Tuesday, June 30, 2015

News Roundup, June 2015: Diplomat, Burman’s, CVS, Target, and the Drugstore Outlook

Summer vacation is here! Before you launch your July 4 festivities, please enjoy these Drug Channels fireworks:
  • The valuation behind Diplomat’s acquisition of Burman’s specialty pharmacy
  • A Wall Street perspective on the CVS-Target deal
  • The outlook for drugstore chains
Plus, we revisit a stirring patriotic message from Sam the Eagle. Happy 239th birthday, America!

P.S. Follow @Drug Channels on Twitter for my daily updates on news and other intriguing ideas.

Diplomat expands hepatitis C specialty services with acquisition of Burman's Specialty Pharmacy, PR Newswire
The specialty pharmacy M&A boom continues. Diplomat Pharmacy has just announced that it has bought Burman’s Specialty Pharmacy, a family-owned independent pharmacy with a significant hepatitis C business. I highlighted Burman’s exactly one year ago, in my June 2014 news roundup. I also mention Burman’s on page 46 of our 2014–15 Economic Report on Retail, Mail, and Specialty Pharmacies.

Diplomat paid $82.8 million in cash and stock for Burman’s, which had annual specialty revenues of $383 million. If Burman’s EBITDA had been comparable to Diplomat’s 2014 results, then Diplomat would have paid a gross 13.8X EBITDA multiple. Burman's actual EBITDA was $21 million, so the multiple was only 3.9X. The March 2015 BioRx deal amounted to a more robust 13.7X EBITDA multiple, but it had a tax benefit that reduced the effective purchase price to 11.5X EBITDA. See Diplomat Shows Specialty Pharmacy’s Profits and Infusion’s Promise. (NOTE: An earlier version of this article misstated the Burman's purchase multiple.)

BTW, Diplomat is touting its own 40th birthday. Might I suggest a red sports car and toupee?

Thumbs up for CVS buying Target's pharmacies, Reuters
George Hill of Deutsche Bank is one of my favorite sell-side equity analysts covering PBMs, retailers, and drug wholesalers. In this video, George gives us his take on drug supply chain consolidation and CVS’s acquisition strategy. For my take on the transaction, see CVS Aims at Target: Deal Analysis and Marketplace Implications.

Industry Outlook: Drug chains to get a lift, Chain Drug Review
The trade magazine Chain Drug Review offers a nice summary of the factors that are driving growth for chain drugstores. In it, your friendly neighborhood blogger provides a few insights about the battle for specialty drugs.

The Muppets: Stars & Stripes FOREVER!
Bork bork bork! Click here if you can’t see the video below.



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