With sale to Metro loom­ing, Jean Coutu ex­pects more sta­bil­ity in generic-drug costs

The Globe and Mail (Atlantic Edition) - - REPORT ON BUSINESS - MON­TREAL

As it pre­pares to join the Metro Inc. gro­cery-chain net­work, Quebec phar­macy com­pany Jean Coutu Group (PJC) Inc. an­tic­i­pates some sta­bil­ity af­ter years of pro­vin­cial govern­ment in­ter­ven­tion in a bid to lower gener­ic­drug costs.

A ceil­ing on pro­fes­sional al­lowances paid to phar­ma­cists by generic-drug man­u­fac­tur­ers such as Jean Coutu’s Pro Doc will be re­stored to 15 per cent next week.

And a new law lim­it­ing phar­ma­cists to mak­ing half of their to­tal generic-drug pur­chases from one generic-drug maker is ex­pected to have lit­tle im­pact on its phar­ma­cist own­ers.

Most of Jean Coutu phar­ma­cists al­ready meet this thresh­old and will be able to main­tain their cur­rent pur­chases from Pro Doc, which mainly sup­plies large vol­ume generic drugs, chief fi­nan­cial of­fi­cer An­dré Belzile said on Thurs­day dur­ing a con­fer­ence call to dis­cuss sec­ond-quar­ter re­sults.

“We don’t ex­pect any ad­di­tional re­form, so we should have a much bet­ter view on the im­pact on our earn­ings and the earn­ings of Pro Doc go­ing for­ward now that we will have that sta­bil­ity for the next five years,” he told an­a­lysts.

The Quebec-based phar­macy chain earned $47.8-mil­lion in its lat­est quar­ter, down from $51.5mil­lion a year ago even as rev­enue im­proved.

The drug­store re­tailer said the profit amounted to 26 cents a di­luted share for the three-month pe­riod ended Sept. 2, which is 2 cents a share above an­a­lyst fore­casts and down from 28 cents a di­luted share in the same pe­riod a year ear­lier.

It at­trib­uted the drop in earn­ings to a lower con­tri­bu­tion from Pro Doc fol­low­ing a lift­ing of pro­fes­sional al­lowance caps in Jan­uary.

Rev­enue in­creased 6 per cent to $744.3-mil­lion, up from $701.2mil­lion.

Last week, Jean Coutu agreed to a $4.5-bil­lion takeover of­fer from gro­cery-store chain Metro that is ex­pected to close in the first half of 2018.

Jean Coutu share­hold­ers are be­ing of­fered a com­bi­na­tion of cash and stock worth about $24.50 a share.

Mean­while, while some an­a­lysts fear that the liq­ui­da­tion of Sears will hurt other re­tail­ers dur­ing the busy hol­i­day sea­son, CEO François Coutu an­tic­i­pates some longer-term ben­e­fits.

“With the problems that Sears is hav­ing, I think this should ben­e­fit also all the re­tail­ers who will prob­a­bly ben­e­fit from this clien­tele who will have to find other places to go,” he said. Jean Coutu Group (PJC.A) Close: $24.66, down 8¢

CHRISTINNE MUSCHI/THE GLOBE AND MAIL

A ceil­ing on al­lowances paid to phar­ma­cists by generic-drug mak­ers will be re­stored to 15 per cent next week.

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