AmerisourceBergen Signs New Deal With Big Customer PharMerica

   By Jon Kamp 
 

Drug wholesaler AmerisourceBergen Corp. (ABC) has signed a new deal extending its relationship with a top customer, the nursing-home pharmacy PharMerica Corp. (PMC).

According to a regulatory filing from PharMerica Wednesday, the company entered into an amended agreement with AmerisourceBergen on Jan. 25 that runs through September 2016, with one-year automatic renewals unless one of the companies decides to break off the deal.

ISI Group analyst Ross Muken said PharMerica--the second-largest nursing home pharmacy after Omnicare Inc. (OCR)--accounts for about $2 billion in annual revenue at AmerisourceBergen. Analysts expect the wholesaler to post total revenue of $85.12 billion in the fiscal year running through March.

"We view this [contract renewal] as an incremental positive, as it removes an overhang related to contract renewals for one of ABC's larger customers," Mr. Muken said.

PharMerica didn't provide details about the new contract's pricing in the company's filing with the Securities and Exchange Commission. Still, "fact that ABC is no longer at risk of losing PMC as a customer should be a positive for shares," Mr. Muken said.

Contract competition among major customers tends to be a hot-button issue for drug wholesalers. AmerisourceBergen--which competes closely with Cardinal Health Inc. (CAH) and McKesson Corp. (MCK)--secured a major deal last summer when it won business from pharmacy-benefit manager Express Scripts Holding Co. (ESRX) away from Cardinal.

AmerisourceBergen already served Medco Health Solutions, a benefit manager that Express Scripts purchased last year. Express Scripts sought a distribution deal for the combined company after wrapping up the acquisition.

Analysts and investors are now closely watching Cardinal's efforts to retain distribution deals with Walgreen Co. (WAG) and CVS Caremark Corp. (CVS) that expire midyear. The drugstore chains accounted for 43% of Cardinal's revenue in the past fiscal year.

AmerisourceBergen shares were inactive in premarket hours Wednesday. Shares are up more than 17% over the last 12 months.

Write to Jon Kamp at [e-mail]

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