Perrigo begins strategic review of baby formula business

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(Reuters) -Perrigo said on Wednesday it has initiated a strategic review of its infant formula business as the consumer health company shifts its focus to higher-margin branded products.

The company is a top supplier of store-brand baby formula, which is sold under retailers’ labels and can cost less than branded products.

The infant formula unit has struggled with quality concerns at its manufacturing facilities that posed contamination risks.

In 2023, Perrigo’s Wisconsin unit received a warning letter from the U.S. health regulator to correct its manufacturing processes to better catch bacterial contamination.

The strategic review will focus on increasing cash flows, reassess a previously announced $240 million investment in the unit and evaluate other potential options, Perrigo said, adding that no final decisions have been made and there is currently no set timeline for completing the review.

“While our infant formula operations have stabilized, the external environment has quickly changed, making a fit with our consumer health OTC businesses less strategic,” CEO Patrick Lockwood-Taylor said.

Perrigo on Wednesday trimmed its full-year profit forecast to a range of $2.70 to $2.80 per share, down from $2.90 to $3.10 per share previously, citing challenges in the infant formula industry and soft demand for its over-the-counter products.

Shares of the company fell nearly 16% in premarket trading.

The company said it expects the infant formula business to generate about $360 million revenue this year, which is less than 10% of Perrigo’s net sales in 2024.

Perrigo’s branded products include children’s oral care brand Firefly, Mederma for scar removal and Coldrex for cough and allergy care.

(Reporting by Mariam Sunny in Bengaluru; Editing by Shailesh Kuber)