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Biotech / Medical : McKesson HBOC (MCK)
MCK 589.95-0.2%Jun 14 4:00 PM EDT

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To: Henk Wondergem who wrote (144)12/15/1999 5:33:00 PM
From: Rambi   of 165
No- and that's really discouraging. I guess everyone saw this at Yahoo:
Drug Distributors Fail to Soar on Retail Deals
By Michael Brick Staff Reporter
12/15/99 12:42 PM ET

Two pharmaceuticals distributors trumpeted new multi-year sales agreements with drugstore chains Wednesday. But the deals did little to cure the distributors' ills on Wall Street.

Bergen Brunswick, (BBC:NYSE - news), of Orange County, Calif., said it signed a five-year agreement to be New York-based Duane Reade's (DRD:NYSE - news) primary supplier of drugs and health care products. The deal is worth $200 million a year, the company said.

Separately, McKesson HBOC (MCK:NYSE - news) of San Francisco said it extended for six years a deal to serve as Youngstown, Ohio-based Phar-Mor's (PMOR:Nasdaq - news) primary supplier. That deal should generate $2 billion in revenue over its lifetime, the companies said.

Shares of Bergen gained 1/4, or 3%, to 8 1/16 by midday Wednesday, and shares of McKesson rose 1/4, or 1%, to 20 11/16. Phar-Mor shares gained 5/16, or 8%, to 2 15/16, but Duane Reade shares dropped 1/2, or 2%, to 22.

"It's nothing that I'm jumping up and down about," said Andrew Speller, analyst for A.G. Edwards. He has hold ratings on both distributors and doesn't cover the retailers. His firm co-managed a preferred stock offering for Bergen in May. "This kind of stuff happens all the time. In most other industries, people don't send out press releases when they sign supply agreements."

Both distributors have been looking for some good news this year. Bergen's stock is almost 30 points off a 52-week high of 37 3/4, and McKesson's is almost 70 points off a 52-week high of 89 3/4.

For McKesson, the deal with Phar-Mor may prove slightly more substantive than its previous arrangement with the retailer because it includes automation products, Speller said. The products -- with names like OmniLink and BakerAPS Pharmacy 2000 -- count pills and notify pharmacists if a patient's insurance won't pay for the drug his doctor prescribed.

That could increase profits at Phar-Mor by allowing the company to eliminate technicians, and the products carry a higher profit margin for McKesson, according to Speller.

"This is pretty much prototypical of what the wholesalers are trying to do," Speller said. "You make money selling pharmaceuticals on the wholesale side, but you make a lot more money offering these other services."
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