Home infusion market sees supply-and-demand issues

YARMOUTH, Maine - It has been a hot market in the past, but there aren't a lot of deals being done in home infusion these days, mainly due to a shortage of inventory, say M&A analysts.

“There are fewer new startups and the other guys have been consolidating,” said Reg Blackburn, managing director of specialty pharmacy and infusion services for The Braff Group. “It's definitely a supply and demand issue.”

That's good news for sellers, with valuations in home infusion remaining strong, says Bruce Burns, president and CEO of Affinity Ventures.

“If you are sitting on a good piece of property we can maximize the value for them easily and get multiple offers,” he said.

A temporary payment fix scheduled to take effect on Jan. 1, 2019, will boost valuations further, says Jonathan Sadock, managing partner/CEO of Paragon Ventures.

“The reimbursement is improving,” he said. “The valuations in home infusion are some of the strongest I've seen.”

With fewer acquisitions being done, companies are focused on growing their existing business, particularly in the specialty infusion market, says Blackburn.

“That's really where the growth is,” he said. “The biggest driver is IVIg therapy, so you do see specialty pharmacy players starting IVIg programs and seeing a better gross profit there.”

With giant companies like Coram, Option Care, BioScrip and OptumRx at one end of the spectrum and smaller independents with a handful of locations at the other, it's likely that at some point there will be further consolidation in the market, say analysts.

“I think the smaller companies are starting to build up again, which will lead to another wave of consolidation a few years down the road,” said Justin Ishbia, a founder and managing partner of Shore Capital Partners, a private equity firm that used to own a home infusion company.

Both big and small companies have a place in the market, says Ishbia.

“I think a large company always has challenges of competing with a local operator,” he said. “I think both have a lot of advantages and they intersect in markets like this in good times. Both players can win for a period, but we'll see who is the favored outcome for local referral sources.”