Medco Health Solutions Inc. (NYSE: MHS) has announced it will
buy
PolyMedica
Corporation (NASDAQ: PLMD) in an all-cash deal worth $1.5
billion.
PolyMedica is a direct supplier of diabetes testing supplies and
other diabetes related products that is largely known for its Liberty brand. The
purchase price values PolyMedica at $53 per share, a 17% premium over its
closing price before the announcement.
Medco is explicitly making a play
for the burgeoning diabetes market, as the press release announcing the deal
states:
"An estimated 17 million Americans are currently treated for
diabetes, with more than 1 million patients diagnosed each year; an additional 7
million are estimated as undiagnosed. Diabetes care represents one of the
fastest-growing segments of health care in a market estimated at more than
$25 billion a year. These patients represent 5 percent of the
population but account for more than 15 percent of total drug
spending..."
Medco is a pharmacy benefit manager that mainly provides
prescription drug programs, with clients including Blue Cross/Blue Shield. Last
year, Medco had net income of more than $600 million on revenue of more than $40
billion. The purchase of PolyMedica is seen positively by analysts as
complimenting Medco's existing services, which include giving prescriptions to
2.8 million diabetes patients.
Both Medco shares and PolyMedica shares
are trading near all-time highs on news of the deal, but the possible synergies
from this purchase still makes MHS a
stock worth watching!
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