Some ‘sta­bil­ity’ fore­cast for generic drugs over 5 years

No ad­di­tional re­forms ex­pected to af­fect Jean Coutu, says chief fi­nan­cial of­fi­cer

Vancouver Sun - - FINANCIAL POST - ROSS MAROWITS

As it pre­pares to join the Metro gro­cery chain net­work, Quebec phar­macy com­pany Jean Coutu Group Inc. an­tic­i­pates some sta­bil­ity af­ter years of pro­vin­cial govern­ment in­ter­ven­tion in a bid to lower generic drug 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 buy­ing half of their to­tal generic drug pur­chases from one generic drug­maker 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 An­dre Belzile said 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 $51.5 mil­lion a year ago even as rev­enue im­proved.

The drug­store re­tailer said the profit amounted to 26 cents per di­luted share for the three-month pe­riod ended Sept. 2, two cents per share above an­a­lyst fore­casts and down from 28 cents per 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 six per cent to $744.3 mil­lion, up from $701.2 mil­lion.

Irene Nat­tel of RBC Cap­i­tal Mar­kets said Jean Coutu’s out­look of sta­bil­ity is good for Metro share­hold­ers.

“Sus­tain­ing mo­men­tum as we move through the ap­proval process for the pro­posed trans­ac­tion re­mains crit­i­cal, par­tic­u­larly in light of on­go­ing pres­sure on prof­itabil­ity of the generic drug unit,” she wrote in a re­port.

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

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

Metro an­nounced on Wed­nes­day that it ex­pects to re­ceive $1.55 bil­lion in pro­ceeds from the sale of more than 27 mil­lion shares in Ali­men­ta­tion Couche-Tard to help fund the Jean Coutu pur­chase.

Mean­while, while some an­a­lysts fear that the liq­ui­da­tion of Sears will hurt other re­tail­ers dur­ing the busy hol­i­day sea­son, CEO Fran­cois Coutu an­tic­i­pates some longert­erm 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.

Sus­tain­ing mo­men­tum as we move through the ap­proval process for the pro­posed trans­ac­tion re­mains crit­i­cal.

COLE BURSTON/BLOOMBERG

Jean Coutu’s out­look of sta­bil­ity is seen as pos­i­tive for Metro share­hold­ers amid chal­lenges fac­ing the generic drug unit. The phar­macy chain agreed to a takeover of­fer from Metro last week,

Newspapers in English

Newspapers from Canada

© PressReader. All rights reserved.