(Reuters) - AmerisourceBergen Corp’s (ABC.N) profit beat analysts’ estimates as it reined in costs and the drug wholesaler raised the lower end of its earnings forecast for the fiscal year, allaying concerns that declining generic drug prices would hurt the pharma supply chain.
The pharmaceutical supply chain, including pharmacy benefit managers and drug distributors, has come under pressure as scrutiny over soaring drug prices has increased.
Drug pricing has become a lightning rod for criticism with several drugmakers facing federal investigations, leading to a fall in the prices of generics and a slowdown in the pace of the increase in branded drug prices.
AmerisourceBergen said on Thursday it continues to expect prices of branded drugs to increase 7 percent to 9 percent and generic drug prices to decline 7 percent to 9 percent for fiscal year 2017.
Leerink Partners analyst David Larsen said the unchanged drug pricing forecast bodes well for fiscal 2018, adding that operating margins for the quarter have been partly hurt by more rapid brand to generic conversions and not pricing.
The company raised the lower end of its adjusted earnings forecast for fiscal 2017 to $5.77 to $5.92 per share from $5.72 to $5.92 earlier.
“We feel good about the $5.77. And again, that’s the low end of our range even if generic deflation change a few percent,” AmerisourceBergen Chief Executive Steven Collis said on a post-earnings call.
In contrast, Cardinal Health said last month it expected full-year adjusted earnings at the lower end of its forecast, citing increased competition and falling generic drug prices.
Competition in the generic drug product line, specifically in the independent customer segment, has heated up in the last few months.
AmerisourceBergen’s net income fell 32 percent to $411.5 million, or $1.86 per share, in the second quarter ended March 31.
Excluding items, the company earned $1.77 per share, beating average analysts’ estimate of $1.68, according to Thomson Reuters I/B/E/S.
Baird analyst Eric Coldwell noted that the company appeared to aggressively manage operating expenses to combat continued “environmental headwinds”.
Revenue rose 4 percent to $37.15 billion but came in below analysts’ estimate of $38.09 billion.
AmerisourceBergen said it now expects fiscal 2017 revenue growth in the range of 5.5 percent to 6.5 percent, from 6.5 percent to 8 percent.
Reporting by Ankur Banerjee in Bengaluru; Editing by Supriya Kurane