Wednesday, January 04, 2017

Specialty Pharmacy M&A: Our Look at 2016’s Deals

For 2016, we estimate that total prescription dispensing revenues from specialty drugs at retail, mail, long-term care, and specialty pharmacies hit a record $115 billion. Specialty dispensing revenues continue to grow at double-digit rates, which is one reason specialty drugs make up a growing share of pharmacy industry revenues.

So it’s no surprise that there is a vigorous market for the buying and selling of specialty pharmacy companies. Let’s kick off 2017 with a quick review of last year’s 14 significant specialty pharmacy mergers a & acquisition (M&A) transactions. Our list below includes only deals that were publicly announced in 2016.

I expect many more transactions in 2017. If you’re looking to pick up a fast-growing specialty pharmacy, click here for your shopping list.

Transactions are listed alphabetically by the acquirer’s name. I include links to any relevant Drug Channels articles, but not to each deal’s public announcement.
  • The private equity firms ACON Investments and Triton Pacific Capital Partners purchased BioMatrix Specialty Pharmacy, which focuses on both infused and oral specialty drugs.
  • Apothecary By Design (ABD), the fifth-largest independent specialty pharmacy in the Inc. 5000 list, acquired two complementary businesses: Village Fertility Pharmacy, a national fertility-focused specialty pharmacy based in Massachusetts, and Healy Pharmacy, a specialty pharmacy based in Illinois. (In 2015, ABD itself was acquired by BelHealth Investment Partners.)
  • Avella Specialty Pharmacy, the second-largest independent specialty pharmacy, announced two acquisitions: Advanced Pharma Inc., a provider of compounded sterile preparations to hospitals and health systems, and Oncology Plus, a provider of patient-specific compounded therapies to oncology practices, hospitals, and payers.
  • Diplomat Pharmacy acquired TNH Advanced Specialty Pharmacy, the third-largest independent specialty pharmacy. Diplomat paid $65 million in cash and $10 million in Diplomat common stock for TNH, which had annual revenues of about $400 million.
  • The supermarket chain Kroger acquired ModernHEALTH, a large independent specialty pharmacy with multiple business segments operating from seven locations. ModernHEALTH was merged with Axium Pharmacy Services, which Kroger had acquired in 2012.
  • The retail and specialty pharmacy Long's Drugs Inc., a portfolio company of Tailwind Capital, acquired Avita Drugs, a specialty pharmacy serving patient populations in Louisiana, Texas, North Carolina, South Carolina, and Virginia. (In 2014, Avita had acquired MedExpress Pharmacy.)
  • Maxor National Pharmacy Services, a PBM and pharmacy services company, acquired Pharmaceutical Specialties, a specialty pharmacy focused on pulmonary, endocrine, and GI medicines.
  • ReCept Pharmacy, a Texas-based specialty and retail pharmacy, acquired Mississippi-based F&M Specialty Pharmacy, which services organ transplant patients.
There’s another interesting transaction worth noting. In 2016, Walgreens Boots Alliance (WBA) and Prime Therapeutics announced a new relationship that partly incorporates a specialty pharmacy merger. The two companies will combine their respective central-fill mail and specialty pharmacies to form a new company, which will have a new name. Both WBA and Prime will be represented on the combined company’s board of directors and executive team. Legally, the business will be a subsidiary of WBA, so its financials will be included within WBA’s broader financial reporting. (See Why the Walgreens/Prime Deal Could Transform the PBM Industry.)

If I missed your favorite deal, email me! Be sure to include a link to the public announcement.

P.S. Hat tip to Mike Hess at Bass Berry + Sims and Reg Blackburn at The Braff Group for highlighting a few deals that I had overlooked.

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