Diplomat bulks up in infusion services

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FLINT, Mich. — Diplomat Pharmacy, which posted strong financial results for fiscal 2014, is acquiring BioRx LLC, a specialized pharmacy and infusion services company.

Based in Cincinnati, BioRx provides treatments for patients with ultra-orphan and rare, chronic diseases.

Terms of the agreement call for Diplomat to buy BioRx for $210 million in cash and $105 million in Diplomat common stock upon closing of the ­transaction.

“We are very excited to expand Diplomat’s infusion services with the acquisition of BioRx,” commented chairman and chief executive officer Phil Hagerman. “The combined resources of both companies will make us much stronger and unique within the infusion services industry.

“The specialty pharmacy market has evolved substantially over the last decade, and this partnership will help Diplomat be even more prepared to grow and thrive in the years to come.”

BioRx cofounders Phil Rielly and Eric Hill have made long-term commitments to help lead the combined infusion services company. “We are proud and excited to join the Diplomat family of companies,” commented Rielly. “Diplomat’s dedication to patient care is unique in the specialty pharmacy industry and aligns very well with the goals of BioRx.”

Separately, Diplomat announced that it posted a net profit for fiscal 2014 as sales grew 46%. For fiscal 2015, management of the newly publicly held company projected substantial gains at both the top and bottom lines.

Influenced by a host of special items — including a $34.3 million charge in the fourth quarter of 2013 for a change in fair value of redeemable common share — the specialty drug company’s bottom line for the year ended December 31 swung to a profit of $4.32 million from a year-ago loss of $26.1 million. Backing out special items in both years, Diplomat — which completed an initial public offering in October — posted adjusted pro forma earnings of $18.7 million for fiscal 2014, in contrast to a loss of $29 million in 2013.

The company pared its net loss for the fourth quarter to $3.09 million from $32.6 million in the prior-year period. On an adjusted basis, Diplomat swung to pro forma earnings of $3.91 million from a $33.7 million loss.

Full-year sales vaulted 46.2% to $2.21 billion from $1.52 billion in 2013. Management noted that the increase resulted from $315 million in revenue from drugs that were new to the market or newly dispensed by Diplomat, about $118 million from added volume of drugs it dispensed a year ago, and around $74 million from recent acquisitions. The balance of the increase stemmed mainly from a richer mix of high-price drugs, the impact of manufacturer price increases and payer mix changes.

The top line for the fourth quarter, meanwhile, escalated 48.6% to $612.1 million from $412 million.

Moving down the full-year income statement, gross margin expanded 45 basis points to 6.33%, with executives crediting drug mix changes, recent acquisitions and ongoing favorable pricing trends.

However, selling, general and administrative expense swelled 62 basis points to 5.76% of sales. Management pointed to a higher share of more labor-intensive drugs in the mix, expenses related to information technology investments, acquisition-related costs and expenses associated with the change to a public company.

With that, full-year operating profit rose 13.5% to $12.6 million. Factoring in $3.38 million in net other expense in 2014, versus $37.2 million in 2013 (which included the aforementioned $34.3 million item for the change in fair value of redeemable shares), Diplomat swung to pretax earnings of $9.21 million from a $26.1 million loss in 2013.

Looking ahead, management expects fiscal 2015 revenue to range between $2.8 billion and $3.1 billion, with net income between $12 million and $14 million.


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