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McKesson, Walgreens Form JV for European Pharmaceutical Unit

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McKesson Corporation (MCK - Free Report) recently entered an agreement with Walgreens Boots Alliance (WBA - Free Report) to create a joint venture (JV) that will combine the companies’ pharmaceutical wholesale businesses in Germany.

Following the announcement, shares of McKesson inched up 0.3% to $143.93 at close.

Notably, the company has also been selected by the Department of Veterans Affairs to continue as the prime pharmaceutical supplier to more than 750 locations.

How Does McKesson Stand to Gain?

Per the terms of the JV, Walgreens will have a 70% controlling equity interest, while McKesson will have the rest. Financial terms of the transaction have been kept under wraps.

The latest move is also expected to boost McKesson’s European Pharmaceutical Solutions segment. For investors’ notice, the segment distributes branded and generic pharmaceutical drugs along with other healthcare-related products in Europe, operating in 13 countries.

It is encouraging to note that, in the last reported quarter, the unit grew 4% at constant currency on market growth in the pharmaceutical distribution business.

Management at McKesson expects revenues to rise in Europe in the second half of fiscal 2020.

Market Prospects

MarketWatch predicts that the global drug distribution market will reach a worth of $12.70 billion by 2024, given the rise in chronic diseases worldwide.

Hence, the latest development has been a well-timed one for McKesson.

Price Performance

In a year’s time, this Zacks Rank #3 (Hold) company has rallied 24.8% compared with the industry’s 1.4% rise.

Key Picks

Some better-ranked stocks from the broader medical space are CONMED Corporation (CNMD - Free Report) and HealthEquity (HQY - Free Report) . While CONMED carries a Zacks Rank #2 (Buy), HealthEquity sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Conmed has a long-term earnings growth rate of 17%.

 HealthEquity has a long-term earnings growth rate of 25%.

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