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Bergen to Buy Specialty Drug Company

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TIMES STAFF WRITER

Bergen Brunswig Corp., underscoring plans to expand its fast-growing specialty drug business, said Monday that it will pay $300 million for a Pennsylvania company that specializes in immune system medications.

The Orange-based drug wholesaler said it will pay about $150 million in cash and $150 million in stock to buy Stadtlander Drug Co. of Pittsburgh from its parent, Counsel Corp. of Toronto.

Stadtlander provides special immune system medications for patients with HIV and others who have received organ transplants. The company also provides pharmaceuticals for about 250,000 inmates in private prisons.

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If completed, the deal will give Bergen a chance to expand significantly into a market that is more profitable than its basic wholesaling business, said Don Spindel, an analyst at A. G. Edwards in St. Louis.

That strategy is also being pursued by giant drug wholesalers such as Cardinal Health Inc. and McKesson Corp. after federal regulators blocked plans for Bergen and Cardinal, and McKesson and AmeriSource Health Corp., to combine.

“They’ve all been making acquisitions that would bring them closer to the drug manufacturer or the customer,” Spindel said.

Stadtlander would add $500 million in annual revenue to Bergen’s specialty drug distribution unit this year, which is on a pace to reach about $800 million. Three years ago, the division had annual sales of $29.7 million.

The unit accounts for 7% of Bergen’s operating earnings.

Analysts applauded the move, saying Stadtlander is a good fit with Bergen’s specialty drug unit.

“I obviously like it when companies add businesses that are good for profits and are growing nicely,” said Kristi Thiese, an analyst at Raymond James in St. Petersburg, Fla.

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Investors also applauded the move. Bergen shares advanced 75 cents to close at $56.06 in New York Stock Exchange trading Monday.

Bergen officials predicted that the combined operations of Stadtlander and its specialty drug unit would generate annual revenue of $1.5 billion next year and about 20% of Bergen’s overall operating earnings.

As part of the deal, Bergen would receive the right to vote all of Counsel’s shares in PharMerica Inc. on matters involving a business combination. Counsel holds a 9% stake in the Tampa, Fla., provider of drugs and services to patients in nursing homes.

On Monday, PharMerica reported that it lost $127.4 million, or $1.42 a share, on revenue of $289.8 million, for the third quarter ended Sept. 30. PharMerica shares closed Monday at $4.44 in Nasdaq trading, down 66 cents from Friday. A year ago, the company’s stock traded at $11.

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