Bergen Brunswig Warning Sends Its Stock Skidding
Bergen Brunswig Corp., the third-largest U.S. drug wholesaler, warned Thursday its fiscal fourth-quarter earnings will fall below analysts’ expectations because of revenue shortfalls at its newly acquired Stadtlander and PharMerica units.
The warning sent the company’s stock into a tailspin. Bergen’s shares, which have lost more than three-fourths of their value so far this year, fell nearly 22% Thursday, the fifth-biggest percentage loss in U.S. markets.
The stock closed at $7.56 a share, down $2.13, after trading as low as $7.13 earlier in the session. A total of 3.1 million shares changed hands on the New York Stock Exchange, more than five times the average daily volume over the last three months.
Orange-based Bergen Brunswig expects earnings of 2 cents to 5 cents a share in the quarter ended Sept. 30 and 85 cents to 89 cents for the year. Analysts were expecting earnings of 24 cents for the quarter and $1.11 for the year, according to a First Call Corp. survey.
The company said it is considering taking a noncash charge of as much as $80 million to write down the purchases of Stadtlander, a distributor of intravenous drugs, and PharMerica, a supplier of drugs to nursing homes.
Bergen Brunswig also filed a lawsuit late Thursday accusing the Stadtlander unit’s former owners--Stadt Holdings Inc. and its parent company, Counsel Corp.--of doctoring financial records to make the unit’s purchase seem more enticing.
“They cooked the books to exaggerate earnings,” Bergen Brunswig attorney J. Michael Hennigan said. Otherwise, Bergen “would not have purchased it.”
Bergen Brunswig bought Stadtlander early this year for more than $400 million in cash and stock.
Counsel and Stadt Holdings could not be reached for comment.
Analysts said PharMerica, the second-largest U.S. pharmacy operator for nursing homes, continues to suffer from new Medicare reimbursement legislation, which has eaten away at profits throughout the industry.
“The prospective payment system has proved far more difficult than anyone ever imagined,” said Leonard Yaffe, a Banc of America Securities analyst.
Medicare is the federal health-insurance plan for the elderly.
Bergen Brunswig plans to report its fiscal 1999 results early next month.
The warning by Bergen Brunswig caused the stocks of other drug wholesalers to fall as well, including shares of the two largest wholesalers, McKesson HBOC Inc. and Cardinal Health Inc. McKesson’s stock fell $2.19, or 8.7%, to $22.75 a share, while Cardinal’s shares fell $1.13 to $51.38.
While McKesson has had problems with its acquisition of HBO & Co., neither McKesson nor Cardinal has exposure to Medicare, Yaffe said.
After the close of trading, Cardinal said it was comfortable with analysts’ expectations for its fourth quarter and fiscal year 2000. Cardinal is expected to earn 53 cents in the first quarter and $2.53 for the year.
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Stock Drop
Bergen Brunswig’s stock, which traded above $30 in January, closed Thursday at $7.56.
Monthly closing stock prices:
Thursday’s close: $7.56
