Tuesday, January 14, 2014

Drug Channels News Roundup: January 2014

The weather may be chilly, but our monthly news update will keep you purring. Here are four questions to ponder as you digest this month’s noteworthy news highlights:
  • What’s McKesson’s next move, post-Celesio bid failure?
  • What does Cardinal Health’s CEO think about Obamacare’s effects?
  • Is Walgreen’s CEO overpaid?
  • How much did Walgreens pay for Kerr Drug?
Plus, the Onion reports on an exciting new antidepressant from Eli Lilly. Is it an antidote to Facebook?

P.S. If you can’t wait for our monthly news updates, then follow @Drug Channels!

McKesson Fails to Gain Stakeholder Support for Celesio Bid
The McKesson-Celesio deal is dead (for now). In case you missed the drama, hedge fund Elliott Advisors successfully forced McKesson to raise its bid to €23.50 per share. Alas, McKesson unexpectedly announced yesterday that they did not reach the 75% completion threshold for Celesio’s outstanding shares and convertible bonds. Since the deal was supported by Franz Haniel (which owns 50.01%) and Elliott, McKesson will probably try again, although the Business Week article suggests that "German rules restrict the renewal of a failed tender offer." McKesson probably seek a generic purchasing joint venture with one its customers. A Rite Aid-McKesson deal now seems more likely, as I suggested last month in Fortune magazine .

Why This $101 Billion Health Care Company Does Not Model Growth from Obamacare
Check out this great video interview with Cardinal Health Chairman and CEO George Barrett. He describes the CVS Caremark deal and provides a fascinating overview of the headwinds and tailwinds from the Affordable Care Act. This interview is definitely worth 4:19 of your time.

We should all be as fortunate as Walgreen's Wasson
Walgreens’ stock has been on a tear, up 57.2% in 2013 compared with a 31.8% rise in the S&P 500. Nonetheless, Crain’s Chicago Business published this hit piece last month on Walgreen Co. CEO Greg Wasson’s compensation. The paper writes that “...the drugstore chain has chosen to insulate him from certain costs resulting from his management and decision-making.” A true Chicago-style takedown. Of course, McKesson's John Hammergren could give Greg a lesson or two.

Walgreen Co, Form 10-Q For the Quarterly Period Ended November 30, 2013
Regular readers know that I’m a big fan of public company filings with the Securities and Exchange Commission. (C’mon, who isn’t?) Buried in Note 4 of Walgreens’ most recent quarterly 10-Q filing, I found this fascinating tidbit about the Kerr Drug acquisition: “In November 2013, the Company completed its acquisition of certain assets of Kerr Drug and its affiliates for $173 million, subject to adjustment in certain circumstances.” In 2012, Kerr Drug's retail drugstores and specialty pharmacy business had total sales of $381 million. Thus, Walgreens’ paid about 45% (=173/381) of revenues. Now you know.

New Antidepressant Makes Friends’ Problems Seem Worse
I prescribe two tablets before viewing your friend’s Facebook page.


  1. Today's Wall Street Journal explain "domination agreement" under German corporate law:

    "Under German corporate law, a majority shareholding isn't enough to control a company. A so-called domination agreement is needed to allow a buyer to integrate its purchase properly and take control of its cash flows. Shareholders who don't tender into a successful offer usually end up in a court process to determine a fair price. Holdout investors are paid a fixed dividend; courts often order the buyer to pay more than the original purchase price."

    The WSJ notes: "McKesson only narrowly missed out on hitting its 75% threshold; it could yet return to try again"

    See Buyers Could Get Wurst Deal Under German Takeover Rules (painful headline)

  2. january round up?? you do realize there is still 15 days to go in january!!