LAKE FOREST, Calif.--In a strategic move away from reliance on Medicare and Medicaid, giant HME provider Apria Healthcare Group said it will acquire Coram, a national home infusion and specialty pharmaceutical services provider, in a $350 million cash deal.
Company officials said the addition will position Apria as the leading nationwide home infusion provider. Together, the two companies care for more than 100,000 patients in all 50 states.
It also sets up Apria to enter the rapidly growing specialty pharmaceutical market and to expand existing managed-care relationships in its respiratory/HME business. Headquartered in Denver, Colo., with 2,100 employees, Coram has more than 70 branch locations, 50 company-owned ambulatory infusion sites, 1,100 clinicians and centralized pharmacy distribution services to patients nationwide.
"This is a transformative event for Apria Healthcare," Larry Higby, Apria's CEO, said in a statement. "The transaction supports our strategy of diversifying our service offering by adding and expanding complementary product lines that fit well with our core competencies. In addition, this expansion makes Apria significantly less reliant on government reimbursement policies, since government payers will represent a smaller percentage of our overall business."
Higby said in making the purchase, Apria is banking on the future of the infusion sector. "With more than 400 new infusion or injectable drugs in manufacturers' pipelines--over half of which are expected to be released by 2010--we believe that the future of the specialty infusion business will be strong," he said.
John Arlotta, Coram's chairman, president and CEO, will continue to lead its operations after the merger is complete. Apria's acquisition of the Denver-based, privately owned company is contingent upon governmental and regulatory approvals, but officials said the deal could close as early as mid-November.
Arlotta said the merger would allow delivery of "cost efficiencies that payers are looking for."
Apria expects Coram to generate $500 million in revenue in 2008, and said that would work out to between $3.5 million and $5.5 million in net after-tax earnings. But investors' concerns that Apria was shelling out too much money in the deal sent its shares down by $1.38, or 5.6 percent, on Tuesday, closing at $24.23. By Friday afternoon, the share price was $23.20. In the past year, Apria stock has fluctuated from a low of $20.75 to a high of $34.36.
In July, Walgreen Co. announced its acquisition of specialty pharmacy and home infusion provider Option Care, including a network of more than 100 pharmacies in 34 states, in an $850 billion deal. (See HomeCare Monday, July 9.)
With more than 3,000 providers across the country, the infusion market is fragmented. But Walgreen's said the Option Care buy would garner it a 6 percent share behind market leader Coram, which had an 11 percent share.
Walgreen's estimates the specialty pharmacy and home infusion markets at $60 billion a year, with a projected annual growth rate of 20 percent.