Keep your eye on CareRx, Bruce Campbell says

Now that Canadian specialty pharmacy company CareRx (CareRx Stock Quote, Chart, News TSX:CRRX) has emerged with a new branding effort, all that’s left is the follow-through in terms of new contract wins.

That’s according to portfolio manager Bruce Campbell, who thinks the stock and company are in the show-me stage for the moment.

“CareRx is certainly an interesting business,” says Campbell, founder of StoneCastle Investment, speaking on BNN Bloomberg on Thursday. “They’re specialty pharmacy —not pharma— and they have fairly significant contracts with long-term care facilities where they do all the medication needs.”

“One of the biggest reasons why seniors get admitted to hospital is they take the wrong medications at the wrong time or they duplicate their medicines,” Campbell said.

“CareRx has a pouch pack technology where everything is labelled and exactly dosed so that people know exactly when it needs to be administered and at what time and who the patient is so that there’s less confusion,” he said.

Formerly Centric Health, CareRx launched last week, with president and CEO David Murphy saying in a press release, “Our new name perfectly encapsulates the common set of values and aspirations that our team shares as it relates to ‘caring’ for all of our stakeholders – the residents that we serve, our home operator partners and their staff, and our employees.”

By the numbers, CareRx serves over 50,000 residents in over 850 facilities including long-term care homes, retirement homes and assisted living residences. Last year, the company grew its beds served by six per cent with specialty pharmacy revenue from continuing operations grew by 7.9 per cent to $32.2 million. Specialty pharmacy adjusted EBITDA grew by a full 87 per cent to $4.0 million.

CareRx has made a number of significant moves over the past few months, including closing on the sale of its surgical and medical centres business for proceeds of $35 million, signing an agreement to acquire specialty pharma business RemedyRx for up to $44 million and obtaining new financing for proceeds of $35.2 million.

Campbell says CareRx now looks like it’s headed in the right direction. “CareRx had quite a significant debt load which they’ve been working on the last few years to reduce. They made a big dent in that debt when they sold their private surgical business,” Campbell said.

“The second thing that they’ve been able to focus on is really trying to pick up new contracts. Most of these care facilities are done on a contract basis. They have a fair number of beds across the country right now but there’s a fair number that constantly roll over on contracts. They’ve got these fulfillment centres spread across the country whereby they’re close enough to the facilities that they can get efficient service and then at the same time they can capture new contracts,” he said.

“It’s one that we don’t own but that we have in the past. It’s one we continue to watch and we think that the area is interesting but right now we’re waiting to see how they execute now that they’ve got the debt down and what they’re doing with new contracts,” Campbell said.