×

UPDATE 2-Drug distributor McKesson's profit misses estimates

(Adds analysts' comments, details, forecast)

July 27 (Reuters) - Drug wholesaler McKesson Corp reported a much lower-than-expected quarterly profit due to the slowing pace of branded drug price increases and intensifying competition in its independent pharmacy business.

The pharmaceutical supply chain, including pharmacy benefit managers and drug distributors, has come under pressure as scrutiny over soaring drug prices has increased.

Drug pricing has come into the spotlight in the past few years, with several drugmakers facing federal investigations, leading to a fall in the prices of generics and a slowdown in the pace of the increase in branded drug prices.

The company said its results were hurt by the lapping effect of increased price competition in its independent pharmacy business and weaker pharmaceutical manufacturer pricing trends.

McKesson, one of the largest U.S. distributors of pharmaceutical drugs, slashed its fiscal-year earnings forecast in October as it raised concerns about aggressive pricing tactics from competitors and moderating pace of branded drug price increases.

Leerink analyst David Larsen noted that the company's distribution business performance was a significant surprise given commentary around a stabilizing environment in independent pharmacy networks and improving sentiment around brand pricing.

Net income attributable to McKesson fell to $309 million, or $1.45 per share, in the first quarter ended June 30, from $542 million, or $2.38 per share, a year earlier.

Excluding items, the company earned $2.46 cents per share, well below analysts' average estimate of $2.83, according to Thomson Reuters I/B/E/S.

The company, however, raised its adjusted earnings forecast for fiscal 2018 to between $11.80 and $12.50 per share, up from $11.75 and $12.45.

While some will question the steepness of the ramp and the underlying drivers behind it, Evercore ISI analysts expect the reaction will be only modestly negative given the forecast update.

Revenue rose nearly 3 percent to $51.05 billion, missing analysts' average estimate of $51.23 billion.

McKesson's results come a day after its shareholders voted against its executive pay policy, and said its compensation committee would conduct a thorough review of the policy. (Reporting by Ankur Banerjee and Anuron Kumar Mitra in Bengaluru; Editing by Saumyadeb Chakrabarty, Amrutha Gayathri and Martina D'Couto)