Amazon (AMZN) launches digital pharmacy

• That launch has been expected for some time, although the exact timing was uncertain. Well, that time has arrived, as Amazon's pharmacy services are now available in 45 states, with the other five states expected to be added in the future.
• This expansion puts the e-commerce company into more direct competition with pharmacy giants, such as CVS and Walgreens Boots.

 

 

(Bloomberg)—Amazon.com Inc. unveiled its biggest push into selling prescription drugs with the launch of a digital pharmacy and discounts for paying U.S. Prime members that sent shock waves through shares of drugstore chains and distributors.

The e-commerce giant on Tuesday unveiled Amazon Pharmacy, a section of its retail website and mobile application that lets people order medication. Shoppers can pay using their health insurance. Prime members who don’t use their insurance are eligible for discounts on generic and brand-name drugs on Amazon’s site or at about 50,000 participating pharmacies.

Amazon’s new offering comes more than two years after its $753 million acquisition of PillPack, an online pharmacy known for organizing prescriptions into packets. This expansion puts the Seattle-based e-commerce company into more direct competition with pharmacy giants CVS Health Corp. and Walgreens Boots Alliance Inc., the two largest chains in the U.S.

The move also helps Amazon compete with Walmart Inc. and other big-box stores that already sell prescription drugs.

Analysts have long expected Amazon to dive deeper into health care in a bet the company can bring its digital real estate and logistical prowess to bear on a roughly $4 trillion industry in the U.S. with a reputation for inefficiency. The company rattled drug retailers with its PillPack acquisition, but Amazon has been slow to integrate the online pharmacy startup into its offerings.

The announcement Tuesday marks the first time that shoppers can order prescription drugs directly on Amazon. Previously, they were redirected to PillPack’s website. An integrated pharmacy removes one of the few gaps in Amazon’s offerings compared with major big box and grocery rivals, some of whom have long filled shoppers’ prescriptions in the same stores where they sold flat-screen televisions or cans of soup.

The discounts are a clear play for people who pay for their medications with cash, whether they are uninsured or are looking to save money. Strong demand for transparency and better deals have helped fuel the rise of discount card programs like GoodRx Holdings Inc. Amazon will display both the price when using insurance and the price without. Infusing transparency into a system that has been frustratingly opaque for consumers could alter the supply chain.

Amazon’s entry into a market doesn’t guarantee its dominance. Drugstores have long insisted that patients prefer to talk to their pharmacist at the counter, an experience Amazon will try to recreate digitally.

Amazon Chief Executive Officer Jeff Bezos has positioned Prime, Amazon’s paid membership program, at the center of the company’s efforts to create loyal customers. What was originally an unlimited shipping program has grown in recent years to include video streaming, games and digital storage, and discounts at Amazon-owned Whole Foods Market.

This week's biggest % winners & losers : Dec 16 - 20,19 (wk 51)

The following are this week's top percentage gainers and losers, categorized by sectors (over $300 mln market cap and 100K average daily volume).

This week's top % gainers

• Healthcare: IMGN (5.33 +48.88%), KZR (3.49 +29.26%), PRTA (15.85 +23.35%), CTMX (8.79 +22.77%), TRHC (46.56 +21.88%), INO (3.3 +21.32%)
• Consumer Discretionary: LOVE (13.37 +24.49%)
• Information Technology: GSKY (9.12 +26.67%)
• Energy: REGI (24.95 +40.17%), MDR (1.11 +34.48%), NE (1.2 +28.67%), HPR (1.73 +21.83%), SDRL (1.69 +21.58%), NBR (2.98 +20.65%)
• Consumer Staples: RAD (14.03 +85.34%), CAG (35.07 +23.57%)

This week's top % losers

• Healthcare: AKRX (1.71 -51.63%), TRXC (1.43 -25.52%), GRTS (7.75 -16.13%), ABEO (3.12 -14.66%), CLVS (10.98 -14.62%), ACB (2.25 -14.45%), RUBY (11.32 -13.65%), CYH (2.95 -13.24%), DRNA (23.28 -13.1%), UBX (7.27 -13.04%), AMRN (20.99 -12.98%)
• Industrials: APOG (31.8 -19.37%), TPC (13.13 -16.53%), BOOM (45 -14.63%)
• Consumer Discretionary: GRPN (2.23 -14.56%)
• Information Technology: CAMP (9.67 -14.2%), GTT (10.11 -13.37%)
• Financials: JT (1.44 -13.25%)

-=Rite Aid (RAD) reported earnings on Thur 19 Dec 19 (b/o)

• Dec.18: #1, 5, 6, 8, 10, 22, 44, 52, 58, 75, 95; vol. 3.1M

Rite Aid beats by $0.39, reports revs in-line; raises FY20 EPS guidance; reaffirms FY20 revenue guidance

Reports Q3 (Nov) earnings of $0.54 per share, excluding non-recurring items, $0.39 better than the S&P Capital IQ Consensus of $0.15; revenues rose 0.2% year/year to $5.46 bln vs the $5.42 bln S&P Capital IQ Consensus.

Retail Pharmacy Segment same store sales from continuing operations for the third quarter decreased 0.1 percent over the prior year period, consisting of a 0.1 percent increase in pharmacy sales and a 0.5 percent decrease in front-end sales. Front-end same store sales, excluding cigarettes and tobacco products, increased 1.0 percent. Pharmacy sales were negatively impacted by approximately 331 basis points as a result of new generic introductions.

Co issues raised guidance for FY20, sees EPS of $0.13-0.55 from $0.00-0.55, excluding non-recurring items, vs. $0.18 S&P Capital IQ Consensus; reaffirms FY20 revs of $21.5-21.9 bln vs. $21.64 bln S&P Capital IQ Consensus. Same store sales expected to range from an increase of 0.0 percent to an increase of 1.0 percent over fiscal 2019.

Earnings this week : Dec 16 - 20, 19 (wk 51)

Notable earnings reports:

• FedEx (NYSE:FDX), Navistar (NYSE:NAV) and Steelcase (NYSE:SCS) on December 17; 
• Micron (NASDAQ:MU) and General Mills (NYSE:GIS) on December 18; 
• Nike (NYSE:NKE), Carnival (NYSE:CCL), ConAgra (NYSE:CAG), Rite Aid (NYSE:RAD) and Darden Restaurants (NYSE:DRI) on December 19; 
• Winnebago (NYSE:WGO), BlackBerry (NYSE:BB) and CarMax (NYSE:KMX) on December 20.

=RAD : 1 to 20 reverse stock split

• Reverse stock split on a one to 20 basis. 
• This will take the total amount of outstanding shares of RAD stock down from 1.08 billion to 54 million. 
• The change goes into effect on April 22, 2019.

=Rite Aid (RAD) to be acquired by Albertsons Companies

The agreement calls for Albertsons to acquire Rite Aid in a cash-and-stock deal, with Rite Aid shareholders owning between 28 percent and 29.6 percent of the combined company.  The grocery company from Idaho will buy the part of Rite Aid that is not being sold to Walgreens.

• Combined company will trade on the NYSE 
• The combined company would have about 4,900 locations in 38 states and the District of Columbia and combined revenue of $83 billion on a pro forma basis.
• If the deal closes as proposed, it would essentially split the Rite Aid chain. Rite Aid, which is based in Camp Hill, Pa., agreed last year to sell 1,932 stores and three distribution centers to Walgreens for $4.38 billion after trying to complete an even bigger deal.
• The deal comes at a time when retailers and pharmacy operators are looking for solutions in an increasingly digital world.
• The latest transaction would boost the footprint of Albertsons, which operates more than 2,300 stores in 35 states and the District of Columbia under Albertsons, Safeway and other brands.
• Albertsons, whose parent is owned by a consortium of investors led by Cerberus Capital Management, operates more than 1,700 in-store pharmacies as part of its business.

Rite Aid and Albertsons Companies to merge; combined company will trade on the NYSE 

Privately held Albertsons Companies will merge with publicly traded Rite Aid.

• In exchange for every 10 shares of Rite Aid common stock, Rite Aid shareholders will have the right to elect to receive either (i) one share of Albertsons Companies common stock plus ~$1.83 in cash or (ii) 1.079 shares of Albertsons Companies stock. Depending upon the results of cash elections, upon closing of the merger, shareholders of Rite Aid will own a 28.0 percent to 29.6 percent stake in the combined company, and current Albertsons Companies shareholders will own a 70.4 percent to 72.0 percent stake in the combined company on a fully diluted basis. Immediately following completion of the merger and assuming that all Rite Aid shareholders elect to receive shares plus cash, Albertsons Companies will have ~392.9 million shares outstanding on a pro forma and fully diluted basis.
• Following the close of the transaction and the share exchange, Albertsons Companies' shares are expected to trade on the New York Stock Exchange. Albertsons Companies is backed by an investment consortium led by Cerberus Capital Management, which also includes Kimco Realty (KIM), Klaff Realty LP, Lubert-Adler Partners LP, and Schottenstein Stores Corporation.
• Current Rite Aid Chairman and Chief Executive Officer John Standley will become Chief Executive Officer of the combined company, with current Albertsons Companies Chairman and Chief Executive Officer Bob Miller serving as Chairman. The combined company is expected to be comprised of leadership from both companies and will be dual headquartered in Boise, Idaho, and Camp Hill, Pennsylvania. The name of the combined company will be determined by transaction close.
• The integrated company will operate ~4,900 locations, 4,350 pharmacy counters, and 320 clinics across 38 states and Washington, D.C., serving 40+ million customers per week. Most Albertsons Companies pharmacies will be rebranded as Rite Aid, and the company will continue to operate Rite Aid stand-alone pharmacies.
• On a pro forma basis, the combined company is expected to generate year one revenues of ~$83 billion (excluding potential revenue opportunities) and year one Adjusted Pro Forma EBITDA of ~$3.7 billion (including run rate cost synergies). The combined company's pro forma net leverage ratio is expected to be 3.8x at transaction close (including run rate cost synergies). The combined company expects to deliver annual run-rate cost synergies of $375 million in ~three years and access potential annual revenue opportunities of $3.6 billion. Over 60 percent of the cost synergies are expected to be realized within the first two years post-close. Identified revenue opportunities primarily include partnering with payors, including Rite Aid's PBM, EnvisionRx, through preferred networks to drive additional high-value customers, connecting Rite Aid's reliable pharmacy customer base to Albertsons Companies through loyalty programs and targeted marketing, leveraging Albertsons Companies' grocery capabilities and Rite Aid's pharmacy expertise to enhance the customer offering, and driving traffic through the omni-channel experience. Cost synergies will be achieved primarily through procurement savings, leveraging efficiencies realized by a combined supply chain, combined distribution and fulfillment channels, and leveraging manufacturing capabilities.

=Walgreens (WBA) reported earnings on Thur 29 June 2017 (b/o)

Rite Aid (RAD) and Walgreens (WBA) terminate merger, sign new agreement whereby Walgreens will acquire 2,186 stores, related distribution assets and inventory from Rite Aid for an all-cash purchase price of $5.175 bln; also reported earnings

Rite Aid (RAD) and Walgreens (WBA) terminate merger, sign new agreement whereby Walgreens will acquire 2,186 stores, related distribution assets and inventory from Rite Aid for an all-cash purchase price of $5.175 bln :

Rite Aid Corporation (RAD) announced that it has entered into an asset purchase agreement with Walgreens Boots Alliance, Inc. (WBA), whereby WBA will acquire 2,186 stores, related distribution assets and inventory from Rite Aid for an all-cash purchase price of $5.175 billion, on a cash-free, debt-free basis. Under the terms of the agreement, Rite Aid has the option to purchase generic drugs that are sourced through an affiliate of WBA at cost, substantially equivalent to Walgreens for a period of 10 years.

• The company also announced the immediate termination of the merger agreement, which was announced on October 27, 2015 and amended on January 29, 2017, under which WBA would have acquired all outstanding shares of Rite Aid. The decision to terminate the merger agreement follows feedback received from the Federal Trade Commission that led the company to believe that the parties would not have obtained FTC clearance to consummate the merger.
• In connection with the termination, WBA has agreed to pay Rite Aid a termination fee in the amount of $325 million in cash. In light of the termination of the merger agreement, the divestiture agreement with Fred's, Inc. (FRED) was also terminated, effective today.
• Rite Aid expects to use a substantial majority of the net proceeds from the transaction to repay existing indebtedness, significantly reducing Rite Aid's leverage levels. Rite Aid also expects that the federal tax gain on the sale of the assets will be largely offset by its net operating loss carryforwards, resulting in a minimal cash tax payment on this transaction.

Walgreens Boot Alliance beats by $0.03, beats on revs; guides FY17 EPS above consensus; enters into new $5.18 bln deal for 2,186 Rite Aid (RAD) stores, terminating old deal with Fred's (FRED) (WBA) :

• Reports Q3 (May) earnings of $1.33 per share, excluding non-recurring items, $0.03 better than the Capital IQ Consensus of $1.30; revenues rose 2.1% year/year to $30.12 bln vs the $29.72 bln Capital IQ Consensus. 
  • Retail Pharmacy USA had third quarter sales of $22.5 billion, an increase of 6.3% over the year-ago quarter. Sales in comparable stores increased 3.7% compared with the same quarter a year ago. Pharmacy sales, which accounted for 69.9% of the division's sales in the quarter, increased 10.3% compared with the year-ago quarter. This was primarily due to higher prescription volumes including mail and central specialty following the formation of AllianceRx Walgreens Prime. Comparable pharmacy sales increased 5.8%, primarily due to higher volume. Retail sales decreased 1.8% in the third quarter compared with the year-ago period, which includes the impact of the previously announced closure of certain e-commerce operations. Comparable retail sales were down 0.4% in the quarter, with declines in the consumables and general merchandise category and in the personal care category partially offset by growth in the health and wellness category and in the beauty category.
  • Retail Pharmacy International had third quarter sales of $2.8 billion, a decrease of 10.3% from the year-ago quarter mainly due to currency translation. Sales decreased 0.2% on a constant currency basis. On a constant currency basis, comparable store sales increased 0.2% compared with the year-ago quarter. Comparable pharmacy sales decreased 0.1% on a constant currency basis, primarily due to the negative impact of pharmacy funding in the UK. Comparable retail sales increased 0.4% on a constant currency basis, reflecting growth in the UK.
• Co issues upside guidance for FY17, sees EPS of $4.98-5.08 from $4.90-5.08, excluding non-recurring items, vs. $4.96 Capital IQ Consensus Estimate. 
• Walgreens Boots Alliance also announced today a new definitive agreement with Rite Aid (RAD) under which Walgreens Boots Alliance will purchase 2,186 stores, three distribution centers and related inventory from Rite Aid. The consideration for the transaction will be $5.175 billion in cash, the assumption by Walgreens Boots Alliance of the related real estate leases and the grant of an option to Rite Aid, exercisable through May 2019. This new agreement replaces the previous merger agreement with Rite Aid, announced in October 2015 and amended in January 2017, and the agreement to divest certain Rite Aid stores to Fred's (FRED) announced in December 2016. Both of these agreements have been terminated.
• On 28 June 2017 the company authorized a share repurchase program for up to $5 billion of the company's shares prior to the program's expiration on 31 August 2018.
• "Our results this quarter continued to meet our expectations as strategic partnerships brought more patients to our U.S. pharmacies. This led to our highest reported quarterly retail prescription market share in the U.S." 

=Rite Aid (RAD) reported earnings on Thur 29 June 2017 (b/o)

• Rite Aid (RAD) and Walgreens (WBA) terminate merger, sign new agreement whereby Walgreens will acquire 2,186 stores, related distribution assets and inventory from Rite Aid for an all-cash purchase price of $5.175 bln; also reported earnings.
• Among the antitrust concerns was that the resulting drugstore giant—which would have challenged CVS Health—would have been able to bully pharmacy-benefit managers steering corporate and government drug plans.

Rite Aid (RAD) and Walgreens (WBA) terminate merger, sign new agreement whereby Walgreens will acquire 2,186 stores, related distribution assets and inventory from Rite Aid for an all-cash purchase price of $5.175 bln :

Rite Aid Corporation (RAD) announced that it has entered into an asset purchase agreement with Walgreens Boots Alliance, Inc. (WBA), whereby WBA will acquire 2,186 stores, related distribution assets and inventory from Rite Aid for an all-cash purchase price of $5.175 billion, on a cash-free, debt-free basis. Under the terms of the agreement, Rite Aid has the option to purchase generic drugs that are sourced through an affiliate of WBA at cost, substantially equivalent to Walgreens for a period of 10 years.

• The company also announced the immediate termination of the merger agreement, which was announced on October 27, 2015 and amended on January 29, 2017, under which WBA would have acquired all outstanding shares of Rite Aid. The decision to terminate the merger agreement follows feedback received from the Federal Trade Commission that led the company to believe that the parties would not have obtained FTC clearance to consummate the merger.
• In connection with the termination, WBA has agreed to pay Rite Aid a termination fee in the amount of $325 million in cash. In light of the termination of the merger agreement, the divestiture agreement with Fred's, Inc. (FRED) was also terminated, effective today.
• Rite Aid expects to use a substantial majority of the net proceeds from the transaction to repay existing indebtedness, significantly reducing Rite Aid's leverage levels. Rite Aid also expects that the federal tax gain on the sale of the assets will be largely offset by its net operating loss carryforwards, resulting in a minimal cash tax payment on this transaction.

Rite Aid misses by $0.04, misses on revs; enters new agreement with Walgreens (WBA) after merger agreement terminated:

• Reports Q1 (May) loss of $0.05 per share, excluding non-recurring items, $0.04 worse than the two analyst estimate of ($0.01); revenues fell 4.9% year/year to $7.78 bln vs the $8.29 bln Capital IQ Consensus.
• Same store sales for the quarter decreased 3.9 percent over the prior year, consisting of a 5.0 percent decrease in pharmacy sales and a 1.5 percent decrease in front-end sales. Pharmacy sales included an approximate 222 basis point negative impact from new generic introductions. The number of prescriptions filled in same stores, adjusted to 30-day equivalents, decreased 1.1 percent over the prior year period due in part, to exclusion from certain pharmacy networks that Rite Aid participated in the prior year. Prescription sales accounted for 67.9 percent of total drugstore sales, and third party prescription revenue was 98.3 percent of pharmacy sales.
• Adjusted EBITDA was $192.6 million or 2.5 percent of revenues for the first quarter compared to $286.0 million or 3.5 percent of revenues for the same period last year. The decline in Adjusted EBITDA is due to a decrease of $100.9 million in the Retail Pharmacy Segment, resulting from lower pharmacy gross profit, which decreased due to lower reimbursement rates, which the company was unable to fully offset with generic purchasing efficiencies and script count, partially offset by good cost control. Adjusted EBITDA in the Pharmacy Services Segment increased $7.4 million compared to the prior year as a result of higher gross profit.
• Walgreens (WBA)/Freds (FRED) transaction:
  • Rite Aid announced that it has entered into an asset purchase agreement with Walgreens Boots Alliance, Inc. (WBA), whereby WBA will acquire 2,186 stores, related distribution assets and inventory from Rite Aid for an all-cash purchase price of $5.175 billion, on a cash-free, debt-free basis. Under the terms of the agreement, Rite Aid has the option to purchase generic drugs that are sourced through an affiliate of WBA at cost, substantially equivalent to Walgreens for a period of 10 years.
  • The company also announced the immediate termination of the merger agreement, which was announced on October 27, 2015 and amended on January 29, 2017, under which WBA would have acquired all outstanding shares of Rite Aid. The decision to terminate the merger agreement follows feedback received from the Federal Trade Commission that led the company to believe that the parties would not have obtained FTC clearance to consummate the merger.
  • In connection with the termination, WBA has agreed to pay Rite Aid a termination fee in the amount of $325 million in cash. In light of the termination of the merger agreement, the divestiture agreement with Fred's, Inc. (FRED) was also terminated, effective today.

=Rite Aid (RAD) & Walgreens (WBA) amend merger agreement

Rite Aid & Walgreens (WBA) amend and extend definitive merger agreement; parties have agreed to reduce the price for each share of Rite Aid common stock to be paid by Walgreens Boots Alliance to a maximum of $7.00/share and a minimum of $6.50/share (RAD) :

Under the terms of the amendment, the parties have agreed to reduce the price for each share of Rite Aid common stock to be paid by Walgreens Boots Alliance. The revised price will be a maximum of $7.00 per share and a minimum of $6.50 per share. In addition, Walgreens Boots Alliance will be required to divest up to 1,200 Rite Aid stores and certain additional related assets if required to obtain regulatory approval. The exact price per share will be determined based on the number of required store divestitures, with the price set at $7.00 per share if 1,000 stores or fewer are required for divestiture and at $6.50 per share if 1,200 stores are required for divestiture. If the required divestitures fall between 1,000 and 1,200 stores, then there will be a pro-rata adjustment of the price per share. Walgreens Boots Alliance agreement to divest up to 1,200 Rite Aid stores represents an increase of up to 200 stores over the 1,000 stores that Walgreens Boots Alliance had agreed to divest under the terms of the original agreement.

• Additionally, Walgreens Boots Alliance and Rite Aid agreed to extend the end date under the previously announced agreement from 27 January 2017 to 31 July 2017 in order to allow the parties additional time to obtain regulatory approval.

=Walgreens Boot Alliance (WBA) reported earnings on Thur 5 Jan 2017 (b/o)

Walgreens Boot Alliance beats by $0.01, misses on revs; guides FY17 EPS in-line; in active talks with FTC regarding Rite Aid (RAD) acquisition :

• Reports Q1 (Nov) earnings of $1.10 per share, excluding non-recurring items, $0.01 better than the Capital IQ Consensus of $1.09; revenues fell 1.8% year/year to $28.5 bln vs the $29.27 bln Capital IQ Consensus. 
  • Retail Pharmacy USA: Sales in comparable stores increased 1.1% compared with the same quarter a year ago. Pharmacy sales, which accounted for 69.1% of the division's sales in the quarter, increased 2.5% compared with the year-ago quarter. Comparable pharmacy sales increased 2.0%.
  • Pharmacy Int'l: On a constant currency basis, comparable store sales decreased 0.1% compared with the year-ago quarter. Comparable pharmacy sales decreased 0.5 % on a constant currency basis, primarily due to a reduction in government pharmacy funding in the UK, which was partially offset by growth in other international markets. Comparable retail sales increased 0.2% on a constant currency basis, reflecting growth in all countries except Chile and Mexico.
• Co issues in-line guidance for FY17, raises EPS to $4.90-5.20 from $4.85-5.20, excluding non-recurring items, vs. $5.00 Capital IQ Consensus Estimate. 

Rite Aid Acquisition

• Walgreens Boots Alliance is actively engaged in discussions with the Federal Trade Commission (FTC) regarding its pending acquisition of Rite Aid Corporation, which was announced 27 October 2015. The company is working toward a close of the acquisition in the early part of this calendar year.
• As announced 20 December 2016, Walgreens Boots Alliance and Rite Aid have entered into an agreement to sell 865 Rite Aid stores and certain assets related to store operations to Fred's, Inc. for $950 million in an all-cash transaction. The divestiture transaction is subject to FTC approval, the approval and completion of the pending acquisition of Rite Aid by Walgreens Boots Alliance and other customary closing conditions. Taking into account the expected divestitures, Walgreens Boots Alliance continues to expect that the acquisition will be accretive to its adjusted diluted net earnings per share in the first full year after closing of the transaction. The company also continues to expect that it will realize synergies from the acquisition in excess of $1 billion, to be fully realized within three to four years of closing of the merger.