s seven-page letter, which includes proposals to explore a sale of Perrigo’s prescription pharmaceuticals business as well as its royalty interest in the multiple sclerosis therapy Tysabri. The drugmaker should focus on its consumer health care over-the-counter business and branded products, Starboard said.

Decisions ‘Soon’

Hendrickson said decisions from the review will be announced “relatively soon.” The Tysabri royalty interest is “clearly not core to us,” he said, but the company has yet to make a decision about divesting it.

The shares rose during his remarks, and were up 6.4 percent to $94.39 at 1:10 p.m. in New York, after earlier rising as much as 6.7 percent, the biggest intraday gain since June 14. As of Friday’s close, the stock had lost 40 percent since Mylan’s offer failed in November.

In the letter, Starboard said it’s seeking “to share our preliminary thoughts on issues facing the company and opportunities for improvement, and to begin what will hopefully be a constructive engagement with the goal of driving value creation for the benefit of all shareholders.”

Smith said the company hadn’t lived up to promises made to fend off Mylan. Since then, it has underperformed its peers, Starboard wrote in the letter.

‘Aggressive Promises’

“In order to convince Perrigo shareholders to reject Mylan’s offer, management and the board made aggressive promises of drastic improvements in both financial and stock price performance,” Starboard CEO Smith wrote in the letter. “Unfortunately, since that time, results have gone decidedly in the wrong direction, and management’s promises have been woefully unfulfilled.”

Perrigo said in a statement Monday that it “looks forward to a constructive and productive dialogue with Starboard -- as we do with all of our shareholders.”

Former CEO Joseph Papa, who led the defense against Mylan, left Perrigo in May to take over the top spot at Valeant Pharmaceuticals International Inc. Hendrickson subsequently cut Perrigo’s forecasts, calling them unrealistic. 

Starboard, which said it had been hopeful for “fresh ideas” from Hendrickson, noted he has worked at Perrigo for about 27 years and “to date, no new plans have been announced for a meaningful change in strategic direction or operational excellence.”

For his part, Hendrickson said the review was ongoing and that “I feel good about the process we’re going through.”

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