Perrigo Securities Fraud Lawsuit Compounds Existing Litigation Overhang

What happened

Perrigo Company plc is facing a class action lawsuit alleging securities fraud for violations of the Securities Exchange Act between February and November 2025, as announced by the Schall Law Firm. This development amplifies the litigation risks already flagged in the DeepValue report, which noted ongoing exposure in the generic pricing antitrust MDL and other legal challenges. Despite Perrigo's ongoing restructuring efforts, including Project Energize and Supply Chain Reinvention aimed at cost savings, the new lawsuit could divert management attention and increase unallocated expenses. The company's low valuation at ~7.8x trailing P/E and high FCF yield may have embedded some execution skepticism, but fresh legal troubles could further erode investor confidence. Investors must now weigh this heightened legal risk against Perrigo's strategic initiatives and cost-saving targets.

Implication

The securities fraud lawsuit introduces immediate legal and financial risks, as it could lead to substantial settlement costs or damages, diverting resources from Perrigo's critical cost-saving programs like Project Energize and Supply Chain Reinvention. Given the company's already elevated litigation exposure, including the generic pricing MDL, this new case may prolong the period of elevated unallocated expenses, hampering margin improvement and free cash flow generation. Investors should monitor quarterly disclosures for any spikes in litigation costs or management distractions that could derail the execution of strategic initiatives. While Perrigo's low valuation provides some downside protection, failure to contain legal overhangs could delay the anticipated multiple expansion from cost savings. Ultimately, this development underscores the need for heightened scrutiny of Perrigo's risk management and legal strategy in the context of its broader turnaround story.

Thesis delta

The DeepValue report's BUY thesis, based on cost savings and valuation, now faces increased uncertainty due to the securities fraud lawsuit, which elevates litigation risks beyond the previously noted generic pricing MDL. This could delay or diminish the benefits from Project Energize and Supply Chain Reinvention if legal costs rise or management focus shifts, warranting a more cautious stance until the lawsuit's impact is clearer.