CVS Caremark Corporation
) has entered into a definitive agreement to buy drug infusion
services provider Coram LLC at an estimated price of $2.1
billion. CVS shares gained 67 cents on the news to end the
session at $66.76 on Nov 27, 2013. It expects to close the deal
in the first quarter of 2014.
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Coram is owned by Apria Healthcare Group, a
) portfolio company. It offers infusion services at lesser costs
to patients' homes, which otherwise can be administered either at
hospitals or physicians' offices at a higher expense.
With the impending integration of Coram into the PBM business,
CVS Caremark seeks to enhance the range of services to include
infusion therapy, that mostly deals with administering
medications and nutrition to patients who are dehydrated, have
nutritional deficiencies, infections, diabetes, cancer or renal
CVS Caremark, expects the acquisition to add $1.4 billion to
revenues in the first year and 3 to 5 cents per share to its
adjusted (EPS) in 2015. Additionally, CVS Caremark can access
Coram's extensive network, catering to around 20,000 patients.
Coram is expected to strengthen its position in the specialty
pharmaceutical business, a growth driver of the PBM segment. In
the most recent quarter, the company disclosed that its PBM
business registered growth of 28%, aided by the specialty
The pharmacy benefit management (PBM) business of CVS Caremark,
is a part of the Pharmacy Services segment and offers a wide
range of services comprising of mail order pharmacy services,
specialty pharmacy services, plan design and administration,
formulary management and claims processing. Specialty pharmacies
support individuals who require complex and expensive drug
therapies. CVS Caremark, as a pharmacy benefit manager,
administers prescription drug benefit programs for employers and
The entry into such specialized services by the second largest
PBM company is of great significance, as major pharma companies
are planning to develop niche drugs for complex disorders. Such
new services will help manage overall cost of care delivery.
Currently, CVS Caremark carries a Zacks Rank #3 (Hold). Investors
interested in the industry may consider stocks like
Rite Aid Corp.
) carrying a Zacks Rank #1 (Strong Buy) and
) carrying a Zacks Rank #2 (Buy).