Augmenting its non-acute care medication adherence solutions
) completed the acquisition of SurgiChem Limited, a wholly-owned
subsidiary of Bupa Care Homes, for a cash transaction valued at
The company plans to integrate SurgiChem with MTS Medication
Technologies Limited, Omnicell's existing medication adherence
business in the U.K.
The significance of medication adherence is gaining importance
with each passing day. According to the World Health Organization,
poor adherence increases chances of medical complications, to the
extent of death and morbidity. As per Omnicell, up to two-thirds of
all medication-related hospitalizations are caused by medication
non-adherence. Notably, 50% of population in developed countries
does not follow the prescribed course of medication.
Omnicell believes with the need for medication adherence rising,
the SurgiChem acquisition will be a strategic fit to the company's
growth plans. The company currently expects to shield itself by
pursuing a three-pronged strategy of domestic expansion, selective
acquisitions and targeted international expansion.
Accordingly, the company upgraded its financial guidance for
2014. Following the SurgiChem acquisition, earnings per share (EPS)
expectation has been raised to the range of $1.18 to $1.24 (from
earlier guided range of $1.17 and $1.23) on revenues of $420 and
$430 million ($415 and $425 million), representing annualized
growth of 10% to 13%. The Zacks Consensus Estimate for EPS is 92
cents, way below the guided range while the benchmark for revenues
of $425 million remains within the range. The company also expects
the acquisition to be accretive by 3 cents per share annually.
Estimated product booking for 2014 has also been raised to the
range of $345 to $355 million from $340 to $350 million.
Omnicell, a provider of medication and supply management
solutions to healthcare systems, serves a niche industry but faces
stiff competition in the market. However, the MTS Medication
Technologies subsidiary has consistently yielded encouraging
results for Omnicell. This has prompted the company to further
penetrate the non-acute care market on the back of strategic
Medication non-adherence has emerged as a potent issue in public
health care systems. The market holds underlying opportunities as
both healthcare systems and community pharmacies are of the view
that medication adherence is a key to delivering better clinical
outcomes and financial results. The present market scenario has
encouraged Omnicell to undertake such an acquisition.
It is expected to set a platform for the company to provide
comprehensive solutions, as its MTS brand and the SurgiChem
products complement each other well in addressing the medical
adherence problem in the U.K. This integration is expected to widen
the range of products and services across the U.K. medication
adherence packaging market.
The acquisition will widen Omnicell's scope within a niche
segment by increasing penetration levels in the overseas market. We
believe such selective buyouts, particularly outside the U.S., will
help Omnicell generate impressive revenues and ease the pressure on
margin expansion in the long run.
Currently, Omnicell carries a Zacks Rank #2 (Buy). Investors
interested in the broader medical industry can also look at stocks
like Merge Healthcare Incorporated (
), Abaxis, Inc. (
) and Hologic Inc. (
), all carrying a similar Zacks Rank #2.
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