CVS Caremark Corporation (CVS) has entered into a definitive agreement to buy drug infusion services provider Coram LLC at an estimated price of $2.1 billion. CVS shares gained 67 cents on the news to end the session at $66.76 on Nov 27, 2013. It expects to close the deal in the first quarter of 2014.
Coram is owned by Apria Healthcare Group, a Blackstone Group (BX) portfolio company. It offers infusion services at lesser costs to patients’ homes, which otherwise can be administered either at hospitals or physicians’ offices at a higher expense.
With the impending integration of Coram into the PBM business, CVS Caremark seeks to enhance the range of services to include infusion therapy, that mostly deals with administering medications and nutrition to patients who are dehydrated, have nutritional deficiencies, infections, diabetes, cancer or renal failure.
CVS Caremark, expects the acquisition to add $1.4 billion to revenues in the first year and 3 to 5 cents per share to its adjusted (EPS) in 2015. Additionally, CVS Caremark can access Coram’s extensive network, catering to around 20,000 patients. Coram is expected to strengthen its position in the specialty pharmaceutical business, a growth driver of the PBM segment. In the most recent quarter, the company disclosed that its PBM business registered growth of 28%, aided by the specialty pharmacy business.
The pharmacy benefit management (PBM) business of CVS Caremark, is a part of the Pharmacy Services segment and offers a wide range of services comprising of mail order pharmacy services, specialty pharmacy services, plan design and administration, formulary management and claims processing. Specialty pharmacies support individuals who require complex and expensive drug therapies. CVS Caremark, as a pharmacy benefit manager, administers prescription drug benefit programs for employers and health plans.
The entry into such specialized services by the second largest PBM company is of great significance, as major pharma companies are planning to develop niche drugs for complex disorders. Such new services will help manage overall cost of care delivery.
Currently, CVS Caremark carries a Zacks Rank #3 (Hold). Investors interested in the industry may consider stocks like Rite Aid Corp. (RAD) carrying a Zacks Rank #1 (Strong Buy) and Herbalife Ltd. (HLF) carrying a Zacks Rank #2 (Buy).