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$ABC completed the acquisition of H. D. Smith, the largest independent wholesaler in the U.S., for $815MM in cash. The acquisition is designed to enhance and expand the company's strategic scale, strengthen its support to community pharmacy and drive long-term, durable value.
$ABC has adopted a new organizational structure designed to further align it to customer needs in a more unified way, while accelerating growth. AmerisourceBergen’s customer-facing offerings will now be aligned under two groups named Pharmaceutical Distribution and Strategic Global Sourcing and Global Commercialization Services and Animal Health.
$ABC announced a new organizational structure. Commercialization Services and Animal Health will be led by Group President James Cleary, Jr., and includes the company's solutions for product commercialization and patient access, as well as international development and animal health.
$ABC announced a new organizational structure. Pharmaceutical Distribution and Strategic Global Sourcing will be led by Group President Robert Mauch. Peyton Howell will assume a new role as President, Health Systems, Physician Practices and Strategic Health Solutions.
$ABC continues to operate under the following working assumptions regarding the pharmaceutical market into its FY17 expectations. $ABC sees brand drug inflation of 7-9%, generic drug deflation of down 7-9%, contributions from new generic launches similar to the prior year and no significant contributions from biosimilars.
$ABC lowered its 2017 revenue growth outlook to 5.5-6.5% from 6.5-8% and adjusted operating expense growth estimate to 2-3% from 4.5-6%. The company narrowed its 2017 adjusted EPS guidance to $5.77-5.92 from $5.72-5.92 and adjusted operating income forecast to flat-to-up 2% from flat-to-up 4%.
$ABC reported a 31.8% drop in 2Q17 earnings due to last year's warrants income. Net income fell to $411.47MM or $1.86 per share from $603.45MM or $2.68 per share last year. Revenue rose 4.1% to $37.15Bil, on higher Pharmaceutical Distribution Services revenue and a rise in Other revenue. Adjusted EPS increased to $1.77 from $1.68.
$ABC has signed a new five-year agreement to supply pharmaceuticals to $ESRX. The agreement extends through September 30, 2022. AmerisourceBergen and Express Scripts’ most recent supply deal began in October 2012 and was set to expire in September 2017. The fiscal year 2016 revenue contribution from that agreement was approx $23Bil.
For FY17, $ABC revised OpEx growth rate to 4.5-6.0%. The company expects that expenses will increase to support the revenue ramp. $ABC started to incur incremental costs related to several IT and infrastructure investments. Operating income dollar growth to be flat to up 4% vs. FY16. $ABC expects modest share repurchase activity in the near term.
For FY17, $ABC expects US pharmaceutical sector to grow, driven by patient demographics as strengthening US economy and a robust pipeline of new brand drug launches. The company is building the new state-of-the-art distribution centers, which are expected to be fully online by the end of FY17.
During 1Q17, $ABC's revenue from its Pharmaceutical Distribution revenue rose 3.9% to $36.6Bil compared to 1Q16. This increase was mainly due to organic sales growth. The segments operating income was down 1.9% to $374MM. Revenue in Other rose 5.4% YoverY during the quarter to $1.7Bil. Operating income in Other rose 17.4% to $112MM.