Amerisource deal may not keep Walgreens competitive: analysts – KFGO

Tuesday, February 13, 2018 9:02 a.m. CST

By Ankur Banerjee

(Reuters) – Walgreens’ potential deal for drug distributor AmerisourceBergen will boost its cash flow and push it deeper into a lucrative specialty pharmacy market, but may fail to keep it competitive in an evolving U.S. healthcare sector, analysts said.

A deal would not be a surprise, but analysts noted that it might cost Walgreens Boots Alliance opportunities down the line as the company tries to keep pace with rival CVS Health Corp, which is set to buy health insurer Aetna Inc, and possibly go up against Amazon.com.

AmerisourceBergen shares were up 8.7 percent in midday trading, while Walgreens shares were little changed.

“This purported deal wouldn’t be shocking … but we’re currently struggling to see the strategic allure of the combination for Walgreens,” Baird analyst Eric Coldwell said.

While the CVS-Aetna deal is expected to create a consumer healthcare giant that will only widen CVS’ formidable reach, Walgreens will get no such lift if it buys AmerisourceBergen, in which it holds a 26 percent stake, analysts said.

However, any Walgreens-AmerisourceBergen deal would give Walgreens a bigger presence in the specialty pharmacy space, where it does not have adequate exposure, setting it up to compete better against CVS and pharmacy benefit manager Express Scripts Holding Co.

“As the broader healthcare sector focuses more on moving specialty drug administration out of facility-based (hospital/physician’s office) settings, gaining a strong foothold in specialty through ABC could be a valuable strategic move,” Jefferies analyst Brian Tanquilut said.

AmerisourceBergen and Walgreens have a 10-year deal, struck in 2013, that allows the drug distributor to buy drugs for Walgreens, the largest U.S. drugstore operator.

The Wall Street Journal reported on the potential deal on Monday, but said talks were in early stages.

“This deal has probably been

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