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| 8-K - FORM 8-K CREDIT SUISSE PRESENTATION - OMNICARE INC | form8-kcreditsuisse.htm |
Credit Suisse 20th Annual Healthcare
Conference
November 10, 2011
Forward-Looking Statements
Forward-looking Statements
Certain of the statements made today and listed within the following presentation slides are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, all statements regarding the intent, belief or current
expectations regarding the matters discussed in this presentation. Such forward-looking statements are based on management’s current expectations and
involve known and unknown risks, uncertainties, contingencies and other factors that could cause results, performance or achievements to differ materially from
those stated. The most significant of these risks and uncertainties are described in the Company’s Form 10-K, Form 10-Q and Form 8-K reports filed with the
Securities and Exchange Commission. Investors are cautioned that such statements are only predictions and that actual events or results may differ materially.
Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, all statements regarding the intent, belief or current
expectations regarding the matters discussed in this presentation. Such forward-looking statements are based on management’s current expectations and
involve known and unknown risks, uncertainties, contingencies and other factors that could cause results, performance or achievements to differ materially from
those stated. The most significant of these risks and uncertainties are described in the Company’s Form 10-K, Form 10-Q and Form 8-K reports filed with the
Securities and Exchange Commission. Investors are cautioned that such statements are only predictions and that actual events or results may differ materially.
These forward-looking statements speak only as of the date this presentation was originally given. We undertake no obligation to publicly release the results of
any revisions to the forward-looking statements made today, to reflect events or circumstances after today or to reflect the occurrence of unanticipated events.
any revisions to the forward-looking statements made today, to reflect events or circumstances after today or to reflect the occurrence of unanticipated events.
To facilitate comparisons and enhance understanding of core operating performance, certain financial measures have been adjusted from the comparable
amount under Generally Accepted Accounting Principles (GAAP). A detailed reconciliation of adjusted numbers to GAAP is posted in the Investor Relations
section of our Web site at http://ir.omnicare.com. Additionally, all amounts are presented on a continuing operations basis, unless otherwise stated.
amount under Generally Accepted Accounting Principles (GAAP). A detailed reconciliation of adjusted numbers to GAAP is posted in the Investor Relations
section of our Web site at http://ir.omnicare.com. Additionally, all amounts are presented on a continuing operations basis, unless otherwise stated.
Important Additional Information
On September 7, 2011, Philadelphia Acquisition Sub, Inc. ("Purchaser"), a wholly owned subsidiary of Omnicare, Inc. ("Omnicare"), commenced a tender offer to
purchase all issued and outstanding shares of common stock, par value $0.01 per share (together with the associated preferred share purchase rights, the
"Shares") of PharMerica Corporation ("PharMerica") at a price of $15.00 per Share, net to the seller in cash, without interest and subject to any required
withholding of taxes, upon the terms and subject to the conditions set forth in the Offer to Purchase and in the related Letter of Transmittal (which, together with
any amendments or supplements thereto, constitute the "Offer"). The Offer is scheduled to expire at 5:00 p.m., New York City time, on December 2, 2011,
unless extended. If the Offer is extended, Omnicare will issue a press release announcing the extension no later than 9:00 a.m., New York City time, on the next
business day following the date the Offer was scheduled to expire. The Offer is conditioned on, among other things, there being validly tendered and not
withdrawn at least a majority of the total number of Shares outstanding on a fully diluted basis, the board of directors of PharMerica redeeming or invalidating its
"poison pill" stockholder rights plan, receipt of regulatory approvals and other customary closing conditions as described in the Offer to Purchase. The Offer is
not subject to any financing contingencies.
purchase all issued and outstanding shares of common stock, par value $0.01 per share (together with the associated preferred share purchase rights, the
"Shares") of PharMerica Corporation ("PharMerica") at a price of $15.00 per Share, net to the seller in cash, without interest and subject to any required
withholding of taxes, upon the terms and subject to the conditions set forth in the Offer to Purchase and in the related Letter of Transmittal (which, together with
any amendments or supplements thereto, constitute the "Offer"). The Offer is scheduled to expire at 5:00 p.m., New York City time, on December 2, 2011,
unless extended. If the Offer is extended, Omnicare will issue a press release announcing the extension no later than 9:00 a.m., New York City time, on the next
business day following the date the Offer was scheduled to expire. The Offer is conditioned on, among other things, there being validly tendered and not
withdrawn at least a majority of the total number of Shares outstanding on a fully diluted basis, the board of directors of PharMerica redeeming or invalidating its
"poison pill" stockholder rights plan, receipt of regulatory approvals and other customary closing conditions as described in the Offer to Purchase. The Offer is
not subject to any financing contingencies.
This communication does not constitute an offer to buy or solicitation of an offer to sell any securities. The Offer is being made pursuant to a tender offer
statement on Schedule TO (including the Offer to Purchase, Letter of Transmittal and other related tender offer materials) that was filed on September 7, 2011
by Omnicare and Purchaser with the SEC. These materials, as they may be amended from time to time, contain important information, including the terms and
conditions of the Offer, that should be read carefully before any decision is made with respect to the Offer. Investors and security holders of PharMerica are able
to obtain free copies of these documents and other documents filed with the SEC by Omnicare through the web site maintained by the SEC at
http://www.sec.gov or by directing a request to the Corporate Secretary of Omnicare, Inc., 100 East RiverCenter Boulevard, Suite 1600, Covington, Kentucky
41011. Free copies of any such documents can also be obtained by directing a request to Omnicare's information agent, D.F. King & Co., Inc., by phone at
(212) 269-5550 or toll-free at (800) 769-7666 or by email at info@dfking.com.
statement on Schedule TO (including the Offer to Purchase, Letter of Transmittal and other related tender offer materials) that was filed on September 7, 2011
by Omnicare and Purchaser with the SEC. These materials, as they may be amended from time to time, contain important information, including the terms and
conditions of the Offer, that should be read carefully before any decision is made with respect to the Offer. Investors and security holders of PharMerica are able
to obtain free copies of these documents and other documents filed with the SEC by Omnicare through the web site maintained by the SEC at
http://www.sec.gov or by directing a request to the Corporate Secretary of Omnicare, Inc., 100 East RiverCenter Boulevard, Suite 1600, Covington, Kentucky
41011. Free copies of any such documents can also be obtained by directing a request to Omnicare's information agent, D.F. King & Co., Inc., by phone at
(212) 269-5550 or toll-free at (800) 769-7666 or by email at info@dfking.com.
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Omnicare Today
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Omnicare Today…
A Leading Provider of Pharmacy Services
A Leading Provider of Pharmacy Services
• Long-term care pharmacy
– Pharmacy services for skilled nursing,
assisted living, chronic care and other settings
assisted living, chronic care and other settings
– 47 states, District of Columbia and Canada
– Dispenses over 110 million prescriptions/year
– Industry leader
• Specialty care
– Supports patients, providers, care-givers,
nurses, physicians and bio-pharmaceutical
companies
nurses, physicians and bio-pharmaceutical
companies
– Dispenses over 8 million prescriptions/year
– Emerging provider with growth rates
outpacing industry average
outpacing industry average
Long-term care pharmacy and specialty care provide two attractive platforms for growth
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Operating Objectives
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Transitioning to an Operations-Driven Company
Focus on Three Core Operating Objectives
Focus on Three Core Operating Objectives
• Establish consistent organic growth in our
Long-Term Care Group
Long-Term Care Group
• Reposition Specialty Care Group for an
elevated level of growth
elevated level of growth
• Create more standardization across the
company
company
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Transitioning to an Operations-Driven Company
Establishing Consistent Organic Growth in LTC
Establishing Consistent Organic Growth in LTC
• Focus on customer retention
– Revamp corporate culture, increase employee engagement
– Align incentive programs with customer service to improve retention
– Reshape the organization to bring it closer to the customer
– Organization-wide focus on the customer
– Objective is to a achieve 95% customer retention rate
• Investments being made to accelerate sales results
– Reorganization of sales force - improve coordination of selling process
– Investments in sales tools, training programs
– Deploy resources in attractive markets
– Refine go-to-market message
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Omnicare is further along with efforts to improve service delivery,
with sales and marketing investments now underway
3Q11 YTD net organic bed loss is 49.5% lower than 3Q10 YTD
Transitioning to an Operations-Driven Company
Establishing Consistent Organic Growth in LTC
Establishing Consistent Organic Growth in LTC
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43.2%
better than
2010
better than
2010
Transitioning to an Operations-Driven Company
Repositioning Specialty Care Group for Elevated Growth
Repositioning Specialty Care Group for Elevated Growth
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Transitioning to an Operations-Driven Company
Repositioning Specialty Care Group for Elevated Growth
Repositioning Specialty Care Group for Elevated Growth
Omnicare specialty care growth has been robust…and opportunities
exist to further accelerate growth through:
exist to further accelerate growth through:
•Continued improvements to the organizational structure
– Investments made in manufacturer-focused sales organization
– Platform-specific experts added to expand breadth of knowledge
•Expanding into other specialty-focused platforms
•Penetrating additional disease states in specialty pharmacy platform
– Primary disease states currently multiple sclerosis and oncology
•Leveraging long-term care business to create new opportunities
Two-year CAGR(1) for Omnicare’s specialty care businesses > 20%
(1) Quarterly revenues based on fourth quarter 2009 results for Advanced Care Scripts, RxCrossroads and excelleRx
(as compared with third-quarter 2009 results)
(as compared with third-quarter 2009 results)
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Transitioning to an Operations-Driven Company
Creating More Standardization
Creating More Standardization
• Technological advancements
– On-site medication availability technology
(pilot)
(pilot)
• Establish benchmarks
– Performance targets drives greater
efficiencies
efficiencies
– Six Sigma quality standards
• Strategic Sourcing
– Leverage assets to maximize efficiencies
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Acquisition Program
Opportunities to Leverage Scale
Opportunities to Leverage Scale
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• Omnicare’s scalable platform makes LTC acquisitions attractive
• Leverage synergies through direct purchasing of generics
• Utilize hub-and-spoke network and automation/technology platforms
• Improvements in customer retention efforts lowers customer attrition risk
• Acquisitions approached in disciplined manner with early involvement of
operators
operators
• PharMerica proposal
• Believe PharMerica to be an excellent fit
• Believe outstanding offer to be a compelling value for PharMerica investors
• Consistent with the country’s ongoing efforts to lower healthcare costs
• Also considering acquisitions to fill-out the specialty care portfolio
Evaluating acquisition opportunities in Long-Term Care and Specialty Care
Industry Outlook
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Demographic Trends
Aging Population Shaping US Healthcare System
Aging Population Shaping US Healthcare System
• Life expectancy continues to lengthen
Source: U.S. Census Bureau
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Persons over age 85 more likely to reside in a skilled nursing facility
Pharmaceutical Market
Trends
Trends
• Development and utilization of specialty drugs increasing
• Major market shift to generic drugs
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Pharmaceutical Market Share(1) by Drug Type
Conventional
Drugs, 72%
Drugs, 72%
Other, 19%
(1) Source: EvaluatePharma
Brand to Generic Drugs
Increasing Utilization of Generics
Increasing Utilization of Generics
(1) Omnicare’s generic prescriptions dispensed as a percent of total scripts
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Generic dispensing rate has increased every quarter since 2006
Major Shift to Generic Drugs
Typical Life Cycle of Nonexclusive Generic Drug
Typical Life Cycle of Nonexclusive Generic Drug
NOTE: Graph is for illustrative purposes only. Not representative of every generic drug, as each generic drug has unique
characteristics.
characteristics.
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Lowers sales but stronger gross profit margin and dollars over time
(1) All generic launches are subject to change due to litigation or pediatric exclusivity.
(2) Drugs already launched shown in gray and italics
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2011
|
2012
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2013
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Fazaclo
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Actos
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Aciphex
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Femara
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Diovan
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Asacol
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Levaquin
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Geodon
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Avodart
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Uroxatrol
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Invega
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Cymbalta
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Vancocin Caps
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Lexapro
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Humalog
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Xalatan
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Plavix
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Lupron Depot
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Zyprexa
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Provigil
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Niaspan SR
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Gabitril
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Seroquel
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Oxycontin
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Lipitor
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Singulair
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Renagel
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Primaxin Inj
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Xopenex
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Travatan
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2011-2013 Potential Patent Expirations(1)(2)
Geriatric Market
Geriatric Market
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Regulatory Outlook
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Regulatory Environment
Current Issues
Current Issues
• Short-cycle dispensing
– Requires dispensing branded drugs bi-weekly, for oral-solids only, to Part D beneficiaries in
skilled nursing facilities
skilled nursing facilities
– Delayed effective date to 1/1/13, reducing impact as more generics enter the market
• AMP-Based Federal Upper Limits (FUL)
– No less than 175% of the weighted average manufacturer’s price (“AMP”)
– Effective 10/1/10, although partial draft FUL lists have only recently been published
– Applies to reimbursement on multi-sourced generics for certain payors
– Omnicare has significantly reduced its exposed by restructuring contracts
– Omnicare believes draft AMP-based FUL’s are highly inconsistent and contain multiple
errors
errors
– No timetable for implementation has been issued
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Anticipate small negative to Omnicare in 2013;
we believe we are best positioned among peers
Negative impact to Omnicare expected
Regulatory Environment
Current Issues
Current Issues
• Consultant pharmacist separation
(consideration only)
(consideration only)
– Separation of consultant pharmacist from
the long-term care pharmacy
the long-term care pharmacy
– CMS believes this model would lower
prescriptions
prescriptions
– Omnicare anticipates higher overall
healthcare costs due to inefficient model
healthcare costs due to inefficient model
• Reduces coordination of care efficiencies
• New Jersey benchmark suggests that
utilization would increase in this proposed
model
utilization would increase in this proposed
model
Anticipate no material impact to Omnicare
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Financial Overview
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Third Quarter 2011 Highlights
• Gross profit increased 2.9% sequentially to $346.1M on 0.7% decrease in sales
– Gross margin sequentially higher by 79 bps to 22.4%, reflecting higher generic
dispensing rates
dispensing rates
• Cash flows from continuing operations of $167.1M increased 22.1% sequentially
and 43.7% over 3Q10.
and 43.7% over 3Q10.
• Adjusted EBITDA(1) increased 7.5% sequentially to $157.2 million
• Adjusted EPS(1) of $0.54 as compared to 2Q11 of $0.50 and 3Q10 of $0.53
• Scripts flat versus 3Q10; 0.7% lower than 2Q11
– Utilization weaker, consistent with industry
– Generic dispensing rate increased 60 basis points sequentially
• Qtr. ending number of beds/patient assistance program (PAP) patients up 2,000
sequentially
sequentially
– Beds 10,000 higher; PAP patients down 8,000
– Net organic bed loss of 8,000 decreased 27.3% from 2Q11 organic net bed loss of
11,000, and decreased 46.7% from 3Q10 organic net bed loss of 15,000
11,000, and decreased 46.7% from 3Q10 organic net bed loss of 15,000
• $54.6 million returned to shareholders through share repurchases and dividends
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(1) Excludes special items. A reconciliation of non-GAAP information has been attached to our press release and is also available on our Web site under
‘Supplemental Financial Information’ from the ‘Investors’ page.
‘Supplemental Financial Information’ from the ‘Investors’ page.
(1) Excludes discontinued operations.
(2) Excludes special items. A reconciliation of certain non-GAAP information is available on Omnicare’s Web site under ‘Supplemental
Financial Information’ from the ‘Investors’ page.
Financial Information’ from the ‘Investors’ page.
Financial Performance
Four Quarter Progression (in $ millions, except per share data)
Four Quarter Progression (in $ millions, except per share data)
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Focus on Cash Flow
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• 17.5% cash flow from operations yield based on current market
capitalization(2)
capitalization(2)
Quarterly Cash Flows from Continuing Operations(1) 2011 vs. 2010 (in $ millions)
(1) Excludes discontinued operations.
(2) As of the close of trading on 10/31/2011
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(1) Through the first nine months of 2011, Omnicare repurchased $200 million of 6.125% senior subordinated notes due 2013 and $425 million of 6.875%
senior subordinated notes dues 2015. During the first nine months of 2010, Omnicare repurchased $125 million of senior term A loans due 2010 and $225
million of 6.75% senior subordinated notes due 2013.
senior subordinated notes dues 2015. During the first nine months of 2010, Omnicare repurchased $125 million of senior term A loans due 2010 and $225
million of 6.75% senior subordinated notes due 2013.
(2) Cumulative % Returned = (Dividends Paid + Share Repurchases) / 12/31/10 Market Capitalization of $2,961.0 million.
• Repurchased an additional 1.8 million
shares ($50.1 million) during 3Q11 (in
addition to 2.3 million shares
repurchased through 2Q11 and 4.4
million repurchased in 2010)
shares ($50.1 million) during 3Q11 (in
addition to 2.3 million shares
repurchased through 2Q11 and 4.4
million repurchased in 2010)
• $78.9 million of authorization remaining
under current share repurchase program
as of September 30, 2011.
under current share repurchase program
as of September 30, 2011.
• 3Q11 dividend of $0.04 per share
• Higher CapEx from technology
investment
investment
(1) Assumes convertible debentures due 2035 are put to the company in 2015 with related tax recapture included and debt amounts shown
are exclusive of unamortized debt discount.
are exclusive of unamortized debt discount.
Capital Structure
Goal is to spread out maturities to limit refinancing risk
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Omnicare’s Fundamental Value Drivers
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Credit Suisse 20th Annual Healthcare
Conference
November 10, 2011