AmerisourceBergen Corporation (ABC) has been on an acquisition spree as it recently announced the completion of the acquisition of IntrinsiQ LLC for $35 million in cash. AmerisourceBergen completed its second acquisition within a week, as the IntrinsiQ acquisition followed the successful completion of the Premier Source acquisition on Friday last week.
This acquisition is not expected to impact AmerisourceBergen’s earnings for fiscal 2011. Following the acquisition, IntrinsiQ has been merged with ION Solutions, which is a unit of AmerisourceBergen Specialty Group. We believe that the combination of IntrinsiQ’s software applications and ION Solutions’ existing oncology technology platform will enhance the company’s proprietary data offerings.
The Premier Source Acquisition
As mentioned earlier, on September 2, AmerisourceBergen had announced the completion of the acquisition of privately-held Premier Source, which provides consulting, and reimbursement services to medical device, pharmaceutical, molecular diagnostic, and biotechnology manufacturers, as well as other health services companies.
Following the acquisition, Premier Source was merged with AmerisourceBergen’s AmerisourceBergen Consulting Services (ABCS) segment, thereby expanding the department’s capabilities. We believe the integration will help the company strengthen its focus on emerging diagnostic, biotech and device manufacturers.
We note that the company has been pretty active on the acquisition front in order to supplement organic growth, spending more than $1 billion on acquisitions in the last eight years. Additionally, AmerisourceBergen, which exited the third quarter of fiscal 2011 with a cash balance of about $2.0 billion, plans to spend around $200 to $300 million in 2011 on the acquisition of pharmaceutical, distribution or related services business.
Our View
We currently have a Neutral recommendation on AmerisourceBergen. The stock carries a Zacks #3 Rank (Hold rating) in the short-run. We believe the company is well-positioned for growth given the strong performance of its generics and specialty business. AmerisourceBergen boasts of a robust plasma and vaccine business, with strong revenues expected to flow from it in the coming quarters.
However, AmerisourceBergen operates in a highly competitive pharmaceutical distribution market. The company’s primary competitors are Cardinal Health Inc. (CAH) and McKesson Corporation (MCK).
