Apria Banks on Infusion Market with Acquisition of Coram

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.