Big Pharma isn't the only drug-related business that's consolidating via M&A. U.S. drug distributor Cardinal Health today announced plans to buy Kinray, a smaller distributor based in the Northeast, for $1.3 billion. Kinray handles both branded and generic drugs and is focused mostly on the vast New York metro area.
The deal makes sense for Cardinal, analysts told Bloomberg, because it stands to broaden the company's mix of customers. It will add some 2,000 customers to Cardinal's retail independent pharmacy base, an increase of 40 percent in that segment. And that's a key change, because Cardinal nets bigger margins from independent retailers than it does from its two major customers, CVS Caremark and Walgreen. As much as seven to eight times the profits, Pembroke Consulting's Adam Fein told the Wall Street Journal.
And it will likely boost Cardinal's generics business, too, Sanford C. Bernstein analyst Helene Wolk said: "Conceptually this makes sense as it increases Cardinal's exposure to generics, given Kinray's relationships with independent pharmacies." Plus, as an all-cash deal, it will add to earnings immediately; the company predicts a 12-cent addition to EPS from Kinray by 2012.
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