Walgreens JV drives AmerisourceBergen Q3 gains

The pharma supply giant’s Q3 operating income went up almost 16% year-on-year to $455m (EUR415m), driven by gross profit from the recent acquisition of veterinary company MWI and a distribution partnership with Walgreens and Alliance Boots.

The company plans a $300m share repurchase but has no M&A plans for next year, CEO Steve Collis added in an earnings call.

Defense contract​

The Walgreens JV helped push up revenue by 20% to AmerisourceBergen Drug Corporation, the distribution unit for manufacturers and pharmacies. The alliance has rolled out supply of specialty autism and oncology drugs to Brazil, a market which is “bearing fruit​” although getting manufacturers’ products into the area is “frankly more of a product problem than ​[generally] realised,​” according to Collis.

Despite gains from the partnership, the drug business was affected by unfavourable repricing of a contract with the US Department of Defense, and by a slowdown in generic price increases, said the company.

Speaking to investors, Chief Financial Officer Tim Guttman predicted generic price hikes will continue to slow next year, bringing in less income in this segment in 2016. Poor profit from the DoD contract will also affect EBITDA for the first two quarters of next year, he said. He added he expected cash flow to return to lower levels in 2016, after being inflated by the Walgreen deal.

The company’s specialty group, which includes blood products, biologics and oncology, saw revenue rise 22%, partly led by manufacturers transferring some cancer products from the drug Corporation. Growth also came from higher volume vaccine and blood products distribution and from the introduction of new branded drugs to the market, said CEO Steve Collins.

Operating expenses for the segment could be improved at the AmerisourceBergen’s national distribution centre in Ohio and in its Swiss manufacturing services business, said the CFO.

Altogether, AB Drug Corporation and AB Specialty Group saw EBITDA rise 5% year-on-year for Q3, to $377.8m.

Sales from the rest of AmerisourceBergen’s businesses, which include consulting companies and acquired transport service World Courier shot up to $1.5bn due to the acquisition of MWI, but grew only around 15% without it.