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LONDON, UK / ACCESSWIRE / January 27, 2017 / Active Wall St. blog coverage looks at the headline from San Francisco-based McKesson Corp. (NYSE: MCK) as the Company announced its plans to acquire Columbus, Ohio-based privately held Healthcare Technology Company CoverMyMeds, when it announced the third quarter earnings report on January 25, 2017. The all-cash deal is valued at $1.1 billion. Register with us now for your free membership and blog access at:
One of McKesson's competitors within the Drugs Wholesale space, Cardinal Health Inc. (NYSE: CAH), announced on January 04, 2017, that it will release its Q2 financial results for its fiscal year 2017 on February 7, prior to the opening of trading on the NYSE. The Company will webcast a discussion of these results beginning at 8:30 a.m. ET. AWS will be initiating a research report on Cardinal Health in the coming days.
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Commenting on the acquisition, John H. Hammergren, Chairman and CEO of McKesson said:
"Our announced acquisition of CoverMyMeds supports McKesson's commitment to provide a comprehensive set of services and solutions that drive value across the healthcare continuum and secure patients' access to their prescribed drugs. McKesson continues to further enhance its diverse suite of pharmaceutical technology solutions to support the very best in patient care."
Terms of Acquisition
McKesson signed the agreement for acquiring CoverMyMeds on January 24, 2017. The all-cash deal is valued at $1.1 billion and McKesson expects the deal to result in an incremental tax savings of over $0.9 billion. CoverMyMeds will receive and additional payment of $300 million, based on its financial performance till end of fiscal year 2019.
The deal is expected to close in the first half of the fiscal year 2018 and is subject to regulatory approvals and closing conditions. Once the transaction is completed, CoverMyMeds will become a part of McKesson and function as a completely separate and independent business unit. The current management team will continue to helm the operations. Co-founders of CoverMyMeds, Matt Scantland, will continue to be the CEO and Sam Rajan will continue to head the sales for the business unit after the completion of the deal.
CoverMyMeds was founded in 2008 and uses technology for getting electronic prior authorization for certain prescription medications. Doctors, hospitals, and their staff use the CoverMyMeds to get drug approvals from health insurers for patients. Electronic prior authorization transforms the paper-based prior authorization workflow into an electronic process that minimizes prescription abandonment and administrative waste. The technology links nearly 48,000 pharmacies, more than 500 electronic health records (EHR) systems and payers, which is approximately 75% of the total prescription volume created in the US. CoverMyMeds handles over a 1.5 million Electronic Prior Authorization (EPA) requests every month.
Third quarter results and future outlook
Highlights of McKessons' third quarter report for the period ending on December 31, 2016:
- Total revenues for the quarter were $50.01 billion;
- Reported earnings of $633 million for the quarter;
- Earnings per share of $2.86.
For the outlook guidance for the fiscal year ending on March 31, 2017, McKesson expects GAAP earnings per diluted share to be between $9.80 - $10.30 and adjusted earnings to be in the range of $12.60 - $12.90 per diluted share.
McKesson also declared a dividend of $0.28 per share, which will be payable on April 03, 2017.
Brush with the Law
McKesson was in the news recently when the Company agreed to a settlement with the US Department of Justice and US Drug Enforcement Administration. The allegations against McKesson are that it supplied a large quantity of oxycodone and hydrocodone pills between 2008 and 2013 to various US pharmacies. The sale was in direct violation of the Controlled Substances Act (CSA). On January 17, 2017, McKesson agreed to a pay a penalty of $150 million to settle the charges. The terms of settlement mandate stated that McKesson suspend sales of these drugs from its distribution centres located in Colorado, Ohio, Michigan, and Florida for a few years. Earlier in 2008, McKesson had paid a penalty of $13.25 million on a similar charge of failing to report suspicious orders for prescription medication which it distributed to independent and small chain pharmacy customers.
At the close of trading session on January 26, 2017, McKesson's stock price tumbled 8.31% to end the day at $138.55. A total volume of 7.15 million shares were exchanged during the session, which was above the 3-month average volume of 2.74 million shares. The stock currently has a market cap of $31.31 billion. The Company's shares are trading at a PE ratio of 15.55 and have a dividend yield of 0.81%.
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