Pharmaceutical Commerce - May/June 2013 - (Page 8)

Top News Walgreens-Alliance Boots sends its business to AmerisourceBergen—and will buy a piece of the company Action could alter drug wholesaling and retailing; meanwhile, ABC divests Canadian wholesaling and contract packaging businesses Steve Collis, AmerisourceBergen CEO, is looking to be a man in a hurry. A little over a year after taking over the reins of the company (from founding CEO R. David Yost), he is one side of a far-reaching supply agreement with Walgreens, and has moved two longstanding assets of the Valley Forge, PA, company off its books. The Walgreens agreement, signed in mid-March, is the deal that could change the future of ABC itself, as well as have a profound impact on Walgreens. Walgreens’ business, worth $28 billion, is moving from Cardinal Health to AmerisourceBergen. The contract is for 10 years, considerably longer than the usual 3- or 5-year deals. The country’s No. 1 retail pharmacy (by number of stores) is in a multi-year agreement to acquire UK-based Alliance Boots outright (it currently owns 45%), and the two have formed a j.v., Walgreens Boots Alliance Development GmbH, that enables the two organizations to supply products globally. Most eyecatching of all: the two companies will purchase a 7% equity stake in ABC, and will have warrants to purchase an additional 16% by September 2017. At two different points when and if these equity positions increase, both will have members on the ABC board. Prior to the ABC announcement, WalgreensAlliance Boots projected combined revenue of $130 billion in 2016; adding ABC’s expected revenue in 2013 would create a $214-billion behemoth, if all three entities were united. This cross-ownership (as opposed to outright merging), according to industry sources, enables AmerisourceBergen to make a legitimate case to other chain pharmacies, and the large number of independent pharmacies that it does business with, that the company can continue to be a reliable supplier. Each of the Big Three wholesalers has chains or large pharmacy benefit managers (PBMs) as clients, and each makes efforts to curry favor with small independents. “As we all recognize the imperatives of health reform not only here in the US but also globally, we have entered into a unique opportunity to unlock value in the pharmaceutical supply chain by collaborating to leverage all of our proven strengths,” said Collis, in a statement. “This new relationship will significantly strengthen and grow our core business and increase our ability to deliver innovative solutions to our customers, and long-term benefits to all of our stakeholders. Importantly, these agreements not only expand our US business, but also provide opportunities to meaningfully grow our specialty and manufacturer services businesses internationally.” “This agreement with AmerisourceBergen, which we consider to be the best-positioned pharmaceutical wholesaler in North America, is a promising development for Walgreens and Alliance Boots following the formation of our strategic partnership last year,” said Stefano Pessina, executive chairman of Alliance Boots. “We strongly believe that our new partnership with AmerisourceBergen will deliver longterm shareholder value by creating an unmatched network of companies that is well positioned to anticipate increasing market needs and expectations across the world.” ABC has already been handling Walgreens’ specialty pharmaceutical supply. The companies’ public announcement indicates that ABC will handle both branded pharmaceuticals ‘AmerisourceBergen [will] focus on its distribution, specialty and manufacturer services businesses’ -- Steve Collis, CEO (which Walgreens has purchased from multiple distributors) and generics, which Walgreens has self-distributed. ABC also says that it will “cooperatively work with Walgreens and Alliance Boots to provide manufacturers with integrated solutions for global clinical trial logistics and innovative global third party logistics services by leveraging World Courier’s position as a global leader in premium logistics. In addition, Alliance Boots’ growing specialty activities with European biotech manufacturers and AmerisourceBergen’s pharmaceutical product commercialization and patient support services offer manufacturers unique opportunities to expand patient access to biotech products in Europe and beyond.” Cardinal’s public statement stated that the company expects no significant change to its 2014 guidance, with chairman George Barrett saying that it has “prepared strategies to mitigate the impact of a Walgreens nonrenewal.” Cardinal also noted that 60% of its Walgreen business was in bulk sales, which have minuscule 0.2% margins. In 2012, Cardinal had BMS puts a $250-million chip on expanded biotech capabilities in Devens, MA Expansion will enable more process development and clinical trials manufacturing, add 350 employees The Devens, MA facility of Bristol-Myers Squibb was a $750-million trophy win for the state of Massachusetts back in 2009, when the state provided resources to convert an old military base to commercial use. Now, an additional $250 million is being committed to the site, adding 200,000 sq. ft of constructed space to the existing 400,000 sq. ft. BMS says that two new buildings will be constructed, one for developing manufacturing processes for investigational biologics, and another for clinical-scale production of those investigational products. The primary activity at the site currently is bulk production, especially for Orencia (abatacept), BMS’ rheumatoid arthritis product. “Biologics are increasingly important in the treatment of serious diseases and are a growing 8 Visit our website at www.PharmaceuticalCommerce.com May | June 2013 also lost the Express Scripts PBM business to ABC. (And, ironically, ABC’s handling of Express Scripts brings in the company Walgreens had a very public spat over during 2012 when Walgreens tried to opt out of Express Script’s pharmacy network, but eventually agreed to stay within.) One industry sector that will look on this deal critically is generic manufacturers, who are seeing two and possibly three of their larger customers becoming essentially one buyer. Another is independent pharmacies (who compete with Walgreens); over the years, ABC has retained a strong and loyal base among independents. In Europe, Alliance Boots has been a strong combined retail pharmacy and drug wholesaler. Divesting AndersonBrecon, ABC Canada A scant couple weeks after the Walgreens announcement, AmerisourceBergen revealed it has a buyer for its packaging business: Frazier Healthcare, a Seattle portfolio-management company with extensive holdings in pharmaceuticals, services and healthcare. The purchase price was $308 million, and three other private-equity firms, Greenspring Associates, QIC Global Private Equity, and Thomas McNerney & Partners, took a share in the acquisition. The AndersonBrecon sale was expected; ABC indicated last fall that it was putting the business on the market. Less than a year ago, ABC had combined two existing subsidiaries, Anderson Packaging (Rockford, IL) and Brecon Packaging (Herefordshire, UK) to form the unit; it has manufacturing plants in 12 countries and employed (as of June 2012) 1,500. Frazier Healthcare acquired the contract packaging facilities of Catalent Pharma Solutions last June, and rebranded the company as Packaging Coordinators, Inc. (Philadelphia) “We are extremely excited to add the complementary U.S. and European footprint of AndersonBrecon to the strength of PCI’s capabilities,” said Bill Mitchell, PCI’s CEO, in a statement. “This acquisition is a positive step in PCI’s growth strategy.” Longtimers in the pharma packaging business will remember Bill Mitchell as head of the Catalent packaging units when they were part of Cardinal Health (Catalent was spun out of Cardinal Health in 2007). Just prior to the AndersonBrecon sale, AmerisourceBergen announced its exit from Canadian wholesaling (some specialty-distribution services will be retained). The buyer is Kohl & Frisch Ltd, a Canadian full-line distributor. The deal, worth between $80-$100 million, will be partially financed by ABC, which also says the sale will result in an impairment charge of $160-180 million in Q2 2013 statement. ABC hinted at less-than stellar performance from the unit in its end-of-Q1 statement, saying that results were impacted by “disappointing performance in our Canadian distribution business.” With the divestiture, ABC expects better earnings for the current fiscal year, raising its earnings estimate by 8-10 cts per share. part of our company’s pipeline of potential new therapies,” said Lou Schmukler, president, Global Manufacturing & Supply. “This initiative is designed to accelerate the development of new biologics medicines through the closer alignment of biologics research and development, and manufacturing.” The Devens site is about 40 miles northeast of Boston; BMS says that the availability of educational resources, trained workers and the state’s Life Sciences initiative have been factors in the site selection. http://www.PharmaceuticalCommerce.com

Table of Contents for the Digital Edition of Pharmaceutical Commerce - May/June 2013

Pharmaceutical Commerce - May/June 2013
Table of Contents
Editorial
Op-Ed
Top News
Business/Finance
Brand Marketing & Communications
Supply Chain/ Logistics
Information Technology
Manufacturing & Packaging
Legal & Regulatory
Meetings and Editorial Index

Pharmaceutical Commerce - May/June 2013

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