The Big Three drug distributors likely to continue dominating the market, says Turner Investments commentary

Investment firm thinks several industry trends will likely lead AmerisourceBergen, Cardinal Health, and McKesson to continued growth over the next four years

BERWYN, Pa.--(BUSINESS WIRE)-- Three companies -- AmerisourceBergen, Cardinal Health, and McKesson -- command over 90% of market share in the $300-billion drug-distribution industry. That dominance, combined with three drug-related catalysts, may make the Big Three even bigger, according to the latest Sector Focus commentary by Turner Investments.

Turner, an investment firm based in Berwyn, Pennsylvania, publishes Sector Focus commentaries monthly as part of the continuing efforts of its five analyst teams to monitor the market sectors for its growth-stock portfolios.

Entitled Why the Big Three drug distributors could get bigger, the piece was written by Turner’s health-care analysts: Theresa Hoang, global security analyst; Heather Flick McMeekin, portfolio manager/global security analyst; Vijay Shankaran, senior portfolio manager/global security analyst; Richard Simons, portfolio manager/global security analyst; and Frank Sustersic, senior portfolio manager/global security analyst.

Trends they expect to boost the bottom lines of the Big Three distributors:

  • Sales of generic and specialty drugs, the ones with the highest profit margins, are on the rise.
  • Federal health-care reform could provide millions of Americans with health insurance, resulting in a projected 4% increase in prescriptions annually.
  • The segment of the population that consumes the most drugs -- those age 65 and older -- is growing because people are living longer, thus increasing drug demand.

With strong balance sheets and high cash reserves, the Big Three seem well positioned for acquisitions. Much consolidating has already occurred in the drug-distribution industry, but the analysts point out two independent companies that may be attractive buys: H.D. Smith and Smith Drugs. In addition, fast- growing medical-supply distribution companies like PSS World Medical may represent good acquisition opportunities.

To read this January 2011 Sector Focus in its entirety, see the Turner Investments Web site, Or call 484-329-2407 for a free copy of the piece.

    The views expressed represent the opinions of Turner Investments as of the date indicated and may change. They are not intended as a forecast, a guarantee of future results, investment recommendations, or an offer to buy or sell any securities. Opinions about individual securities mentioned may change, and there can be no guarantee that Turner will select and hold any particular security for its client portfolios. Earnings growth may not result in an increase in share price. Past performance is no guarantee of future results.

    Turner Investments, founded in 1990 and based in Berwyn, Pennsylvania, is an investment firm with more than $17 billion in assets under management in stocks, as of December 31, 2010. Turner manages growth, global/international, core, value, quantitative, and alternative separately managed accounts and mutual funds for institutions and individuals.

    As of December 31, 2010, Turner held in client accounts 1.3 million shares of AmerisourceBergen and 86,360 shares of McKesson. Turner held no shares of Cardinal Health.


    Turner Investments
    Megan Charlton, 484.329.2407
    E-mail: [email protected]

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