In a bid to strengthen its foothold in the international market,
), a leading developer and marketer of end-to-end automation
solutions for the medication-use process, recently completed the
acquisition of MTS Medication Technologies, Inc., a global
medication adherence packaging systems provider.
Following the acquisition, MTS Medication will operate as a
wholly-owned subsidiary of Omnicell but with the same brand
Earlier on May 2, 2012, Omnicell entered into this deal with an
offer price of $156 million in cash, subject to certain
adjustments. Omnicell exited the first quarter 2012 with cash, cash
equivalents and short-term investments of $209.5 million compared
with $199.8 million at the end of December 2011. The transaction is
expected to be accretive in 2012 and boost the bottom line in
fiscal 2013 by roughly 15 -17 cents per share.
The MTS Medication products are mostly used by the institutional
clients to supply long-term care and non-acute care facilities with
medication packages to follow the prescriptions. Currently, the
company serves for 6,000 pharmacies across the world providing
automated packaging systems for international epidemic.
This critical problem of medication non-adherence remains at an
alarming note as the current data shows that it costs up to $290
billion annually and is the cause of death for approximately
125,000 people a year. According to the Centers for Medicare and
Medicaid Services (CMS), 11% of all hospital admissions are related
to this issue.
Omnicell remains optimistic regarding the acquisition of MTS as
it will enable the company to access MTS' automated medication
adherence packaging equipment and consumables. This will allow the
company to offer a complete automated medication management system
across the acute and non-acute range of patient care.
Omnicell strongly believes that together with MTS, it will
emerge as a market leader for medication management solutions
across the broad range of health care beyond the acute care
setting. The company also expects this to deliver superior results
while lowering costs considerably.
Outside the U.S., the healthcare providers are becoming
increasingly aware of the benefits of automation. Many governmental
and private entities are aware of the progress made over the last
several years in the U.S. and are starting to invest significantly
in information technology and automation.
Given the fact that the international market is less than 1%
penetrated with very few hospitals adopting medication control
systems, Omnicell aims to derive a significant portion of its
revenues from international operations in the longer term.
To achieve this, the company is aiming to expand its
international footprint through various strategies. Following its
entry in China last year and the launch of Mandarin-language
versions of G4 platform, the company encouragingly reported initial
sales in China in the last quarter. Additionally, Omnicell
announced a partnership with China resources Beijing Pharmaceutical
for distributing its automated medication dispensing systems in
Moreover, in January 2012, Omnicell launched its G4 platform in
the Middle East. Considering the rising investment in information
technology (IT) by healthcare providers and taking into account the
huge untapped market for automated healthcare management systems in
China, we expect Omnicell's entry into the Chinese and Middle East
markets to further enhance the company's international endeavor
going forward. Moreover, we think that the company's acquisition of
MTS Medication will be beneficial to this strategy.
However, several macroeconomic uncertainties as well as intense
competition from major players such as
) remain concerns. Currently, Omnicell retains a short-term Zacks
#2 Rank (Buy). Over the long term we are Neutral on the stock.
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