AmerisourceBergen sees Memphis plant back on track by 2019; shares rise

(Reuters) - Drug distributor AmerisourceBergen Corp ABC.N posted a better-than-expected quarterly profit on Wednesday and said it expects its Memphis facility to be fully operational by fiscal 2019, sending its shares up 5 percent.

Operations at the troubled facility, which produced around half the compounded drugs the company supplied, is expected to resume in phases, starting this year.

The company has spent about $22 million since the beginning of the year to fix problems at the facility, Chief Financial Officer Tim Guttman said on a conference call, adding any income contribution this year is expected to be nominal.

The Memphis plant was acquired as part of a 2015 buy of PharMEDium Healthcare Holdings and has remained closed since December following inspections by the U.S. Food and Drug Administration.

Since the closure, revenue from AmerisourceBergen’s PharMEDium unit has been hit, but the drug distributor is confident of regaining customers it had lost, noting most clients had simply moved their business in-house.

“There’s just not another large sophisticated competitor out there,” CFO Guttman said.

AmerisourceBergen has repeatedly been rapped on the knuckles by regulators and state authorities who have cited violations and raised public health concerns relating to several facilities in its PharMEDium business.

But the company noted its other plants remain open and called a recent FDA warning concerning its Lake Forest, Illinois facility “procedural”.

Quarterly sales from the pharmaceutical distribution services unit, which houses PharMEDium, rose to $39.45 billion, beating estimates of $39.17 billion according to Thomson Reuters I/B/E/S.

The company reiterated its adjusted earnings per share forecast of between $6.45 to $6.65 for 2018, but said it expected earnings to be at the bottom end of that range.

“Amerisource delivered a messy but likely better than feared second quarter,” EvercoreISI analyst Ross Muken said, noting some investors feared a forecast cut as deep as 20 to 30 cents.

Excluding items, the company earned $1.94 per share. Analysts were expecting $1.82 per share.

Net income fell 30 percent to $287.5 million, hurt by a lower revenue from PharMEDium and high operating expenses.

Revenue rose 10.5 percent to $41.03 billion, beating estimates of $40.64 billion, helped by sales from stores bought as part of its acquisition of H.D. Smith.

Reporting by Tamara Mathias and Anuron Kumar Mitra in Bengaluru; Editing by Shailesh Kuber