July 9, 2013 / 12:37 PM / in 4 years

UPDATE 1-Lower generic drug prices hurt Jean Coutu profit

* 1st-quarter earnings C$0.51/shr vs C$1.81/share year earlier

* Same-store sales up 0.6 percent vs 3.4 pct last year

July 9 (Reuters) - Canadian drugstore chain Jean Coutu Group Inc’s first-quarter net profit plunged as prices for generic drugs fell and the company recorded a smaller gain from the wind-down of shareholding in U.S. drugstore chain Rite Aid Corp.

Price-controls for generic drugs, aimed at cutting costs for government and private health programs, have hurt Jean Coutu and rivals such as Shoppers Drug Mart.

In the latest quarter, the prices of six commonly prescribed generic medicines fell to 18 percent of the price charged by branded makers from 25-40 percent.

Jean Coutu’s net profit fell 77 percent to C$108.6 million ($102.9 million), or 51 Canadian cents per share, in the quarter ended June 1, from a year earlier.

Generic drugs accounted for 66 percent of drug prescriptions sold during the quarter, compared with 58.8 percent a year earlier, exacerbating the impact of lower prices.

Excluding a gain related to Jean Coutu’s sale of shares in Rite Aid and other items, the company earned 26 Canadian cents per share, in line with analysts’ expectations, according to Thomson Reuters I/B/E/S.

Revenue for the Longueuil, Quebec-based company was flat at C$681.6 million. Sales at established stores, a key measure for retailers, rose 0.6 percent compared with 3.4 percent in the same quarter last year.

The sale of Rite Aid shares added C$54.4 million to earnings, compared with C$348 million a year earlier.

Jean Coutu is Rite Aid’s biggest shareholder, the legacy of the Canadian company’s 2004 purchase of the Brooks and Eckerd drugstore chain. In 2007, Jean Coutu sold the U.S. business to Rite Aid for cash and stock.

In April, it sold 72.5 million shares, bringing its stake in Rite Aid to 11.7 percent.

Jean Coutu shares closed at C$17.81 on the Toronto Stock Exchange on Monday.

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