Drug distributors poised for growth
I just came across a short, yet interesting article on the sector by Bloomberg that lays out the bull case for McKesson (MCK), AmerisourceBergen (ABC), and Cardinal Health (CAH).
Analyst Charles Rhyee said in a note Tuesday he expects that improvements in prescription volumes will continue in 2011, and investors have started to appreciate the strength of generic drug introductions through 2014. Several blockbuster brand-name drugs like Eli Lilly and Co.'s antipsychotic Zyprexa will lose patent protection in the next few years, and drug distributors can see greater profitability from their generic counterparts.
"It was encouraging to see consistent improvements in prescription volume for the past few quarters," Rhyee said in a research note. "More specifically, we believe generic dispensing rate and mail-order volume remain strong and should help drive profitability for the next few quarters."
The piece is definitely worth a read.