* Profit C$0.26/share vs C$0.23 year earlier
* Revenue up 2 pct at C$716.6 mln
* Same-store sales rise 2.6 pct
* Shares rise 2 pct on Toronto Stock Exchange
Jan 10 Jean Coutu Group Inc reported a
10 percent increase in quarterly profit on strong sales of its
Pro Doc generic drugs and the prospect of further gains, sending
shares of the Canadian pharmacy chain higher on Thursday.
Sales at Coutu's Pro Doc generic subsidiary rose 12 percent
to C$41.4 million ($41.9 million) for the fiscal third quarter
that ended Dec. 1, and its contribution to its parent's
operating income before amortization rose to C$16.1 million from
C$15.4 million a year ago.
Spending on Pro Doc products could rise further, the company
said, under a change in Quebec's prescription drug policies.
The province is abolishing the "15-year rule" under which
public prescription plans covered the cost of newly listed
branded drugs for a full 15 years, even after cheaper generic
versions were available.
Chief Executive Francois Coutu said on a conference call
that the change would affect 62 drugs starting next week. It may
prompt more customers to buy Pro Doc generics.
"It's likely going to lead to more generic penetration,"
said Canaccord Genuity analyst Derek Dley. "Now that's obviously
bad for pricing on the franchising side, but it's good for
margins for Jean Coutu."
Dley said the comments were likely boosting the stock
despite quarterly results that he said were in line with
Prescription sales growth at Jean Coutu and rivals such as
Shoppers Drug Mart Corp have been held back in recent
years by a crackdown by provincial governments on generic drug
prices and reimbursement rules. But Jean Coutu has said Pro Doc
may help boost margins on generics nonetheless.
Shoppers has a similar private-label generic drug unit, but
it has been hindered by a regulation in Ontario, its biggest
market, that forbids drugstores from selling their own
private-label drugs. The bulk of Jean Coutu's network of 405
pharmacies is in Quebec, which has no such rule.
Canada's top court is set to hear a challenge to the Ontario
law, brought by Shoppers Drug and closely held competitor Katz
Group, in May.
Increasing use of generic drugs has exacerbated the impact
of generic-drug reforms. Jean Coutu said 61.8 percent of its
third-quarter prescriptions were for generics, up from 57.2
percent a year earlier.
The company said sales at established stores, a key measure
for retailers, increased 2.6 percent in the quarter, and rose
2.0 percent for non-pharmacy, or "front-end," goods.
But same-store pharmacy sales, up 2.7 percent, lagged the
volume of prescriptions, which rose 4.8 percent on same-store
Net profit for the quarter rose to C$56.2 million, or 26
Canadian cents a share, from C$51.2 million, or 23 Canadian
cents, a year earlier.
Analysts, on average, had been expecting 26 Canadian cents a
share, according to Thomson Reuters I/B/E/S.
The Longueuil, Quebec-based company's revenue rose 2 percent
to C$716.6 million, in line with analysts' average estimate of
C$716.1 million. ()
Shares of Jean Coutu rose 2.0 percent to C$14.50 on the
Toronto Stock Exchange.