AmerisourceBergen halts PharMEDium compounding operations — 5 details

AmerisourceBergen Corp. is shutting down its PharMEDium compounding business, the company announced Jan. 30.

Five things to know:

1. AmerisourceBergen is halting all commercial and administrative operations related to the compounding business, citing ongoing operational, regulatory and commercial challenges.

2. One such challenge was PharMEDium's decision to suspend production at a New Jersey compounding facility pending upgrades to its air handling and filtration systems.

3. AmerisourceBergen anticipates impairment charges of more than $323 million related to PharMEDium. The company also expects to incur employee separation costs of about $80 million to $100 million.

4. As a result of the exit, the company expects to gain a cash tax benefit of up to $600 million from fiscal years 2020 through 2022.

5. The decision comes on the heels of a strong first quarter for fiscal year 2020, during which AmerisourceBergen saw revenue increase 5.4 percent to $47.9 billion. The company updated its full-year guidance to reflect the removal of PharMEDium's operating loss.

The decision "is credit positive because AmerisourceBergen will shed an underperforming business that has been saddled with extensive remediation costs while under a consent decree with the Food and Drug Administration (FDA),” said Jonathan Kanrek, a Moody's vice president-senior credit officer.

"Exiting this business will result in only a modest loss of business diversification and will eliminate a significant management distraction. That said, AmerisourceBergen still faces potentially large, yet-to-be resolved opioid litigation liabilities."


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