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AmerisourceBergen Banks on Strategic Deals, Competition Rife

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On Dec 19, we issued an updated research report on AmerisourceBergen Corporation , one of the world’s largest pharmaceutical service companies. The company focuses on providing drug distribution and related services to reduce health care costs and improve patient outcome.
We are positive on the deals signed by AmerisourceBergen, which should boost its top line. The company entered into a strategic agreement with Walgreen Boots Alliance (WBA - Free Report) . The agreement includes a 10-year pharmaceutical distribution contract with Walgreens Boot Alliance, under which the company will distribute branded and generic pharmaceutical products to Walgreen Boots.

We believe that AmerisourceBergen will benefit from generics growth in the long run. The company is well-positioned to help products get to market efficiently.

AmerisourceBergen has been actively pursuing acquisitions to strengthen its core areas. The MWI Veterinary acquisition has diversified the company’s existing pharmaceutical distribution & services businesses into the highly lucrative animal health market.

 

 

On the flip side, cutthroat competition in the niche space is a concern. AmerisourceBergen operates in a highly competitive pharmaceutical distribution and related health care services market. The company’s primary competitors are national generic and regional distributors. The generic industry is witnessing consolidation of customers and manufacturers, globalization and increasing quality along with regulatory challenges. The company also faces competition from manufacturers, chain drugstores, specialty distributors and packaging and health care technology companies.

In the last six months, AmerisourceBergen has been trading below the industry in terms of price. Shares of the company have lost 2.7% compared with the industry’s rally of 2.4%.

Zacks Rank & Key Picks

AmerisourceBergen carries a Zacks Rank #3 (Hold).

A few better-ranked medical stocks are athenahealth, Inc. and Align Technology, Inc. (ALGN - Free Report) . Notably, athenahealth and Align Technology sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

athenahealth has a long-term expected earnings growth rate of 22.3%. The stock has rallied roughly 27.3% over a year.

Align Technology has a long-term expected earnings growth rate of 28.9%. The stock has gained 137.9% in a year.

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