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Omnicell Expands on SurgiChem Buyout

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Omnicell, Inc. (OMCL - Free Report) has forged a new agreement with Bupa Care Homes to take over the entire outstanding share capital of SurgiChem Limited, a wholly-owned subsidiary of Bupa. The cash transaction is valued at $19.6 million, subject to certain adjustments and clearance from the UK competition authorities.

SurgiChem, based in Stockport, U.K. with 21 employees, is a provider of medication adherence packaging systems and solutions to the UK community and home care markets.

Omnicell, a leading provider of medication and supply management solutions to healthcare systems, serves a niche industry but faces stiff competition in the market. However, it expects to shield itself by pursuing a three-pronged strategy of domestic expansion, selective acquisitions and targeted international expansion.

The MTS Medication Technologies subsidiary has consistently yielded encouraging results for Omnicell. This has prompted the company to further penetrate the non-acute care market on the back of strategic investments.

Medication non-adherence is gradually emerging as a potent issue in public health care systems. The market holds underlying opportunities as both healthcare systems and community pharmacies are of the view that medication adherence is a key to delivering better clinical outcomes and financial results. Poor adherence increases chances of medical complications, to the extent of death and morbidity. It can shoot healthcare expenses up by as high as $290 billion annually and cause 125,000 deaths in a year.

The present scenario of the market, has encouraged Omnicell to undertake such an acquisition. It is expected to set a platform for the company to provide comprehensive solutions, as its MTS brand of products and the SurgiChem products complement each other well in addressing the medical adherence problem in the U.K. This integration is expected to widen the range of products and services across the UK medication adherence packaging market.

The acquisition will widen Omnicell’s scope within a niche segment by increasing penetration levels in the overseas market. We believe that such selective buyouts, particularly outside U.S., will help Omnicell generate impressive revenues and ease the pressure on margin expansion in the long run.

Currently, Omnicell carries a Zacks Rank #4 (Sell). Investors interested in the industry can look at stocks like Align Technology Inc. (ALGN - Free Report) sports a Zacks Rank #1 (Strong Buy) while Cardinal Health, Inc. (CAH - Free Report) and Affymetrix Inc. carry a Zacks Rank #2 (Buy).

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