McKesson to Acquire Specialty Drug Distributor

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October 9, 2007

McKesson to Acquire Specialty Drug Distributor

McKesson Corporation, San Francisco, CA, has agreed to buy Oncology Therapeutics Network, a U.S. distributor of specialty pharmaceuticals, for $575 million.

According to Pembroke Consulting's Adam Fein, OTN owns Onmark, a large buying group for thousands of small accounts. He says in his Distribution Trends blog: "Such forward integration makes it virtually impossible for a manufacturer to bypass and sell directly to the customer, because the distributor and the customer are the same company." The customers of OTN will continue to operate as separate businesses.

Sales of specialty drugs are increasing rapidly, especially oncology drugs. OTN serves more than 3,500 oncologists, 1,500 rheumatologists and other providers. Its annualized revenues are $3 billion. McKesson plans to combine the operations of OTN with the operations of McKesson Specialty, which is reported in the McKesson Distributions Solutions segment.

“The integration of these two businesses will enhance our position in one of the fastest-growing categories of drugs in the U.S.,” said CEO John H. Hammergren.

Between 2006 and 2010, sales of oncology drugs are forecast by IMS Health to increase from $30 billion to $60 billion.

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