With sale to Metro looming, Jean Coutu expects more stability in generic-drug costs
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¢
A ceiling on allowances paid to pharmacists by generic-drug makers will be restored to 15 per cent next week.