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Walgreens (WBA) Buys Remaining Stake in German Wholesale Business

Walgreens Boots Alliance, Inc. WBA recently inked an agreement with McKesson Corporation MCK to acquire the remaining 30% interest of their GEHE Pharma Handel (GEHE) and Alliance Healthcare Deutschland (AHD) joint venture (JV). The agreement is subject to standard regulatory approval by the relevant local authorities.

Following the deal's closure, Walgreens will become the 100% owner of the combined GEHE and Alliance Healthcare businesses in Germany. The financial terms of the deal were kept under wraps.

The recent investment is likely to fortify Walgreens’ International Pharmaceutical business.

More on the News

In November 2020, Walgreens and McKesson entered into an agreement to build a joint venture combining their respective pharmaceutical wholesale businesses in Germany, AHD and GEHE. Under the terms of the agreement, Walgreens holds a 70% controlling equity interest in the JV and McKesson holds the remaining 30% interest.

The recent announcement of Walgreens acquiring the remaining interest in the joint venture came on the heels of McKesson’s announcement in July 2021 of the sale of certain European businesses and its decision to exit the European region completely to reinvest in strategic growth opportunities elsewhere.

Strategic Efforts

Per Walgreens’ management, the acquisition of full ownership interest allows Walgreens to further bolster its position as a leading pharmaceutical wholesaler in Germany. With the formation and development of the joint venture, Walgreens is optimistic about further boosting its innovative services to manufacturers and pharmacists in Germany.

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Zacks Investment Research

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Going by the November 2020 agreement, in the face of future challenges in the healthcare sector, the new company is focused on boosting the pharmacist's position as a healthcare professional, creating innovative added-value services and substantially improving digitalization and operational excellence.

Industry Prospects

Per a report by Grand View Research, the Germany pharmaceuticals market size was valued at $41.4 billion in 2019 and is expected to see a CAGR of 6.0% by 2027. Increasing patent applications focused on developing novel drug delivery systems, new drugs, and formulations are factors driving the market.

Considering the market opportunities, Walgreens’ recent acquisition is well thought-off.

Recent Developments

In October 2021, Walgreens announced the expansion of its Mental Health First Aid training for more than 27,000 Walgreens pharmacists, while Boots is introducing new services focused on helping to meet the growing need in communities across Europe and the U.K.

In September 2021, Walgreens, through its wholly-owned subsidiary, Walgreen Co., announced the acquisition of majority investment in Shields -- an industry leader in integrated, health system-owned specialty pharmacy care.

Price Performance

Shares of the company have gained 12.5% in a year compared with the industry’s rise of 25.5%.

Zacks Rank and Key Picks

Walgreens currently carries a Zacks Rank #4 (Sell).

A couple of better-ranked stocks from the broader medical space are Medpace Holdings, Inc. MEDP and Laboratory Corporation of America Holdings, or LabCorp LH.

Medpace reported third-quarter 2021 adjusted EPS of $1.29, surpassing the Zacks Consensus Estimate by 20.6%. MEDP’s revenues of $295.57 million beat the Zacks Consensus Estimate by 1.2%. Medpace currently carries a Zacks Rank #1 (Strong Buy).

Medpace has an estimated long-term growth rate of 16.4%. MEDP surpassed estimates in the trailing four quarters, the average surprise being 11.9%.

LabCorp reported third-quarter 2021 adjusted EPS of $6.82, which surpassed the Zacks Consensus Estimate by 42.9%. Revenues of $4.06 billion outpaced the Zacks Consensus Estimate by 13.4%. LabCorp currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

LabCorp has an estimated long-term growth rate of 10.6%. LH surpassed estimates in the trailing four quarters, the average surprise being 25.7%.

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Laboratory Corporation of America Holdings (LH) : Free Stock Analysis Report

McKesson Corporation (MCK) : Free Stock Analysis Report

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Medpace Holdings, Inc. (MEDP) : Free Stock Analysis Report

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