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NEW YORK — Stefano Pessina likes what he sees after Walgreens Boots Alliance (WBA) finished its first full year as a unified company.
WBA’s executive vice chairman and chief executive officer told shareholders at its annual meeting here that the company expects its deal to acquire Rite Aid Corp. and its partnership with Valeant Pharmaceuticals International Inc. to build on its strong start.
“I am happy to say that we are on track for better things this year,” Pessina said. “We continue to manage our business well and to grow our earnings strongly. And we continue to expect healthy growth in earnings for 2016 and beyond.”
Rite Aid would bring a third retail brand to WBA’s U.S. retail operation, Pessina noted. Currently, that business includes the Walgreens and Duane Reade drug chains and encompasses about 8,200 stores in 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands.
“Our focus in the U.S. has been first to ensure that we are operating our business as efficiently as possible and, alongside this, we must look very closely at our retail offering. Our goal is to ensure we are offering the best and most relevant shopping environment and product range to our customers, differentiating our stores, and offering our customers the service and value that they want,” Pessina said. “We are reviewing the merchandise of our convenience offering to ensure that we are offering customers what they want and need, and building a wider and better beauty and personal care offering based on our own exclusive product range.”
In the United States, a Walgreens-Rite Aid merger would create a pharmacy retailer with more than 12,800 stores.
“The acquisition will go a long way to help fill the gaps in our geographical coverage in the U.S. in one step,” Pessina told shareholders, adding that “this deal can be harmonized with the Walgreens business” and promises other benefits.
“The addition of Rite Aid to our network offers the potential for significant cost savings and purchasing efficiencies, in addition to opportunities in terms of improved market penetration for our own exclusive product portfolio,” he explained. “We are currently going through the regulatory process to get approval for this transaction. So far, this process is proceeding as we had anticipated, and we continue to expect the transaction to complete at some point in the second half of this calendar year.”
Pessina reiterated to shareholders that the benefits from the partnership with Valeant will take time to come to fruition. Under the arrangement, Valeant will directly distribute branded prescription drugs in a range of therapeutic areas to Walgreens at reduced pricing.
“In December, we also announced a long-term partnership with Valeant Pharmaceuticals, designed to provide great patient access to their products at lower overall cost to the health system than previously,” he said. “This partnership, though somewhat unique and novel to the U.S. market, is based on a number of concepts that we use in a different context elsewhere in our organization and is a demonstration of how a partnership can create value while reducing cost for the system as a whole. It will take some time and work for this partnership to deliver its full potential. But, over time, such an innovative and collaborative initiative has the potential to deliver significant benefit.”
Pessina added that WBA will also continue to seek “profitable opportunities to expand our footprint in new and economically attractive markets.”
“We will continue to invest, prudently, and with a close eye on the financial return, in existing businesses, in product brands to support and develop these businesses, and in complementary businesses that grow our offering in existing markets or bring us into new ones,” he said. “There is no doubt that the greatest opportunity for the company today is here in the U.S.”
