The current viability of the Infusion Pharmacy Market
The IVIG U.S. market: a snapshot
The U.S. IVIG market was valued at $3.13 billion in 2017, and is expected to reach $5.04 billion by 2025, with a 6.1% CAGR over the forecast period. Demand for IVIG is rising quickly thanks to its role in treating primary immunodeficiency diseases (PIDs) such as hypogammaglobulinemia and congenital AIDS. At least 1 in 1,200 people in the U.S. suffers from PIDs, according to the American Board of Internal Medicine1. Awareness of PID is growing; leading to an increased incidence of the disease.
Demand for IVIG is growing most rapidly from it use in autoimmune disorders. Most of these are off-label. Autoimmune disorders have traditionally been treated with IG administered intravenously, however since Hizentra’s approval for CIDP in early 2018, there has been a rising use of SCIG in autoimmune disorders. “SCIG is now 20% of our IG business, and we are definitely operating in some niche areas. I’m confident this is the future of IG therapy, due to increased autonomy and fewer systemic side effects experienced with SCIG.”2
Intravenous route of administration is most commonly used in the treatment of autoimmune diseases and accounted for the largest market share in 2014. Subcutaneous administration is anticipated to be growing at a lucrative CAGR of over 9.0% during the forecast period. This can be attributed to the associated potential advantages such as fewer side effects and shorter response time with subcutaneous route of administration and rising preference for subcutaneous home-based self-infusion. The rising incorporation of subcutaneous immunoglobulin in the treatment of primary immunodeficiency diseases and in replacement therapy is anticipated to provide growth platform to the immunoglobulin market in the next seven years.3
Subcutaneous administration is expected to grow at a rate of 9.8% over the next three years. Subcutaneous Immunoglobulin Replacement Therapy (SCIG) is generally a much lower-cost method of administering IVIG, since it often removes the need for a nurse.
A variety of devices have been introduced for administering IVIG, facilitating ease of use and accessibility, especially in-home care. Infusion pumps, intravenous sets, IV cannulas, and needleless connectors are all commonly used in IVIG home infusion. As the availability of devices, such as smart pumps, help more patients receive safe and accurate Immunoglobulin (IG) treatment, the overall pharmacy market for IG therapy will grow too.
North America was the largest regional market for IVIG in 2018, primarily due to a large geriatric population (Americans aged 65 and older will make up 21% of the country’s population by 2030, up from 15% in 2017), and an increased prevalence of chronic ailments, including PIDs & autoimmune disorders.
Given that patients who are administered IVIG treatment often require long-term therapy and conditions treated by IVIG are on an upward trend, the North American dominance of the IVIG market is expected to continue. An uptick in the popularity of alternate healthcare settings and home infusions will also boost the growth of IVIG in North America, making IVIG treatments more affordable and shifting IVIG from acute care to home care settings.
Should I sell my infusion pharmacy?
Due to the growth of IVIG, it is a seller’s market for infusion pharmacy. Although the multiples are probably close to the top, if you can justify the risk and want to keep yourself invested in a growing market, stay in. We suggest exploring the market for potential investors who can provide you with growth capital and operational support. While the future is never certain, what we do know at the moment is that the demand for IVIG is high.4
What is the value of a specialty infusion pharmacy?
Depending on the patients and markets served, a strategic buyer might pay as much as 90% revenue for a specialty infusion pharmacy with the right synergies at play. Financial buyers will generally buy in somewhere around 5-7 times EBITDA, depending on variables such as:
Regions the pharmacy is serving.
IVIG dispensing network.
The drug therapies are offered.
Who are the buyers of infusion pharmacies?
Strategic buyers of infusion pharmacies include regional infusion pharmacies generating between $100 million to $500 million in sales. Many mid-market specialty pharmacies are interested in growing their infusion business and see purchasing acquisitions as a method of growing: “growth through acquisitions” as opposed to “organic growth.” Home health companies who want to add infusion pharmacy services to their existing patient services are also showing increasing interest in purchasing infusion pharmacies.
Financial buyers, such as private equity firms, may be interested in infusion pharmacies generating a minimum of $2 million of EBITDA for bolt-ons and, at least $5 million EBITDA for platform companies.
What is the competitor risk?
As of now, there isn’t much competitor risk in the IVIG market.5 There is no consolidator in the IVIG market space who is stealing quantifiable market share away from independent infusion pharmacies (unlike specialty or retail pharmacies). This is due to the fragmented IVIG business among the hospital, doctors’ offices and home infusions. However, the IVIG market could start to shift once URAC fully rolls out its Infusion Accreditation Program.6 The presence of an accreditation process for IVIG may entice more health providers, large cap pharmacies, private equity firms to enter the market. The largest risk right now is PBM wholly-owned subsidiary pharmacies, who can convert referrals, however, local infusion pharmacies with a niche seem protected due to their local high-touch service.
Is this the time to invest in the IVIG market?
One of the limiting factors in IG growth is the supply side of goods, not demand. Manufacturers are having trouble keeping up with demand at this point. We don’t believe this is a strong enough headwind to preclude investment in the Infusion Pharmacy Market.
We expect more IVIG pharmacy sellers in the upcoming years. However, the current shortage of infusion/IG sellers is keeping multiples on the higher side. Our internal comp data shows just over 6X adjusted EBITDA as the mean valuation. Given profitability in the billing, uptrends in growth over the next five years and negligible strategic competitor risk, buyers should consider entering the market now as this could lead to massive returns over the next 5 years.
If you’re the owner of a lower-middle market healthcare services business, or a buyer interested in purchasing one, we can help. To learn more about what American Healthcare Capital can do for you, click here.
1Grand View Research. U.S. IVIG Market Size…2018 – 2025. August 2018. 2J.S.; Infusion Pharmacy Owner in Southern U.S. 3“IVIG Market Projected To Be Worth USD 10.9 Billion By 2022.” Market Research Reports & Consulting, www.grandviewresearch.com/press-release/global-ivig-market. 4Shelley, Suzanne. “Immunoglobulin (IG) Drives the Blood-Plasma Therapeutics Market.” Pharmaceutical Commerce, 4 Apr. 2016, pharmaceuticalcommerce.com/brand-marketing-communications/immunoglobulin-ig-drives-the-blood-plasma-therapeutics-market/. 5“Home Infusion Market Sees Supply-and-Demand Issues.” Home Infusion Market Sees Supply-and-Demand Issues HME News, 14 Sept. 2018, www.hmenews.com/article/home-infusion-market-sees-supply-and-demand-issues. 6“URAC Invites Public Comment for Home Infusion Therapy Accreditation Standards.” URAC, www.urac.org/press-room/urac-invites-public-comment-home-infusion-therapy-accreditation-standards.
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Andre has closed transactions in a variety of healthcare segments. He specializes in all Pharmacy types, Home Health, Private Duty, Hospice, and Physical Therapy. He graduated with a B.A. degree from the University of California, Los Angeles, and he is bilingual in English and Spanish. Along with sell-side and buy-side representation, Andre can assist clients with debt financing.
Prior to joining American Healthcare Capital, he was a Principal at Riverbrook Capital, an Investment Bank. As an agent of a registered broker-dealer, he has helped lower middle market clients with financial transactions including capital raises, debt restructurings, and sell-side and buy-side acquisition projects.