Infusion market up for grabs

Thursday, February 28, 2002

MELVILLE, N.Y. - By striking a deal to sell its home infusion business, Gentiva Health Services stands poised to throw that market niche up for grabs.

Gentiva announced in January that it had struck a deal to sell its home IV business and Specialty Pharmaceutical division for $415 million to Accredo Health, one of the country's largest providers of specialized pharmacy services. Accredo then turned around and said it planned only to retain the specialty pharmacy division, about 75% to 80% of the total acquisition, and jettison the home IV business by Dec. 31, 2002.

Gentiva is one of the largest providers of home infusion in the country, and already referral sources, uncertain about the future, are looking for possible replacements for Gentiva.

"It's probably the biggest thing to hit the home infusion market since Corum went belly up," said Schuyler Hoss, president of Northwest Healthcare Management, in Vancouver, Wash. "This will represent a huge market share shift and nobody is quite sure where it is going."

At the moment, Option Care appears to be the favorite to acquire the IV business from Accredo. Home infusion accounts for about 60% of Option Care's $215 million in business, and the company has no debt.

"My guess is that Accredo will cut a sweet-heart deal with Option Care," said one analyst. "Price is not minor, but the greater value is from the divestiture and not having to worry about it and concentrating on what they want to."

One catch: thus far Option Care has built its success in home infusion by gobbling up companies of $10 million or less, significantly less than what Accredo would likely ask for the IV business.

"Accredo has made it clear they want to get rid of the acute side of the business," said Option Care President Raj Rai. "If the terms are correct, the price is right, and it makes sense, we would be interested. But it is too premature because the deal doesn't consummate until April or so."

Other companies with the resources to make a deal include Apria and Lincare. Neither, however, appears likely, focused as they are on honing their HME businesses rather than going whole hog into home infusion. Bankruptcy probably eliminates infusion giant Corum, say industry watchers, who don't rule out the possibility that a roll-up may make a play for the business.

Gentiva decided to sell its home infusion and specialty pharmacy business to Accredo so to focus on home healthcare. The deal will leave Gentiva with no debt and cash in the bank of between $60 million to $80 million. HME