Allion Healthcare: Taking care of business
Allion Healthcare (Nasdaq:ALLI), a specialty pharmaceutical company focused on HIV/AIDS therapies, is ably performing in an attractive market segment. Expected to nearly double earnings this year, Allion is taking care of others and is feeling pretty good itself.
The company offers reimbursement expertise, arrangement of medication delivery and patient consulting services. It operated 11 specialty pharmacies under the MOMS Pharmacy brand in four states and had 15,610 patients at the end of 2007. Allion’s distribution centers are near metropolitan areas in New York, California, Florida, New Jersey and Washington, where the majority of patients live.
And there is a stream of them: in the United States, the World Health Organization says as many as 2 million people were living with HIV/AIDS in the United States at the end of 2005; other data show between 400,000 and 500,000 were taking medicine. There are at least 40,000 — probably many more — new cases of HIV infection each year. The market is estimated at $25 billion for anti-retrovirals and ancillary HIV drugs.
Allion has expanded both internally and through acquisitions, the most recent of which was a purchase in April of Biomed America, a provider of infusion medications for patients with immune deficiencies and other chronic illnesses. And in May, Allion opened a pharmacy in partnership with Lifelong AIDS Alliance of Seattle, which serves more than 3,000 people.
The company intends to continue expansion by raising revenue from its current product base, increasing the number of diseases served and offering more services. It’s open to acquisitions and wants more partnerships.
Strong second-quarter results included the Biomed acquisition and AIDS partnership. Sales in the quarter through June were up 39% from the previous year, to $86 million; the Biomed acquisition added $18 million. Earnings per diluted share nearly doubled to $0.11 from $0.06 for the second quarter of 2007.
For full 2008, the average of two analyst estimates puts earnings at $0.41, up from $0.21 a year ago, and revenues at $325 million, up from $247 million. Allion, which went public in 2005, closed Tuesday at $6.55. The Melville, New York-based company has market capitalization of $167 million.
For 2009, expectations simmer down, with sales seen growing 13% and earnings 15%. Still, Allion has another attraction: large pharmaceutical companies are prowling for specialty providers to help tame higher healthcare costs and cope with the needs of an aging population. Take Walgreens (NYSE:WAG): it’s morphing into a provider since buying last year Option Care Inc. and now offering Take Care Clinics in its drugstores. The CVS/Caremark (NYSE:CVS) merger in 2006 defines the trend.
Competition includes mail-order drug deliverers, such as Express Scripts (Nasdaq:ESRX) and BioScrip (Nasdaq:BIOS), and pharmacy benefit managers including CVS/Caremark and Medco Health Solutions (NYSE:MHS). The main risk, though, is reimbursement, since payment hinges on reimbursement rates paid by government and private payors.
Not only is Allion taking care of business, the business of healthcare may just take extra good care of it.
