The auction for Riordan, Lewis & Haden‘s portfolio company, Avella Specialty Pharmacy, was well under way back in February, according to industry sources. UnitedHealth Group‘s (NYSE: UNH) Optum was reported to be in the lead, and then things went dark.
It wasn’t until UnitedHealth Group’s third quarter earnings report was published on October 16 that the story ended. Some time in the third quarter, Optum acquired Avella and tucked it into its OptumRx pharmacy services subsidiary.
The price wasn’t disclosed, but PEHub cited two sources saying the deal was valued at around $325 million. That’s pretty low, considering Avella’s previously disclosed revenue of $1.35 billion in 2017. And that UnitedHealth recently paid $2.5 billion (according to Bloomberg News) for another specialty pharmacy firm, Genoa Healthcare, 80% owned by Advent International.
Size matters, of course. Avella has 16 community-based locations and a national distribution center in Pheonix, Arizona. All locations are staffed with pharmacists and pharmacy technicians who are specially trained in one or more disease states, including oncology, fertility, ophthalmology, transplant, women’s health, compounding, pain management, dermatology, rheumatology and infectious disease.
Contrast that with Genoa’s more than 435 specialty pharmacies in behavioral health centers in 46 states, serving more than 650,000 people. The company also has a team of more than 250 psychiatrists and nurse practitioners who provide telepsychiatry services to mental-health patients.
Both companies will be integrated into OtumRx, which is undergoing its own metamorphosis. Back in March 2015, UnitedHealth announced its $12.8 billion acquisition of Catamaran Corporation (then NASDAQ: CTRX), one of the largest pharmacy benefits management (PBM) companies at the time.
On the recent October 16th third-quarter earnings call, UnitedHealth Group CEO David Wichmann made a point of telling analysts that OptumRx is pivoting “from a PBM to a pharmacy care services-based business.”
What will that mean? More consolidation in the specialty pharmacy field, most likely. We’ve seen at least 10 transactions this year, including Cigna‘s (NYSE: CI) $67 billion deal for Express Scripts (NYSE: ESRX). There are plenty of smaller targets, from Diplomat Pharmacy (NYSE: DPLO) with a market cap of $1.5 billion to privately held PANTHERx Specialty Pharmacy, named Specialty Pharmacy of the Year (2018) by the National Association of Specialty Pharmacy. Easy pickings for the right bidder.
