Cardinal Health (CH) has sourced an opportunity in the independent community oncology space to acquire Integrated Oncology Network (ION) for $1.1bn. CH manufactures laboratory products, distributes them, operates facilities, and provides performance and data solutions. CH’s Pharmaceutical and Specialty Solutions segment operates one of the largest pharmaceutical supply chains in the US, with distribution centers that maintain fast delivery to patients. The multinational healthcare services company wants to build a larger focus on oncology and specialty services. In addition, they are looking to expand its offerings past Navista and Specialty Networks (which it recently acquired on March 18, 2024). The deal was announced on the 20th of September 2024, and it will be an all-cash transaction.
Oncology is a medical specialty that focuses on the diagnosis, treatment, and prevention of cancer, and ION partners with specialty healthcare providers to enhance the lives of patients and physicians. ION differentiates itself by having a proven model that provides extensive support for community oncology (medical, radiation, urology, diagnostic testing, and other ancillary services). Moreover, they specialise in the patient-centered, evidence-informed field of cancer care. This includes utilising mind and body practices, natural products, and lifestyle modifications alongside conventional cancer treatments to provide solutions for patients. CH hopes to leverage ION’s 50 practice sites in 10 states, representing over 100 providers, and they will benefit from ION’s extensive reach in local communities.
ION has a flexible business model and meets member practices where they are and its support services include revenue cycle management, payor relations, physician recruitment, practice marketing, finance, accounting, human resources, and information technology.
As a result of this transaction, numerous synergies will be exploited, such as ION practices becoming members of Navista. ION’s practices in management and growth services will benefit from access to Navista’s advanced analytics capabilities that use artificial intelligence. ION will have access to the technology that should allow them to become more innovative, helping them grow and impacting patients positively. Furthermore, ION services can use Specialty Networks PPS Analytics, and SoNaR technology solutions to create actional clinical and business insights.
Part of ION is comprised of the California Cancer Associates for Research and Excellence (cCare) practice, which will be able to provide higher quality, lower-cost, patient-centered cancer care. cCARE will stay independent which is imperative for preserving the trust that patients and communities have in their solutions.
Surprisingly, shortly after the deal, CH shares fell slightly from a price of $111.84 to $106.54. However, the deal follows a large spike in the share price from July to August, where the share price increased by $15 from $95 to $110. Perhaps, investors had priced in more than they thought the company was worth and the stock price is still recovering from this slight overvaluation. Moreover, CH has an extremely large Price-to-Earnings (P/E) ratio of 179.98 which could explain this shortfall.
Overall, ION complements and will expand Cardinal Health's holistic suite of clinical and practice management solutions designed to support independent community oncology practices.
Sources: Newsroom, Nasdaq, MergerLinks
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