Leading pharmaceutical care provider Omnicare Inc (OCR) has reportedly acquired Pennsylvania-based, privately-held institutional pharmacy provider Continuing Care Rx (CCRx) for an undisclosed price. This represents one of the major acquisitions by the omnipresent Kentucky-based company over the past few years.
 
CCRx (founded in 1996) is a leading provider of pharmacy services to the long-term care market with revenues of roughly $170 million for the 12 months ended June 30, 2010. The company offers its services to residents in long-term care facilities in Florida, Illinois, Maryland, New Hampshire, New York, North Carolina, Pennsylvania and Virginia.
 
The acquisition represents a part of Omnicare’s initiatives to increase bed counts to boost growth. The deal came after the weak second quarter fiscal 2010 results last month, which came well below the expectations. Profit slipped 60% year over year while revenues fell as the company’s institutional pharmacy business was hit by reduced prescription volumes and lower number of beds served.
 
CCRx currently serves long-term care facilities and correctional facilities with roughly 43,000 licensed beds. The addition of CCRx expands Omnicare’s overall bed count to more than 1.4 million across 47 states, thereby enhancing its position as the leading provider of pharmacy services for the elderly.
 
Omnicare has a rich history of growth through rapacious acquisitions, which has made it a dominant player in the industry. The company boasts a reasonably sound balance sheet and is well positioned with healthy cash flow, which it can use for further acquisitions, debt repayments and share repurchases. Omnicare is pursuing an aggressive acquisition strategy in fiscal 2010. The company agreed to buy institutional pharmacy businesses in July 2010 and is also in advanced negotiations for other acquisitions.     
 
Omnicare is a market leader in an industry that is essential to serving the needs of the population seeking long-term care. The company has reduced costs and increased efficiency through its “Full Potential Plan (FPP)”, a program designed to optimize resources across the organization.
 
However, the benefits of the FPP are partly masked by pressure from reimbursement cuts on generic drugs. Nevertheless, in the longer term, Omnicare will be able to offset some of these reimbursement exposures through synergies from restructuring efforts. Moreover, market entry of several generic products over the next few quarters represents a substantial opportunity, given Omnicare’s higher exposure to the institutional pharmacy channel.
 
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