Contrary to statements in previous version of this article, AmerisourceBergen did in fact have its license to distribute controlled substances reinstated by the DEA in August 2007. The Motley Fool regrets the error.
2008 has not been kind to generic-drug distributor McKesson's
After tightening its earnings guidance last quarter, the company's $1.05 per share in Q4 earnings hit the high end of the new, narrowed range, representing a 23.5% year-over-year gain. Revenue grew 8.6% to $26.2 billion, slightly trailing Wall Street expectations.
Looking ahead, management reiterated that numerous factors make quarterly forecasts and year-over-year comparisons difficult; the company prefers to give an annual range instead. McKesson predicts $3.75 to $3.90 in EPS for fiscal 2009, compared to $3.31 for 2008. Because of some tough year-over-year comparisons in the first two quarters, managers see most of the gains coming in the second half of the year.
During the last quarter, McKesson resolved its issues with the Drug Enforcement Administration over its failure to report suspicious purchases of controlled substances from its distribution facilities. The company will pay a fine -- it had already taken a one-time charge to establish a reserve -- and temporarily suspend shipments from two locations. This should effectively end the issue for McKesson, while competitor Cardinal Health
As the world's largest distributor of generic drugs, McKesson appears well-positioned to benefit from the anticipated surge in sales as many brand-name drugs come off patent protection. The company has established relationships with a number of manufacturers to get new products into the channel faster, since first movers in generic drug offerings tend to earn greater profits. McKesson's OneStop Generics program offers retailers the opportunity to purchase a broad selection of generics from a single source. Generic pharmaceuticals generally carry larger profit margins, so the company's positioning in this space should bode well for future growth.
Three major pharmaceutical distribution companies -- McKesson, Cardinal, and AmerisourceBergen
We prescribe further Foolishness:
- McKesson Expands Its Empire
- Cardinal Health Gets Its Nest in Order
- Benefiting From 2008's Generic Drugs