PharMerica (PMC) shares soared 13.4% on Thursday amid rumors that the pharmacy company may be shopping for a buyer. The sale rumors come just weeks after the company’s CFO David W. Froesel Jr. announced that he would be retiring in September.
Traders are certainly under the impression that the company will pull the trigger and possibly sell. Here’s why:
1. The Company Enlisted the Help of UBS (UBS) and Bank of America (BAC)
PharMerica has allegedly enlisted the help of UBS and Bank of America to explore strategic alternatives, which includes a possible sale.
Bank of America and UBS are reportedly working with the company the sale process. The process has proven fruitful and already attracted the interest of private equity firms.
Sources close to the matter caution that it is still uncertain as to whether the company will decide to sell.
News of the potential sale comes five years after the company received an unsolicited takeover bid from Omnicare Inc., which was eventually acquired by CVS Health Corporation (CVS).
2. The Company is Facing Increased Pressure Due to Medicare Payment Cuts
PharMerica has been facing increased pressure as Medicare and other government payers cut back on payments for certain types of care.
In June, the Obama administration announced that it would be adjusting its plan to reduce Medicare payments for certain prescription drugs. In March, the administration also announced that it was exploring new ways to cut Medicare’s spending on prescription medications.
3. The Company’s Net Income Declined in the First Quarter
Second-quarter results for PharMerica were in line with expectations, but still concerning. Net income was at $2.5 million, which was 8.7% higher year-on-year, but 39% lower compared to the first quarter of the year. Adjusted earnings per share was at 47 cents, 2.1% lower than the same quarter last year.
Nevertheless, PharMerica would still be an attractive buy, and would add $519 million in quarterly revenue to the buyer.
