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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): OCTOBER 30, 2000
ACCREDO HEALTH, INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
DELAWARE 000-25769 62-1642871
(STATE OR OTHER JURISDICTION OF (COMMISSION FILE NUMBER) (IRS EMPLOYER
INCORPORATION) IDENTIFICATION NUMBER)
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1640 CENTURY CENTER PKWY
SUITE 103
MEMPHIS, TENNESSEE 38134
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(901) 385-3688
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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ITEM 9. REGULATION FD DISCLOSURE
Note: the information in this report (including the exhibits) is furnished
pursuant to Item 9 and shall not be deemed to be "filed" for the purposes of
Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the
liabilities of that section. This report will not be deemed an admission as to
the materiality of any information in the report that is required to be
disclosed solely by Regulation FD.
The information will be presented in a quarterly earnings conference
call to be held on October 30, 2000 and/or may be displayed as slides at
investor conferences in the future.
DISCLAIMER
In addition to historical information, certain of the statements in the
preceding paragraphs, particularly those anticipating future financial
performance, business prospects and growth and operating strategies constitute
forward-looking statements within the meaning of the "safe harbor" provisions
of the Private Securities Litigation Reform Act of 1995. Such statements may be
identified by words such as anticipate, believe, estimate, expect, intend,
predict, hope or similar expressions. Such statements are based on management's
current expectations and are subject to a number of factors and uncertainties
which could cause actual results to differ materially from those described in
the forward-looking statements, including, without limitation, the loss of a
biopharmaceutical relationship, our inability to sell existing products, the
impact of pharmaceutical industry regulation, the difficulty of predicting FDA
and other regulatory authority approvals, the regulatory environment and
changes in healthcare policies and structure, acceptance and demand for new
pharmaceutical products and new therapies, the impact of competitive products
and pricing, the ability to obtain products from suppliers, reliance on
strategic alliances, the ability to expand through joint ventures and
acquisitions, the ability to maintain pricing arrangements with suppliers that
preserve margins, the need for and ability to obtain additional capital, the
seasonality and variability of operating results, the Company's ability to
implement its strategies and achieve its objectives and the risks and
uncertainties described in reports filed by Accredo with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended,
including without limitation, cautionary statements made in Accredo's 2000
Annual Report on Form 10-K under the heading "Risk Factors".
The Company does not have, and expressly disclaims, any obligation to release
publicly any updates or any changes in the Company's expectations or any changes
in events, conditions or circumstances on which any forward-looking statement
is based.
INVESTMENT HIGHLIGHTS
- Strong historical revenue/EPS growth from "same store sales":
- 20% revenue - 25% EPS
- Revenues/margins have been predictable and sustainable
- Potential upside growth from new indications and new products
- Potential new accretive acquisitions
- Potential large pipeline of new biopharmaceutical drugs
- Present relationships with five premier biopharmaceutical manufacturers
COMPANY OVERVIEW
Accredo Health is the leading provider of specialized contract
pharmacy and related services to biopharmaceutical manufacturers, serving
patients with long-term, chronic diseases.
Through the creation of a customized patient support service, Accredo
Health can help the biopharmaceutical manufacturer increase their revenues up
to 30 to 40 percent for patients Accredo serves.
BUSINESS OVERVIEW
Unique Drug Characteristics
- Injectible: unpleasant, time consuming
- Chronic: side effects, secondary medical conditions, no cure,
lifetime commitment
- Expensive: $8,000 to $250,000 per patient, per year
- Unstable: temperature control, reconstitution
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Primary Issues of Injectible, Chronic Therapies:
Persistence:
Greater than 40% of the chronic, long-term patients treated with injectible
medications will quit therapy within the first 18 months.
Compliance:
For those chronic, long-term patients who stay on therapy greater than 30%
of the patients will miss 25% of their injections.
ACCREDO
Reimbursement
Clinical
Delivery
Contract Pharmacy
MANUFACTURERS PATIENTS
Biogen Reimbursement
Centocor Compliance/Persistence
Genentech, Inc. Clinical Hotlines
Genzyme Customized Patient Support
MedImmune, Inc.
PAYORS
Reimbursement
Compliance/Persistence
Delivery
Customized Patient Support
Preferred Relationships with Manufacturers
- Lowest cost of goods
- Manufacturers' reps call on physicians
- Annually adjust cost of goods
DISEASES SERVED
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--------------------- ------------------- ------------------- ------------------ ------------- --------------
DISEASE MANUFACTURER PRODUCT REV. PER PATIENT MAINT. MARKET ACDO MARKET
SHARE SHARE
--------------------- ------------------- ------------------- ------------------ ------------- --------------
<S> <C> <C> <C> <C> <C>
Growth Hormone Genentech Protrophin(R) $20K 60% <15%
--------------------- ------------------- ------------------- ------------------ ------------- --------------
Hemophilia ALL ALL $80K 100% <10%
--------------------- ------------------- ------------------- ------------------ ------------- --------------
Gaucher Genzyme Cerezyme(R) $175K 100% 50%
--------------------- ------------------- ------------------- ------------------ ------------- --------------
Multiple Sclerosis Biogen AVONEX(R) $11K 60% <30%
--------------------- ------------------- ------------------- ------------------ ------------- --------------
Crohn's Centocor REMICADE(TM) $8K 100% <5%
--------------------- ------------------- ------------------- ------------------ ------------- --------------
RSV MedImmune Synagis(R) $8K 100% <5%
--------------------- ------------------- ------------------- ------------------ ------------- --------------
Rheumatoid Arthritis Centocor REMICADE(TM) $8K N/A N/A
--------------------- ------------------- ------------------- ------------------ ------------- --------------
Autoimmune ALL IVIG $40K 100% <10%
--------------------- ------------------- ------------------- ------------------ ------------- --------------
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POTENTIAL NEW INDICATIONS FOR PRESENTLY APPROVED DRUGS
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Manufacturer Drug Potential Indication Status
------------ ---- -------------------- ------
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Biogen AVONEX(R) Monosymptomatic MS Phase III(1)
Biogen AVONEX(R) Multidose MS Phase III
Biogen AVONEX(R) Secondary Progressive MS Phase III
MedImmune Synagis(R) RSV in children born Phase III
with congenital heart disease
MedImmune Synagis(R) RSV in patients undergoing Phase III
bone marrow transplant
MedImmune Synagis(R) RSV in babies born with Phase IV
Cystic Fibrosis
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(1) Trial completed, to be filed with FDA.
I. Discussions are ongoing between Accredo Health, Inc. and
Genzyme, Inc. regarding the prospect of Accredo Health, Inc. distributing three
of Genzyme's new drugs, which are in various stages of the regulatory approval
process. These drugs are:
- Fabrazyme(TM) (agalsidase beta), an enzyme replacement therapy for
patients with Fabry Disease, which is a potentially fatal lysosomal
disorder. A competitive product is being developed by Transkaryotic
Therapies, Inc.
- Recombinant human alpha-L-iduronidase for treatment of
Mucopolysaccharidosis (MPS-1) Disease (Hurler syndrome) which is a
fatal childhood genetic lysosomal disorder. Development of this
product is through a joint venture with BioMarin Pharmaceutical,
Inc. This drug is currently in Phase III trials at the FDA.
- Recombinant human alpha-glucosidase for the treatment of Pompe
Disease, which is a fatal lysosomal disorder causing the buildup of
glycogen in the muscles. This drug is being developed by Genzyme
through a joint venture with Pharming Group N.V. The drug is
produced in the milk of transgenic rabbits.
II. Accredo Health, Incorporated continues to feel comfortable
with the potential to add one or two new products per year to those products
which it currently distributes and to add one to two strategic relationships
with medical centers to those it already enjoys.
III. Accredo Health, Incorporated distributes Synagis(R), which is
manufactured by MedImmune, Inc. Synagis(R) is a seasonal drug for the treatment
of respiratory syncytial virus (RSV) in infants. The RSV season is approximately
October through March. Accredo estimates that it will obtain $14 to $15 million
of Synagis(R) sales in the December and March quarters of fiscal year 2001.
IV. Aetna US Healthcare(R) Inc. has indicated to Accredo that
approximately 13,000 patients needing injectible drugs (some of which are sold
by Accredo) were being served by a provider that was not one of the three
providers selected by Aetna US Healthcare to provide injectible medications to
its enrollees. These patients will be converted to one of the three selected
providers beginning July 15, 2000.
RECENT DEVELOPMENTS
- Genzyme's BLA filing for Fabrazyme(TM) for Fabry disease
- Purchase of additional 30% ownership in California partnership
- Hemophilia Medicaid reimbursement changes
- New Aetna U.S. Healthcare(R) injectible pharmacy contract
Hemophilia Medicaid Reimbursement/Prescription Drug Program
- Medicare investigation of manufacturers: average wholesale price based
reimbursement
- First DataBank publishes 2nd "Medicaid Reimbursement" screen
- State Medicaid programs individually reviewing their reimbursement
- Some hemophilia products are on "the list"
- Many State Medicaid programs still have not made a decision
- 7% of ACDO revenues are hemophilia Medicaid
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New Aetna U.S. Healthcare(R) Specialty Pharmacy Injectible Program
- ACDO has been selected as 1 of 3 specialty pharmacy providers
- 3 year contract, effective July 1, 2000 for new referrals
- Contract includes approximately 21 million covered lives
- Effective July 15, 2000 approximately 13,000 current patients will be
transitioned from their previous pharmacy provider to 1 of 3 new providers
CORPORATE STRATEGY
- Expand revenue from current product lines
- Expand number of diseases served via new indications
- Expand number of diseases served via new products
- Establish additional relationships with medical centers
- Increase number of payor contracts
- Selectively pursue strategic acquisitions
SUMMARY
- Leading provider of contract pharmacy services to the biopharmaceutical
industry
- Strong historical revenue/EPS growth from "same store" sales
- Financial model has been very predictable and sustainable
- Potential upside growth from new indications and new products
- Proven history of accretive acquisitions
- Potentially large pipeline of new drugs well suited for the Company's services
- Experienced management team
FINANCIAL OVERVIEW
- Purchase product below average wholesale price (AWP)
- Customized pricing from biopharmaceutical manufacturers
- Varying contribution margin for each product line
- Recognition of revenue when drug is shipped
- Joint ventures with pediatric medical centers
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REVENUE GROWTH
($ Millions)
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Fiscal Years Ended Three Months Ended
June 30 September 30
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Revenue % Growth Revenue % Growth
------- -------- ------- --------
<S> <C> <C> <C> <C>
1998 $181 57% $ 57 --
1999 258 43 77 34%
2000 353 37 100 30%
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EARNINGS PER SHARE(1)
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Fiscal Years Ended Three Months Ended
June 30 September 30
----------------------- -----------------------
EPS(1) % Growth EPS(1) % Growth
------ -------- ------ --------
<S> <C> <C> <C> <C>
1999 $0.42* 147% $0.13 30%
2000 $0.67 60% 0.21 62%
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(1) All EPS amounts are adjusted for the 3-for-2 stock split with a record
date of February 11, 2000.
* Excludes effects of mandatorily redeemable preferred stock and an
extraordinary, nonrecurring charge for early retirement of debt.
QUARTERLY PROGRESSION
Total Revenue ($Millions)
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<S> <C> <C> <C> <C> <C> <C> <C>
Dec.-98 March-99 June-99 Sept.-99 Dec.-99 March-00 June-00 Sept.-00
$62.7 $66.9 $71.4 $76.9 $86.4 $91.4 $98.4 $99.6
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Net Income ($Thousands)
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<S> <C> <C> <C> <C> <C> <C> <C>
Dec.-98 March-99 June-99 Sept.-99 Dec.-99 March-00 June-00 Sept.-00
$948 $1,020 $1,499 $1,968 $2,349 $2,732 $2,847 $3,364
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PAYOR MIX
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YEAR ENDED JUNE 30, 1999 YEAR ENDED JUNE 30, 2000 THREE MONTHS ENDED SEPTEMBER 30, 2000
------------------------ ------------------------ -------------------------------------
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Medicaid/Other 16% Medicaid/Other 16% Medicare/Other 16%
Medicare 2% Medicare 2% Medicare 2%
Private 82% Private 82% Private 82%
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*Percent of gross patient service revenue.
DAYS SALES OUTSTANDING
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At June 30, 1999 At June 30, 2000 At September 30, 2000
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73 64 62
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OPERATING MODEL
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Three Months Ended
FY Ended June 30 September 30
1999 2000 1999 2000
------ ------ ------ ------
<S> <C> <C> <C> <C>
Total Revenue 100.0% 100.0% 100.0% 100.0%
Cost of Services 85.4 85.2 85.8 85.4
General and administrative 6.8 6.8 6.8 6.6
Bad debts 1.8 1.7 1.8 1.6
Depreciation & amortization 1.5 1.0 1.9 1.0
------ ------ ------ ------
Operating margin 4.5 5.3 4.7 5.4
Net income margin 1.7* 2.8 2.6 3.4
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*Excludes effects of mandatorily redeemable preferred stock and an
extraordinary, non-recurring charge of early retirement of debt.
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SUMMARY BALANCE SHEET
(Thousands)
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<CAPTION>
September 30, 2000
-----------------------
<S> <C>
Cash and cash equivalents $ 58,478
Working capital 92,887
Total assets 256,744
Long-term debt --
Stockholders' equity 171,120
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Ratios:
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Working Capital Ratio 2.12 to 1
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ACCREDO HEALTH, INCORPORATED
By: /s/ Joel K. Kimbrough
-------------------------
Joel K. Kimbrough
Chief Financial Officer
Date: October 30, 2000
