HOME INFUSION INDUSTRY OVERVIEW - Harris Williams

[Pages:7]HOME INFUSION INDUSTRY OVERVIEW

June 2014

Investment banking services are provided by Harris Williams LLC, a registered broker-dealer and member of FINRA and SIPC, and Harris Williams & Co. Ltd, which is authorised and regulated by the Financial Conduct Authority. Harris Williams & Co. is a trade name under which Harris Williams LLC and Harris Williams & Co. Ltd conduct business.

HOME INFUSION MARKET OVERVIEW

Cost-containment trends and developments in the clinical administration of infusion therapy support the sustained growth of the $11.0 billion home and alternate site infusion therapy industry.

"Traditional" infusion therapies typically treat shorter-term / acute patient conditions, while "specialty" infusion

therapies are typically more expensive, require high value services, and are longer-term drug therapies addressing patients' chronic conditions.

Expanding patient population driven by:

? Aging U.S. population ? Increasing incidence of chronic conditions ? Increased patient access to healthcare

Increasing penetration of home and alternate site infusion services resulting from:

? Continued recognition of the benefits of home infusion therapy ? Patient preference ? Shift from acute care settings to lower cost, high quality alternate sites ? Robust pipeline of infusible drugs

INFUSION THERAPY PRODUCT MARKET SHARE

CHRONIC CONDITION CONTINUUM

Hydration 2%

Chemotherapy 2%

Pain Management

4%

Total Parenteral Nutrition 10%

Other 16%

IVIg/Specialty Pharmaceuticals

13%

Anti-infectives (antibiotics) 28%

Enteral Nutrition 25%

Revenue / Patient

Represents Size of Market ($ in millions)

$30,000 $25,000 $20,000

Total Parenteral Nutrition $1,100

IVIg/Specialty Pharmaceuticals

$1,430

$15,000 $10,000

$5,000 $0

Anti-infectives

(antibiotics)

Enteral Nutrition

$3,080

$2,750

Hydration

Chemotherapy

$220

$220

Pain Management

$1,000

Acute

Weeks / Months

Years / Lifetime

Chronic

Source: Equity and market research. 1

INDUSTRY GROWTH DRIVERS: INCREASING PENETRATION OF HOME INFUSION

Penetration of home and alternate site infusion therapy services is increasing as industry constituents better understand the cost savings and preferences of outpatient treatment.

Shift to lower cost, high quality alternate site providers.

? As much as 90% cost savings when compared to the same infusion care conducted in an institutional setting ? Payor preference for lower cost, high quality outpatient treatment will continue to increase demand for at-home or alternate site

infusion services

Patient and caregiver preferences continue to shift toward at-home or alternate site care for non-financial

reasons.

? 85% of Americans view the availability of long-term care services in the home as very or extremely important1 ? The percentage of people over 75 living in nursing homes fell from 10% in 1985 to less than 6% in 20101

$1,600 $1,400 $1,200 $1,000

$800 $600 $400 $200

$0

PER DAY COST SAVINGS VS. HOSPITAL

$1,500

Hospital

~90% Cost Savings $200

Home or Alternate Site

Source: Pharmaceutical Commerce. (1) AARP national survey 2010.

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INDUSTRY GROWTH DRIVERS: EXPANDING PATIENT POPULATION

Home and alternate site infusion therapy segment growth is driven by favorable demographic and secular trends which lead to an expanding patient population.

Elderly population more likely to develop conditions requiring infusion therapy.

? By 2050P, 19% of the population will be over 65, compared to only 13% today

Increased incidence of chronic conditions as a result of growing size and lengthening life span of senior

population and unhealthy lifestyle of younger Americans.

? Over 170 million Americans will be afflicted with a chronic disease by 2030P

The Patient Protection and Affordable Care Act will grant more than 32 million previously uninsured individuals

access to medical coverage increasing the potential patient population for home infusion therapy.

Senior Population (millions) Chronic Disease Patients (millions)

U.S. SENIORS BY AGE AND % OF POPULATION

For the Years 2010 ? 2050P

100 90 80 70 60 50 40 30 20 10 0 2010

2020P

2030P

2040P

25% 23% 20% 18% 15% 13% 10% 2050P

Persons Over 65

Percent of Popula tion

Seniors as a % of U.S. Population

CHRONIC DISEASE IN THE U.S.

For the Years 1995 ? 2030P 180

160

140

133 125

118

120

100

80

60

40

20

0 1995 2000 2005

171 164 157 149 141 2010 2015P 2020P 2025P 2030P

Source: U.S. Census and RAND Corporation. 3

REIMBURSEMENT ENVIRONMENT

Home and alternate site infusion therapy services reimbursement trends should continue to support the shift of patient care away from the hospital setting.

Most common method of payment used by private health

care plans and Medicare Advantage plans is a threecomponent payment consisting of:

? A payment for the drug;

? A per diem payment for supplies, equipment, pharmacy services, and other non-nursing services; and

? A payment for each episode of nursing care

Majority of health plans pay for drugs based on a discount

to the average wholesale price.

Home infusion therapy is typically reimbursed under

medical coverage rather than the pharmacy benefit due to the high-touch service offering.

INDUSTRY REIMBURSEMENT MIX

Private Pay 5%

Medicaid 10%

Medicare 15%

Commercial 70%

Source: Market and industry research. 4

COMPETITIVE LANDSCAPE

The home and alternate site infusion therapy services market is highly fragmented.

Highly fragmented market with no individual provider

comprising more than 10% market share.

? Handful of larger, national providers offer home and alternate site infusion as part of a larger product and service offering

? 800 to 1,000 small, independently-owned providers ? Hospital systems that provide infusion services to their patients in a

hospital setting

Meaningful barriers to entry:

? Referral source and payor relationships ? Recruitment and retention of clinical staff ? Brand recognition ? Strict billing and regulatory requirements of the industry

The industry has experienced consolidation of individual or

smaller networks by larger, more established alternate site infusion companies.

? Local participants struggle with the complex operational and regulatory requirements of the industry and most lack sufficient infrastructure or capital for continued regional expansion

HIGHLY FRAGMENTED INDUSTRY

CVS, Coram

10%

Walgreens, Option Care

6%

Express Scripts, Critical Care Systems 5%

Bioscrip 5%

Other Independents

74%

Source: Market and industry research. 5

DISCLOSURES

Harris Williams & Co. () is a preeminent middle market investment bank focused on the advisory needs of clients worldwide. The firm has deep industry knowledge, global transaction expertise, and an unwavering commitment to excellence. Harris Williams & Co. provides sell-side and acquisition advisory, restructuring advisory, board advisory, private placements, and capital markets advisory services.

Investment banking services are provided by Harris Williams LLC, a registered broker-dealer and member of FINRA and SIPC, and Harris Williams & Co. Ltd, which is authorised and regulated by the Financial Conduct Authority. Harris Williams & Co. is a trade name under which Harris Williams LLC and Harris Williams & Co. Ltd conduct business.

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Copyright ? 2014 Harris Williams & Co., all rights reserved.

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