PHARMACY

WAG Q2 results headed in right direction as chain prepares three new flagship openings in DC, NY and Boston

BY Michael Johnsen

DEERFIELD, Ill. — Even as Walgreens expands its operation globally through strategic partnerships with both Alliance Boots and now AmerisourceBergen, the pharmacy operator continues to create some retail pop in the U.S. market. For example, Walgreens has set the stage for the opening of three more flagship stores. A Walgreens flagship opens in downtown Washington D.C. later this week. Next, Walgreens will open its third New York Walgreens flagship in the Empire State Building later in March and next month New England will see its first Walgreens flagship in Boston. 

"These locations are raising the Walgreens brand in important markets as we continue to drive transformation of our stores across the entire network," noted Walgreens president and CEO Greg Wasson during a second-quarter conference call with analysts Tuesday morning. 

And while Walgreens’ omnichannel pharmacy brand is becoming better recognized as the go-to shopping destination for health and beauty, there are a number of tailwinds helping to bolster Walgreens performance as well. For example, Walgreens continues to see a growing influx of returning Express Scripts patients, Wasson told analysts. Also, Walgreens is now a preferred drug store in four Medicare Part D plans "giving these members a financial benefit when they choose Walgreens over our comeptitors," Wasson said. Other tailwinds include a reinvigorated private label offering and the cycling of Walgreens’ promotional strategy from last year, which included more print placements versus digital media. 

And Walgreens Balance Rewards program continues to excel, as evidenced by the 60 million consumers who have signed on since its inception six months ago. 

Walgreens tabulated sales of $18.7 billion for the second quarter ended Feb. 28, which were flat compared to the prior-year quarter. First half sales decreased 2.3% to $35.96 billion.

Walgreens reported that its joint synergy program with strategic partner, Alliance Boots, continues to be on track to deliver its first-year target of $100-$150 million in combined synergies. “Alliance Boots contribution to our results was in line with our expectations this quarter, and we anticipate that to continue in the second half of our fiscal year,” Wasson said.

The two companies also announced earlier today a strategic, long-term relationship with AmerisourceBergen, one of North America’s largest pharmaceutical services companies. Under the agreement, Walgreens will expand its existing relationship with AmerisourceBergen into a 10-year comprehensive primary distribution agreement for branded and generic pharmaceutical products. In addition, Walgreens and Alliance Boots will collaborate with AmerisourceBergen on global supply chain opportunities and will have rights to acquire a minority equity position in AmerisourceBergen.

Front-end comparable store sales were down 2.6% in the second quarter. Customer traffic in comparable stores decreased 5.2% and basket size increased 2.8%, while total sales in comparable stores decreased 2.6%. All second-quarter comparable store sales and prescription figures include 29 days in February 2012.

Prescription sales, which accounted for 61.1% of sales in the quarter, were flat, while prescription sales in comparable stores decreased 2.7%. The company filled 208 million prescriptions in the quarter, an increase of 6% over last year’s second quarter. Prescriptions filled in comparable stores increased 4.3% in the quarter. 

As of Feb. 28, Walgreens increased its retail prescription market share 50 basis points from the end of its fiscal 2013 first quarter on Nov. 30, 2012, to 19.2%, the company reported. 

Flu shots administered at pharmacies and clinics this flu season were up 27.3% through Feb. 28, totaling 7 million compared with 5.5 million a year ago.

 

 

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PHARMACY

Walgreens, Alliance Boots announce blockbuster partnership with AmerisourceBergen

BY Michael Johnsen

DEERFIELD, Ill. — Walgreens will no longer source branded prescription medicines directly from suppliers beginning in September, the Chicago-based retailer announced Tuesday as part of a significant partnership between Walgreens, Alliance Boots and AmerisourceBergen that includes Walgreens and Alliance Boots potentially taking a 7% stake in the Pennsylvania wholesaler. Walgreens will begin sourcing generic medicines from AmerisourceBergen beginning in the calendar year 2014.  

The relationship enables Walgreens, Alliance Boots and AmerisourceBergen to benefit from greater scale and global opportunities and work together on programs to improve service levels and efficiencies, while reducing costs and increasing patient access to pharmaceuticals.  

“Today’s announcement marks another step forward in establishing an unprecedented and efficient global pharmacy-led, health and wellbeing network, and achieving our vision of becoming the first choice in health and daily living for everyone in America and beyond,” stated Gregory Wasson, president and CEO Walgreens. “We are excited to be expanding our existing relationship with AmerisourceBergen to a 10-year strategic long-term contract, representing another transformational step in the pharmaceutical supply chain. We believe this relationship will create a wide range of opportunities and innovations in the rapidly changing U.S. and global health care environment that we expect will benefit all of our stakeholders.”

“As we all recognize the imperatives of health reform not only here in the U.S. but also globally, we have entered into a unique opportunity to unlock value in the pharmaceutical supply chain by collaborating to leverage all of our proven strengths," commented Steven Collis, AmerisourceBergen president and CEO. "These agreements not only expand our U.S. business, but also provide opportunities to meaningfully grow our specialty and manufacturer services businesses internationally.” 

According to the three companies, the partnership will help address global healthcare challenges by making it easier for manufacturers to bring products to market; by increasing accessibility to the benefits of global sourcing and best practices for community pharmacies; and by providing patients with better access to health care. The collaboration will also generate opportunities to attract partners in new markets and prospects in existing markets around the globe.

As part of the agreement, Walgreens and AmerisourceBergen have agreed to expand their existing relationship beyond the specialty items currently distributed by AmerisourceBergen to a 10-year comprehensive primary distribution agreement for branded and generic pharmaceutical products. The agreement will result in the distribution by AmerisourceBergen of the branded pharmaceutical products that Walgreens has historically sourced from distributors and suppliers, effective Sept. 1. Over time, beginning in calendar year 2014, this increasingly will include generic pharmaceutical products that Walgreens historically has self-distributed. 

In turn, AmerisourceBergen will access generics and related pharmaceutical products through the recently established Walgreens and Alliance Boots joint venture, Walgreens Boots Alliance Development. Walgreens will benefit from AmerisourceBergen’s expertise in its specialty and manufacturer services businesses, as well as its wholesale distribution to health systems across the United States. Alliance Boots strong international expertise in pharmaceutical wholesaling and distribution also opens avenues for collaboration on new projects and services.

To align interests and strengthen the long-term relationship, Walgreens and Alliance Boots together have been granted the right to purchase a minority equity position in AmerisourceBergen, beginning with the right, but not the obligation, to purchase up to 7% of the fully diluted equity of AmerisourceBergen in the open market, with associated board representation as described below. In addition, AmerisourceBergen has granted to Walgreens and Alliance Boots equity warrants exercisable for 16% in the aggregate of the fully diluted equity of AmerisourceBergen. The first tranche of warrants, representing 8% of the fully diluted equity of AmerisourceBergen, has a strike price of $51.50 and will be exercisable for a six-month period beginning in March 2016. The second tranche of warrants, also representing 8% of the fully diluted equity of AmerisourceBergen, has a strike price of $52.50 and will be exercisable for a six-month period beginning in March 2017. The warrants will be allocated equally among Walgreens and Alliance Boots. Walgreens and Alliance Boots have agreed to customary transfer restrictions on their equity stake, and have also agreed not to acquire additional equity of AmerisourceBergen under the terms of a standstill agreement, subject to the terms and conditions of such agreement, including certain pre-emption rights and permitted exceptions. 

A Walgreens executive will be appointed to AmerisourceBergen’s board upon Walgreens and Alliance Boots together acquiring a 5% equity stake, and an Alliance Boots executive will be appointed upon exercise in full of the first warrants. These new board seats will add to AmerisourceBergen’s current nine-member board. 

The equity investment by Walgreens and Alliance Boots is subject to the receipt of customary regulatory approvals.

Walgreens and Alliance Boots announced a strategic partnership in June 2012 to create the first global, pharmacy-led health and wellbeing enterprise. As part of the partnership, Walgreens has invested in a 45% equity ownership stake in Alliance Boots and has the option to proceed to a full combination by acquiring the remaining 55% of Alliance Boots in approximately two years’ time.


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kpereau says:
Mar-19-2013 01:38 pm

Why am I not surprised. IMO, Walgreens will lead the consumerization of healthcare one step at a time.

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PHARMACY

GSK donates $500,000 to Philadelphia Children’s Hospital Cancer Center

BY Alaric DeArment

PHILADELPHIA — Drug maker GlaxoSmithKline’s philanthropic arm has donated $500,000 to the Children’s Hospital of Philadelphia as part of a fund that provides assistance to families for travel and living expenses they may incur while their children are enrolled in experimental or novel treatments offered at the hospital’s Cancer Center.

The GSK Foundation made the donation as part of its Hope for Families Fund, a permanent endowment it established with a $1 million gift in 2008 that helps children and young adults with relapsed cancers gain access to the new therapies offered at the hospital, helping financially eligible families cover airfare and ground transportation, lodging and meals. Many families using the fund are low-income or one-income families, who have come from 20 U.S. states and six foreign countries.

"Financial burdens such as missed time from work, airfare and other expenses can really take a big toll on a family dealing with cancer," GSK Oncology president Paolo Paoletti said. "Through the GSK Hope for Families Fund, our goal is to alleviate some of the financial burden so that families can focus on helping their child get well."

 

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