Drug distributor and wholesaler McKesson ($MCK) has expanded in the past couple of years, doing deals as it has followed competitor AmerisourceBergen ($ABC) in muscling up internationally. Now it has contracted, whacking about 1,600 jobs.
San Francisco-based McKesson in a statement confirmed a Bloomberg report of the cuts, saying, it has already eliminated 1,600 jobs, about 4% of its workforce. The company said after a review in January "the company determined that reductions to our workforce would be necessary to align our cost structure with our business needs."McKesson CEO John Hammergren
The review in January came as CEO John Hammergren reported that the company expected generic price growth in the U.S. to slow in the second half of the year. Coupled with consolidation in the industry, it led the company to reduce its forecast for the fiscal year to $12.60 to $12.90 a share from a previous forecast of $12.50 to $13.
McKesson has lost some business with Target and Omnicare and also faces the loss of a major part of its business to AmerisourceBergen after the Rite Aid drugstore chain agreed in October to be acquired by Walgreens Boots Alliance ($WBA) in a $17.2 billion deal. Walgreens has a small ownership interest in and gets its drugs from AmerisourceBergen. The Federal Trade Commission is giving the Rite Aid and Walgreens deal close scrutiny.
McKesson has made a number of acquisitions in the past few years as it battles for revenues and competes for market share globally with its rival. Earlier this month, it said it would lay out $2.23 billion (CA$3 billion) to buy Rexall Health from Katz Group, picking up 470 retail pharmacies in Canada and about 8,600 employees. Last year McKesson struck a $466 million (€408 million) deal to buy drug distribution businesses in the two Irelands and the year before that bought Germany-based Celesio for about $5.4 billion.
- read the Bloomberg story
Editor's Note: The story was updated with comments from McKesson.