CANCER PPMs: Nation’s Two Largest Firms Tie The Knot
The nation's two largest cancer management firms announced a $715 million merger yesterday, creating a physician management giant that will care for 13% of new cancer patients in the U.S. The deal uniting American Oncology Resources and Physician Reliance Network would also make the merged company the largest purchaser of cancer drugs after the government, a status company officials hope will lead to annual savings of $12 million (Sit-DuVall, Houston Chronicle, 12/15). Analysts praised the firms for improving convenience and reducing costs for patients by building outpatient clinics that offer chemotherapy, pain management, laboratory services and radiation all in one facility. "These are really good companies with a clear structure and strong management," said Brooks O'Neil, a Piper Jaffray analyst. "They've got a model that's been well-developed and is easily replicable in many markets around the U.S.," he added (Ornstein, Dallas Morning News, 12/15). American Oncology CEO Dale Ross said the merger would lure "big corporate health plans and ... pharmaceutical companies looking for large medical practices to handle clinical drug tests." Analyst Art Dickerson of William M. Mercer Inc. said, "It's just managed care forcing another round of consolidation. ... You keep your margins up by merging and eliminating redundant services" (Chronicle, 12/15). With $868 million in annual revenue, 700 physicians and 306 service sites in 24 states, Ross believes the new company will achieve "critical mass" (American Oncology Resources release, 12/14).
Show Me The Money
The deal, slated to close in the second quarter of next year pending shareholder and regulatory approval, would exchange each Physician Reliance share for 0.94 shares of American Oncology, which will also assume $60 million in debt. News of the merger sent shares of American Oncology down 81 cents to close at $12.19 Monday. Shares of Physician Reliance fell 50 cents to close at $11 (Dallas Morning News, 12/15). Ross will serve as chair and CEO of the new company, while Physician Reliance CEO John Casey will be a member of the board. The new company will be headquartered in Houston (Chronicle, 12/15).