Armada Specialty Pharmacy Summit is the largest gathering of participants in the specialty pharmacy industry. In May, three members of the Founders team traveled to Las Vegas for the event. Over the span of three days, we had the opportunity to meet and connect with hundreds of individuals who were interested in three primary topics regarding the specialty pharmacy industry:
- Pipeline Optimism
Everyone, from the specialty pharmacies up to the manufacturers themselves, was excited about the specialty drug development pipeline. From the manufacturers perspective, their focus continues to turn to the high margins and profitability that specialty drugs bring. Additionally, a more accommodating regulatory environment has streamlined FDA approval timelines; Diplomat expects at least 25 new approvals in 2016. All specialty pharmacies were encouraged by the strength of the drug pipeline and the opportunity to add new and effective treatments for multiple therapeutic categories.
- Potential Intervention against High Prices
The national attention on high prices and continued drug price increases by manufacturers (Turing, Valeant, Questcor) has led some to be concerned about the sustainability of prices and margins, especially in an election year where rhetoric and focus is greatly amplified. Both Hilary Clinton and Donald Trump have indicated an intention to address the issue of high Rx prices. The issue isn’t a contested one across the aisle, with 77% of Americans believing that making medications affordable should be a top priority for politicians.1 In addition, we repetitively heard that the continual pressure that pharmacy benefit managers (PBMs) and payors are putting on manufacturers are impacting margins across the industry.
- Industry Consolidation
As pressure to reduce the cost of specialty drugs increases, specialty pharmacies are increasingly finding themselves as acquisition targets for multiple groups. Larger specialty pharmacies are struggling to grow organically and have begun looking to M&A for top-line growth. Comparable size pharmacies are looking at M&A strategies to grow into new therapies or geographies. Other groups we learned that are beginning to target pharmacies for acquisition are: Wholesalers and Distributors, looking to vertically integrate; PBMs who can drive increased savings for the payors they work with; and Health Systems/Providers who are finding their reimbursements tied to quality and would be interested in acquiring a specialty pharmacy to maintain more control of outcomes and adherence.
Valuation and multiples are still near record highs, but many specialty pharmacies believe the window may be closing shortly. Founders Investment Banking specializes in helping specialty pharmacy owners realize the value they have created in their company and can help navigate the merger and acquisition landscape to achieve the goals of the owners, founders, and operators.
About Founders Investment Banking
Founders Investment Banking (Founders) is a merger, acquisition & strategic advisory firm serving middle-market companies. Founders’ focus is on oil and gas, SaaS/software, industrials, internet, digital media and healthcare companies located nationwide, as well as companies based in the Southeast across a variety of industries. Founders’ skilled professionals, proven expertise and process-based solutions help companies access growth capital, make acquisitions, and/or prepare for and execute liquidity events to achieve specific financial goals. In order to provide securities-related services discussed herein, certain principals of Founders are licensed with M&A Securities Group, Inc. or Founders M&A Advisory, LLC, both members FINRA & SiPC. M&A Securities Group and Founders are unaffiliated entities. Founders M&A Advisory is a wholly owned subsidiary of Founders. For more information, visit www.foundersib.com.