New Lincare venture appears 'off the wall'

Thursday, October 7, 2010

CLEARWATER, Fla. - Lincare recently diversified its product portfolio by launching a company that supplies monthly testing supplies to people who take Coumadin, a frequently prescribed blood thinner.

The new venture appears "pretty far off the wall but is no surprise," said one industry watcher.

"They are actively looking to diversify, but they have such a huge base in respiratory, that it's like turning an aircraft carrier," he said. "It's going to be a long time before it changes."

The new company, mdINR (, is based in New Windsor, N.Y., and appears to work much like a mail-order company for diabetic supplies. mdINR provides home testing supplies (monitors, lancets, test strips and alcohol swaps) to patients who need to monitor, usually weekly, how quickly their blood clots. mdINR is also an independent diagnostic testing facility (IDTF) and relays the test results to the patient's doctor, who adjusts the Coumadin dosage as needed. Roughly 1.5 million people in the United States use Coumadin for a variety of conditions, including atrial fibrillation and heart valve deformities.

Medicare reimburses between $125 and $150 a month for the testing supplies.

"This is not a windfall profit center for them, but when you take a look at the decreasing reimbursement for neb meds and oxygen, it will fill some holes," said Mickey Letson, CEO of Dream Software, and a former vendor of respiratory medications.

Lincare's business development division has a mandate to consider a "wide variety of things," said an industry watcher familiar with the company's diversification efforts. The only requirement is that potential new business ventures must "play to their skill set," which includes Medicare billing and an inexpensive delivery model.

Industry consultant Wallace Weeks said that he suspects Lincare is constantly scanning the market for new business opportunities.

"Good companies will test a lot of things," he said. "And those things that prove to be a good opportunity, they will pursue vigorously."

Interestingly, mdINR's patient enrollment form has a check-off section for co-morbidities, which include diabetes, CHF, COPD, thyroid disorder and other. This is another smart business move, Letson said.

"They are looking to see what else this patient has," he said. "Don't you think they are feeding that back to their locations, saying, 'This patient also has COPD. Get an oxygen concentrator on them. Get a neb med on them.'"

Market analyst comments on Lincare

While management has been reluctant to provide too much detail about new internal growth initiatives, our sense is there are three to four new business units being developed internally. Management's goal is to ramp-up these initiatives to help replace potential lost revenue/EBITDA due to the impending Medicare competitive bidding. It is too early to assess Lincare's trends in these business units, but we believe Lincare is moving in a few interesting directions that could take it closer to pharma services.

--Darren Lehrich, Deutsche Bank Equity Research, Sept. 28, 2010