Bergen Brunswig Corp. the nation's third largest drug wholesaler, warned Wednesday that its earnings in the latest quarter and the current fiscal year will fall short of expectations.
The Orange-based company attributed the weakness to negative industry trends at its specialty long-term care subsidiary, PharMerica. Bergen acquired the Tampa, Fla., unit in April for $1.4 billion in stock.
Bergen said lower-than-anticipated occupancy by Medicare-funded patients at the nursing facilities PharMerica serves, lower levels of drug usage among residents of these facilities and pricing pressures hurt profits.
The company said it would move immediately to cut costs at PharMerica by more than $20 million.
Bergen said it expects to earn 25 cents to 27 cents a share in its third quarter, which ended June 30, compared with the Wall Street consensus estimate of 31 cents a share.
For the fiscal year ending Sept. 30, Bergen said it expects to report earnings of $1.10 to $1.15 a share, compared with analysts' estimates of $1.24.
"When we completed the acquisition of PharMerica, this business had performed on target with our expectations for the March quarter and exceeded consensus estimates for the December 1998 quarter," Donald Roden, Bergen's chief executive, said in a statement.
The company said it would institute a generic-drug-purchasing program, enter purchasing alliances with other companies and centralize operations such as packaging and billing.
Omnicare Inc., PharMerica's larger rival, recently warned that its second-quarter earnings will fall short of analysts' expectations. Omnicare said it will cut 1,700 jobs, or 15% of its work force, close some sites and take $21 million in charges because of Medicare reductions.
Bergen also said it was hurt by lower-than-expected earnings at the Stadtlander Drug Co. unit it bought from Counsel Corp. for about $400 million in stock, cash and debt. Bergen Brunswig said it is in a disagreement with Counsel and its auditors over the value of Stadtlander.
Bergen's stock closed Wednesday at $16.19, down 81 cents a share.
The company said it will report quarterly results July 28.