Twelve years ago David Jonas, freshly retired from his 25 year career with Baxter International, decided to start a new company.
To do this, he took over a business unwanted by Baxter at the time as it was losing money, and successfully turned it into a leader in the niche industry of creating compound drugs that are unavailable to hospitals from traditional pharmaceutical markets.
Thanks to Jonas’ dedication and business savvy, PharMEDium now supplies close to 70 percent of this specialized market segment, with most of the remaining 30 percent provided by thousands of smaller outfits and regional players.
This is hardly surprising, as the compounding business is very difficult to break into due to the huge investment requirements for equipment and facilities. The process also demands complete dedication to sterile procedures in order to build a reputation for doing it right and all that, under an even more stringent than usual FDA review.
“I just don’t think that there’s really a meaningful competitor in the space today,” noted Gordon Pan, the Managing Partner of Baird Capital which invested in PharMEDium in 2003.
Jonas’ hard work has paid off, as the 9.1 percent of the company he owns as a director just netted him $234 million from the successful sale of PharMEDium to AmerisourceBergen.
The Chesterbrook based company purchased the compound business for $2.58 billion, and as a result can now add over 2,000 compounds to its services which focus on drugs for surgeries, pain management, and epidurals for deliveries.
The purchase is not a sure bet however, as the new business comes with an open warning letter cautioning of health risks for patients, as well as with the possibility that the growth and consolidation of hospitals could lead to lower prices.
The upside heavily outweighs the downside for AmerisourceBergen though, as the pharmaceutical distributor immediately jumped on the deal after PharMEDium laid out its financials in its IPO filing. The all-cash purchase was finalized on November 6.
“AmerisourceBergen is very diligent, very careful when it comes to what businesses they want to operate,” stated Vishnu Lekraj, a health care analyst at Morningstar.
