Skip to main content

The Globe and Mail

Jean Coutu sees gains from generic drug move

Sale signs at Jean Coutu store in Longueuil, Quebec, May 2, 2012.

Christinne Muschi/The Globe and Mail

Jean Coutu Group Inc.'s move into generic-drug manufacturing five years ago is turning out to be just the asset the company needed to offset falling prescription sales.

The Longueuil, Que.-based drugstore chain posted an increase in adjusted profit for the latest quarter, thanks in part to double-digit gains in sales and operating income at its generic-drug division, Pro Doc Ltd.

Coutu, Shoppers Drug Mart Corp. and other drugstore companies have taken a hit in recent years from provincial generic-drug reform aimed at reducing the cost of generic drugs as well as rebates from generic-drug makers.

Story continues below advertisement

Pro Doc's sales in the second quarter rose 14 per cent to $38.3-million. The unit's contribution to income before amortization jumped 25.2 per cent to $15.4-million.

Coutu acquired Pro Doc – a small generic drug manufacturer based in Laval, Que. – in 2007, and senior executives said at the time there was plenty of future growth potential thanks to a raft of brand-name drug patents set to expire in the coming years.

Canaccord Genuity analyst Derek Dley said Coutu and other drugstore chains face a growing challenge from declining generic-drug pricing as well as increased generic-drug penetration.

They are also being squeezed at the front-end of the store by an increasingly crowded discount-retail space, he said.

Pro Doc is showing every sign of being a huge help in offsetting those trends, he said.

"Pro Doc has been a sound strategic move for Coutu and they've executed well on it," Mr. Dley said in an interview.

"There are a lot of brands coming off patent and that's going to grow [the generic] pipeline."

Story continues below advertisement

Mr. Dley said Q2 results were pretty well in line with expectations, although front-end sales were a little weaker than he had anticipated at a 1.6 per cent increase.

Second-quarter profit reached $50-million or 23 cents per share, compared with $44.6-million or 19 cents a year earlier; that's excluding proceeds of $22-million related to the sale of shares in U.S. pharmacy chain Rite Aid.

Revenue rose to $658.7-million from $635.2-million in the year-earlier fiscal period.

Report an error Licensing Options
About the Author
Quebec Business Correspondent

Bertrand has been covering Quebec business and finance since 2000. Before joining The Globe and Mail in 2000, he was the Toronto-based national business correspondent for Southam News. He has a B.A. from McGill University and a Bachelor of Applied Arts from Ryerson. More

Comments

The Globe invites you to share your views. Please stay on topic and be respectful to everyone. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

We’ve made some technical updates to our commenting software. If you are experiencing any issues posting comments, simply log out and log back in.

Discussion loading… ✨

Combined Shape Created with Sketch.

Combined Shape Created with Sketch.

Thank you!

You are now subscribed to the newsletter at

You can unsubscribe from this newsletter or Globe promotions at any time by clicking the link at the bottom of the newsletter, or by emailing us at privacy@globeandmail.com.