Premier to exit specialty pharmacy business

Premier (PINC) is exiting its specialty pharmacy business to “enhance the company’s focus on the continuing evolution of its core supply chain, enterprise analytics and performance improvement capabilities.” On May 6, certain of Premier’s consolidated subsidiaries entered into a definitive asset purchase and sale agreement with ProCare Pharmacy, a subsidiary of CVS Health Corporation (CVS), under which Premier will sell certain assets related to its specialty pharmacy business for $22.5M, plus up to an additional $20.0M for inventory, each subject to adjustment. The transaction is expected to close in the current quarter ending June 30. The sale was made in connection with the company’s plans to discontinue its specialty pharmacy operations conducted by both Acro Pharmaceutical Services and Commcare Pharmacy by June 30. Net proceeds from the transaction will be used primarily to fund costs associated with the transaction and wind down and exit from the specialty pharmacy operations, and for general corporate purposes. In connection with Premier’s exit from the specialty pharmacy business, the company expects to record a non-cash impairment charge of approximately $87.0M-$92.0M related to goodwill, purchased intangibles and other assets of the specialty pharmacy business. Including costs incurred to date, it also expects to incur one-time, transaction and exit-related pre-tax charges of approximately $11.0M-$15.0M, primarily related to severance and retention benefits and financial advisor and legal fees. These expenses are expected to be recorded in Q4. These actions are expected to increase Premier’s consolidated non-GAAP adjusted EBITDA margin to approximately 45% for Fy19 compared to approximately 34% for the FY19 six-month period ended December 31, 2018, while reducing annual consolidated net revenue by approximately $470M and increasing annual pre-tax income by approximately $6M.

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