May 8, 2019 / 11:17 AM / 12 days ago

McKesson meets full-year profit estimates, renews partnership with CVS

(Reuters) - U.S. drug distributor McKesson Corp forecast a full-year profit on Wednesday that matched analysts’ estimates, easing some fears over drug pricing pressures and costs of opioid-related litigations.

The company also said it had renewed a distribution agreement with its largest client, CVS Health Inc, through 2023.

“McKesson reported mixed end to its FY19, but in this environment that is likely to be enough especially as guidance met expectations,” an Evercore ISI note said.

The mid-point of the company’s 2020 adjusted profit outlook of between $13.85 and $14.45 per share was a cent above the average analyst estimate, according to IBES data from Refinitiv.

The profit forecast assumes an estimated $150 million in costs tied to opioid-related litigations, the company said on conference call.

McKesson expects sales across most of its business units to grow in 2020, including its international drug distribution business, which has been hit by lower reimbursement rates paid by the UK government.

Analysts in the past have said the company’s U.S. distribution business could be hurt as growing government scrutiny over rising healthcare costs in the U.S. is expected to slow the pace of rise in branded drug prices.

However, McKesson said it expected the prices of branded drugs in the United States to rise in the mid-single digit percentage range in 2020, unchanged from its expectations for last year.

The company last week agreed to pay $37 million to resolve a lawsuit by the state of West Virginia alleging it helped fuel a U.S. opioid epidemic by failing to stop suspicious orders of painkillers by pharmacies in the state.

Revenue rose 1.6 percent to $52.43 billion, but fell short of analysts’ estimates of $53.15 billion.

On an adjusted basis, McKesson earned $3.69 per share, while analysts had expected $3.36 per share, according to IBES data from Refinitiv.

Net loss attributable to the company narrowed to $796 million, or $4.17 per share, in the fourth quarter ended March 31, compared with a loss of $1.15 billion, or $5.58 per share, a year earlier.

Revenue rose 1.6 percent to $52.43 billion, falling short of analysts’ estimates of $53.15 billion.

McKesson’s shares were up 2.3 percent at $128.63 in morning trade on the New York Stock Exchange.

Reporting by Manas Mishra and Aakash Jagadeesh Babu in Bengaluru; Editing by Shounak Dasgupta and Shailesh Kuber

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