Bergen Brunswig 1st-Quarter Profits Up 46% Despite Losing Huge Sales Contract

Drug distributor Bergen Brunswig Corp. posted higher first-quarter profits and sales Thursday despite losing a contract with Novation LLC, the top U.S. health care purchasing group.

Net income met analysts expectations for the three months ended Dec. 31, moving up 46% to $21.4 million, or 16 cents a share, from $14.7 million, or 11 cents a share, a year ago, when the Orange-based company logged charges of $6.2 million for discontinued operations.

Sales from continuing operations, excluding shipments to customers’ warehouses, rose 5.8% to $4.78 billion from $4.51 billion.

Novation, a purchasing group for hospitals and clinics, didn’t renew a distribution contract last year for pharmacy services with Bergen Brunswig. Earlier contracts had covered products valued at about $1.5 billion annually. Bergen said in a statement that it kept about $450 million in sales from Novation members.

The company said sales growth slowed this quarter, compared with a year ago, when customers stockpiled drugs because of concerns about Y2K distribution problems.

“This is their toughest comparison, because last year all of the distribution revenues were inflated by Y2K,” said analyst John Ransom at Raymond James Financial Inc. “We would think the next three quarters, the growth in the [drug distribution] business should pick up significantly.”

Bergen said it expects to meet its 10% sales growth and its 30% earnings growth objectives for 2001.

The company’s stock rose 58 cents a share to $16.18 on the New York Stock Exchange. The shares have more than doubled in the past 12 months.

Analysts said collections are improving at the company’s PharMerica unit, which provides pharmacy services to nursing homes. Nursing homes had been hurt by cuts in reimbursements from Medicare, the federal health insurance program for the elderly.

PharMerica’s bad debt fell to 3% of sales in the quarter from 5% for fiscal 2000.

Chief Executive Robert Martini told investors during a conference call that the company is still seeking his successor.

Martini returned as interim CEO in November 1999 when Bergen fired Donald Roden as chief executive, after the company’s shares dropped 80% in 10 months. Martini, who joined the company in the 1950s, had been CEO from 1990 to 1997.

Dow Jones Newswires were used in compiling this report.