McKesson dismisses 1,600 staffs from US office to preserve its cash level

By Staff Writer

Mar 17, 2016 08:23 AM EDT

McKesson, a US-based pharmaceuticals distributor, is terminating nearly 1,600 staffs from its US division in an effort to trim expenses after some important customers left the company. The drug vendor began alerting its workers regarding the dismissals in the middle of March.

McKesson began examining options for an efficient cost reduction strategy in January and decided that trimming workforce will best suit its business requirements, the company said in an e-mailed statement to Bloomberg. The finishing of a deal with UnitedHealth Group's unit Optum and adjustments in deals with Target Corp and Omnicare impacted the company's business structure in the recent period.

McKesson's operating profit in the final six-month period was hurt by the slowdown in price hike on generic drugs. The drug vendor acquired Rexall Health, a drugstore chain based in Canada, for $2.23 billion in March starting and also purchased two oncology firms for $1.2 billion in February. Through these acquisitions, the company aims to improve its balance sheet in the coming period. Shares of the company dropped less than 1% to $156 in New York stock exchange on Wednesday. Over the previous 12 months, the company's shares have missed 32%.

The company said it will providing compensation benefits as well as other related outplacement benefits for those workers, who are affected by McKesson's layoff move. Reuters quoted a regulatory filing which stated that McKesson laboured nearly 70,400 people as full-time staffs as at March 2015.

Recently, the company announced its intention to broaden its corporate operations in Dallas and to open a new office in Irving. With regard to this expansion strategy, McKesson aimed to create 975 additional jobs and invest a capital amount of $157 million into the business. The City of Irving along with the Governor's office and Greater Irving-Las Colinas Chamber of Commerce supported the company in its expansion effort.

The company will acquire a 525,000 square-foot commercial building to execute key operations like information technology, purchasing, administrative support, accounting and project management. While the office at Irving will serve as a back office for McKesson's headquarter office at The Woodlands, TX.

McKesson sold 6000 shares on March 15 at a median price of $157.59 for a total value of $945,540.00. Deutsche Bank reissued McKesson's shares a "buy" rating in a research report released on Wednesday. Raymond James lowered the company's shares to an "outperform" rating from a "strong-buy" rating and also fixed an objective price of $225.00 for McKesson, as reported by Microcap Magazine.

Mizuho lowered McKesson's shares to a "neutral" rating from a "buy" rating and also reduced its objective price to $164.00 from $193.00 for the company. In addition, Barclays set an objective price of $211.00 on McKesson's shares and reaffirmed an "overweight" rating. Currently, the company has an average rating of "buy" and an objective price of $202.57.

McKesson is performing various business adjustments in order to reduce expenses and improve its balance sheet. Meanwhile, the company is also taking various steps to gain back its lost customers.

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