Acquisition adds innovative pharmacy services
delivery model with meaningful organic growth expected from
existing customers
TORONTO, March 30, 2022 /CNW/ - CareRx Corporation
("CareRx" or the "Company") (TSX:
CRRX), Canada's leading provider of pharmacy services to
seniors living and other congregate care communities, announced
today it has entered into a definitive asset purchase agreement to
acquire Hogan Pharmacy Partners Ltd. ("Hogan"), a long-term
care pharmacy serving approximately 725 residents in long-term care
and retirement homes in Ontario
(the "Transaction").
In connection with closing of the Transaction
("Closing"), CareRx will sign a new seven-year contract with
Hogan's largest customer, a regional seniors living operator,
representing approximately 85% of the beds serviced by Hogan.
Hogan's customers are expected to increase their beds serviced by
over 1,200 beds by the fourth anniversary of Closing based on new
license allocations and other anticipated growth plans, which is
expected to increase the total beds serviced to approximately
2,000.
Hogan has distinguished itself from other long-term care
pharmacies in Ontario through the
"Hogan Model", an award-winning, technology-enabled model of
pharmacy services. The Hogan Model utilizes biometrically secured
"smart" medication dispensing cabinets, 24/7 pharmacist support and
a fully integrated enterprise resource planning system that reduces
medication errors and waste and improves resident care and safety
through a closed-loop medication system. The Hogan Model, which
operates under a different commercial arrangement with customers
than CareRx's current model, provides significant value-added
resources to long-term care homes and residents, including freeing
up nursing time to focus on direct resident care and significantly
reducing wait times for first doses of medication when residents
transition into long-term care homes. The Hogan Model is protected
by a Canadian patent application that CareRx will acquire as part
of the Transaction.
"The Hogan team has built a pharmacy services model that is
truly unique amongst long-term care pharmacies," said David Murphy, President and Chief Executive
Officer of CareRx. "The Hogan Model combines innovative
technologies, application integration and processes with high-touch
pharmacist support that effectively provides an on-site pharmacy
within long-term care homes. Our acquisition of Hogan will extend
our technology leadership position and provide our home partners
with additional choice from a service delivery standpoint, thereby
further differentiating us from our competitors."
The Transaction consideration is composed of $2.2 million of CareRx common shares ("Common
Shares"), the number of which will be determined based on the
volume weighted average price of the Common Shares prior to
Closing, and a $2.2 million vendor
take-back note (the "VTB Note") of which $1 million is repayable after 18 months,
$0.4 million is repayable after 36
months, and the final $0.8 million is
repayable after 48 months. To the extent that Hogan's customers do
not achieve the expected additional bed growth by the fourth
anniversary of Closing, the final $0.8M principal repayment on the VTB Note will be
subject to downward adjustment, subject to an ability to extend the
maturity date in certain circumstances.
The Transaction is expected to be immediately accretive to
CareRx's earnings, with the purchase price representing an
annualized run-rate Adjusted EBITDA multiple of approximately 5.7
times prior to any contribution from expected bed growth and any
cost savings synergies from the integration of the operations of
the two businesses.
Closing is expected to occur in May
2022.
About CareRx Corporation
CareRx is Canada's leading
provider of pharmacy services to seniors living communities. We
serve over 96,000 residents in over 1,600 seniors and other
congregate care communities (long-term care homes, retirement
homes, assisted living facilities, and group homes). We are a
national organization with a large network of pharmacy fulfillment
centres strategically located across the country. This allows us to
deliver medications in a timely and cost-effective manner and
quickly respond to routine changes in medication management. We use
best-in-class technology that automates the preparation and
verification of multi-dose compliance packaging of medication,
providing the highest levels of safety and adherence for
individuals with complex medication regimes. We take an active role
in working with our home operator partners to promote resident
health, staff education, and medication system quality and
efficiency.
Forward-Looking Statements
This press release contains statements that may constitute
"forward-looking statements" within the meaning of applicable
Canadian securities legislation. These forward-looking statements
include, among others, statements regarding the Company's business
strategy, plans and other expectations, beliefs, goals, objectives,
information and statements about possible future events, including
the completion of the Transaction. Forward-looking statements
generally can be identified by the use of forward-looking
terminology such as "may", "will", "expect", "intend", "estimate",
"anticipate" or similar expressions suggesting future outcomes or
events. Such forward-looking statements reflect management's
current beliefs and are based on information currently available to
management.
Forward-looking statements involve risks and uncertainties that
could cause actual results to differ materially from those
contemplated by such statements. Factors that could cause such
differences include the Company's exposure to and reliance on
government regulation and funding, the Company's liquidity and
capital requirements, exposure to epidemic or pandemic outbreak,
the highly competitive nature of the Company's industry, reliance
on contracts with key customers and other risk factors described
from time to time in the reports and disclosure documents filed by
the Company with Canadian securities regulatory agencies and
commissions. These and other factors should be considered carefully
and readers should not place undue reliance on the Company's
forward-looking statements. As a result of the foregoing and other
factors, no assurance can be given as to any such future results,
levels of activity or achievements and neither the Company nor any
other person assumes responsibility for the accuracy and
completeness of these forward-looking statements. The factors
underlying current expectations are dynamic and subject to
change.
Non-IFRS Measures
This press release includes certain measures which have not been
prepared in accordance with IFRS such as "EBITDA" and "Adjusted
EBITDA". These non-IFRS measures are not recognized under IFRS and,
accordingly, shareholders are cautioned that these measures should
not be construed as alternatives to net income determined in
accordance with IFRS. The non-IFRS measures presented are unlikely
to be comparable to similar measures presented by other
issuers.
The Company defines "EBITDA" as earnings before depreciation and
amortization, finance costs (income), net, and income tax expense
(recovery). "Adjusted EBITDA" is defined as EBITDA before
transaction and restructuring costs, change in fair value of
contingent consideration liability, impairments, change in fair
value of derivative financial instruments, change in fair value of
investment, gain on disposal of property and equipment and
stock-based compensation expense. The Company believes that
Adjusted EBITDA is a meaningful financial metric as it measures
cash generated from operations which the Company can use to fund
working capital requirements, service interest and principal debt
repayments and fund future growth initiatives. The Company's
agreements with lenders are also structured with certain financial
performance covenants which includes Adjusted EBITDA as a key
component of the covenant calculation. EBITDA and Adjusted EBITDA
are not recognized measures under IFRS.
SOURCE CareRx Corporation