McKesson quarterly net profit falls

Source:Reuters.com Author:Bill Berkrot Date:03/25/14 Click:

NEW YORK (Reuters) - Pharmaceutical wholesaler McKesson Corp (MCK.N) reported on Thursday that its quarterly profit fell 17 percent as results were hit by charges and lower profit margins on generic drugs.

The company also lowered the top of its full-year earnings forecast range and its shares fell nearly 3 percent in after-hours trading.

"The end came down by five cents. I think that's what's hurting the stock," said Jeff Jonas, an analyst with Gamco Investors.

"They've been outperforming for the last couple of quarters, so to see them move closer to the low end is going to be a bit of disappointment," Jonas said.

For the full fiscal year ending March 31, McKesson now expects earnings of $3.22 to $3.32 per share. The previous top end of the forecast range had been $3.37.

McKesson posted a net profit of $201 million, or 69 cents per share, for its fiscal third quarter ended December 31, compared with a profit of $243 million, or 80 cents per share, a year ago.

The results include charges of 11 cents per share for asset impairments, severance and restructurings and pending legal settlements as well as 2 cents a share related to its acquisition of Oncology Therapeutics Network.

Excluding special charges, earnings from continuing operations were 79 cents per share, missing analysts' average forecast by one penny, according to Reuters Estimates.

"I wouldn't call it a bad quarter but it was a little less than expected," Jonas said.

"In the distribution area it might have been a little bit of a weak quarter this time and there were higher costs in both parts of the business," he said.

The San Francisco-based company said it faced a tough comparison with last year's third quarter, which had significant earnings from three major generic drugs, two of which had lower profit margins this year and one of which is no longer available as a generic.

Generic versions of the blood clot preventer Plavix disappeared after Bristol-Myers Squibb Co (BMY.N) won a patent infringement lawsuit. And prices on generics of the cholesterol fighter Zocor and antidepressant Zoloft came down sharply as more companies began selling the drugs.

The company expects a generic pickup going forward as it benefits from the recent launch of a generic version of Wyeth's (WYE.N) acid reflux drug Protonix.

One month into the current quarter, said Chief Financial Officer Jeffrey Campbell, "we continue to expect a strong finish to the year."

McKesson said the fourth quarter is traditionally its strongest.

Revenue for the quarter rose 15 percent to $26.5 billion, topping Wall Street expectations of $25.27 billion.

Drug distribution revenue rose by 14 percent to $25.8 billion, led by a 17 percent rise in U.S. pharmaceutical direct distribution sales.

Technology solutions revenue rose 35 percent to $736 million, but operating profit in the quarter fell to $49 million from $63 million due to charges of $25 million to streamline staffing and product lines and for legal settlements.

Shares in McKesson fell to $61.01 after closing at $62.79 on the New York Stock Exchange on Thursday.

(Reporting by Bill Berkrot; Editing by Gary Hill and Carol Bishopric)

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