Drug Distributors: Prescription Volumes, New Therapies Powering Higher Stock Prices

Drug distributors McKesson Corporation (MCK), Cencora Inc. (COR), and Cardinal Health Inc.(CAH) have been performing significantly better than the healthcare sector. This is because they have been selling a large quantity of pharmaceuticals. However, the distribution of GLP-1 drugs has been boosting their revenues at the cost of their profit margins. These distributors are also benefiting from new therapies in biopharma, especially in the field of oncology. This is resulting in new business opportunities for them. Although the multiples have expanded and are currently trading at premiums to recent historical levels, we believe that the valuations are justified in the current operating environment.