Securities Fraud Lawsuit Amplifies Perrigo's Litigation Overhang

What happened

Bernstein Liebhard LLP has announced a securities class action lawsuit on behalf of investors who purchased Perrigo stock between February 27, 2023, and November 4, 2025, alleging potential fraud during this period. This development directly amplifies the litigation risks previously noted in the DeepValue report, such as the ongoing generic pricing multidistrict litigation (MDL), adding a new layer of legal uncertainty. While Perrigo's management has emphasized strategic simplification and cost-saving programs like Project Energize, this lawsuit could indicate underlying disclosure issues or operational missteps that have not been fully transparent. Investors must now contend with increased potential for financial liabilities, legal expenses, and management distraction, which could impede progress on critical operational milestones. The timing is particularly sensitive as the company navigates its multi-year restructuring efforts and seeks to deliver on promised savings and growth from initiatives like Opill.

Implication

This securities fraud lawsuit introduces immediate financial uncertainty, with potential for substantial settlements or judgments that could strain Perrigo's cash flow and delay deleveraging efforts, directly impacting the investment thesis. Management's focus may be diverted from executing key cost-saving programs like Project Energize and Supply Chain Reinvention, risking delays in achieving the $140–300M annualized savings critical for margin expansion and multiple re-rating. The stock is likely to face downward pressure as legal overhang grows, potentially exacerbating the already low valuation but also increasing downside risk if litigation costs escalate. However, Perrigo's valuation at ~7.8x P/E embeds significant skepticism, and if the lawsuit is resolved without material impact or through insurance, the core business catalysts—such as Opill growth and portfolio streamlining—could still support upside. Investors must closely monitor quarterly disclosures for litigation expense trends, management commentary on legal strategies, and any signs of operational slippage to gauge whether the bull case remains intact.

Thesis delta

The BUY thesis is now under increased pressure due to this securities fraud lawsuit, which elevates litigation risk beyond the previously highlighted generic pricing MDL and could undermine investor confidence in management's transparency. While the low valuation and cost-saving initiatives provide some downside protection, the added legal complexity necessitates a more cautious stance, with the potential for a downgrade to HOLD if legal costs mount or operational execution falters. Investors should update their models to incorporate higher litigation risk premiums and watch for any adverse developments that could invalidate the thesis, such as significant financial settlements or diverted management attention.