'Many Moving Parts' Subdue AmerisourceBergen's Q2 Results

By Dan Stanton

- Last updated on GMT

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'Many Moving Parts' Subdue AmerisourceBergen's Q2 Results
In a quarter that has seen the company divest its contract packaging and Canadian drug distribution arms, AmerisourceBergen’s Q2 results have been deemed “less than special” by analysts.

Though revenue for the quarter was $20.5bn (€15.7bn) up 4% on the same period last year, a 7% drop in operating income and losses from discontinued operations amounting to almost $160m meant the company’s net income stood at just $45m for the period, compared with $212m in Q2 of FY2012.

Ross Mukin, an analyst from ISI, said in an analyst note though the quarter had seen “lots of moving pieces”​ the results were “less than special”​ for AmerisourceBergen who have stated that full-year earnings were likely to come in at the lower end of its previously forecast range.

The main movements were discussed by AmerisourceBergen’s CEO, Steven Collis, in a conference call with investors:

“We announced an agreement to sell our contract pharmaceutical packaging business, AndersonBrecon; we signed an agreement to sell our underperforming Canadian drug distribution business; and most importantly, we entered into a new strategic long-term relationship with Walgreens and Alliance Boots.”

The two divestments and the one contract penned were part of a strategy “to generate sustainable long-term growth,”​ according to Collis.

Frazier Healthcare acquired AndersonBrecon​ earlier this month in a deal worth $308m for AmerisourceBergen who exited the contract packaging business to focus on its core businesses.

The company also slim lined its service offerings with the sale to Kohl & Frisch of its Canadian Distribution Business – an area which had been the key burden in AmerisourceBergen’s quarterly increasing operating costs​, according to AmerisourceBergen’s CFO, Tim Guttman, back in January.

Speaking this quarter, Guttman said that there would be “estimated losses”​ of $166m regarding the sale and now classified “Drug Canada as a discontinued operation,”​ revising 2012 figures and 2013 figures to fit.

Finally, a 10-year primary distribution contract penned with Walgreens and Alliance Boots​ last month is expected to net the firm an incremental $28bn in revenues, though this operation will not commence until September, with the deal moving into distributing Walgreen’s generics in 2014.

Such reclassifications of operations and new contracts have affected the company’s guidance for 2013. Revenue growth for 2013 is now estimated to increase from 8-10% to “be in the 11% to 13% range”​ according to Guttman, whilst “operating income will now be down 3% to 5% for the year”​ due to the “many moving parts.”

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