UNITED STATES
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): February 25, 2004
CURATIVE HEALTH SERVICES, INC.
(Exact name of registrant as specified in its charter)
Minnesota 000-50371 51-0467366
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
150 Motor Parkway
Hauppauge, New York 11788-5145
(Address of principal executive offices)
(631) 232-7000
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report.)
Item 5. Other Events and Regulation FD Disclosure
On February 25, 2004, Curative Health Services, Inc., issued a press release
announcing that it has entered into a definitive agreement to acquire the
capital stock of Critical Care Systems, Inc. ("CCS") for a total consideration
of approximately $150 million in cash. Critical Care Systems is a leading
national provider of specialty infusion pharmaceuticals and comprehensive
clinical services. CCS focuses on delivering four principal therapies:
hemophilia clotting factor, intravenous immune globulin (IVIG), Total Parenteral
Nutrition (TPN) and anti-infective therapies. These core therapies represent the
essential components of Specialty Infusion as distinct from Home Infusion and
account for approximately 75% of CCS' revenues. The transaction is expected to
close early in the second quarter of 2004.
The combination is expected to deliver a number of strategic benefits to both
companies including:
o Establishing a leader in specialty infusion pharmaceuticals to the home
with core strengths in Hemophilia, IVIG, Synagis, Antibiotics and TPN.
o Creating an organization with a network of 38 pharmacies in 23 states
through which to drive growth in the related core disease states that
require a local clinical presence.
o Leveraging the approximately 450 payor contracts already serviced by the
combined company.
o Creating a unique therapy offering that is mission critical as well as
demonstrably cost-effective for payors creating a competitive advantage in
contracting and pull-through.
o Adding exceptional clinical backbone and expertise highlighted by CCS'
JCAHO accreditation.
o Creating operating leverage by generating economies of scale through the
elimination of certain redundant G&A categories.
Curative expects to fund the purchase price, repayment of certain existing
indebtedness of CCS and related fees and expenses with $165 million of senior
unsecured notes to be issued through a private placement. Curative has received
a $165 million financing commitment from UBS Loan Finance LLC which will be
used in the event the notes are not issued. In addition, GE Healthcare Financial
Services has committed to a $60 million senior secured credit facility to
support the acquisition and Curative's future working capital needs. The
commitments are subject to customary conditions. The transaction will be subject
to approval by applicable governmental regulatory agencies. UBS Investment Bank
acted as financial advisor to Curative for the transaction.
"We believe this combination is an excellent strategic fit, allowing us to
build rapid scale as a national leader in the important specialty infusion and
homecare market," said Joseph Feshbach, Curative's Chairman and Chief Executive
Officer. "Critical Care Systems already distributes some of our most important
therapy lines as well as several complementary products. The combined
organization will possess a broad and unique service offering, a local presence,
greater efficiencies and value-added services, providing the opportunity for
significant associated cost containment for payors and clients."
"We remain committed to our community service model in Hemophilia and see
revenue upside as our CSSR network teams with local branches in providing the
highest quality homecare for the Hemophilia consumer and leveraging the numerous
existing contracts held by CCS."
Christopher J. York, Chief Executive Officer of CCS, stated, "With the closing
of this transaction, the Curative-CCS combination will form a powerful force in
the Specialty Infusion business. The combined breadth and scope of high-quality
clinical service and managed care contracting capability will put the combined
entity in a market leading position."
Concurrent with the closing of the acquisition, Mr. Paul F. McConnell,
President, Chief Operating Officer, and co-founder of CCS will assume the role
of President and Chief Operating Officer of Curative Health Services. Mr.
William Tella, President of the Specialty Pharmacy Services Business Unit, has
agreed to remain on board to support the integration efforts, after which time
he will pursue other business endeavors.
Mr. McConnell commented, "Moving forward, we envision advancing the local CCS
branch model at an accelerated pace, including the conversion of a number of
existing Curative satellite pharmacies to full-service branches. We also see the
potential for synergies between Curative's expansive wound care management
network and Critical Care Systems' focus on the management of chronic infections
through its provision of anti-infective therapies."
"Additionally, we believe that significant geographic expansion potential exists
for Specialty Infusion branches and the current competitive climate is
particularly favorable for this therapy offering. Most importantly, we share the
same commitment for providing the highest standards in personalized care to
those we serve."
Details of the transaction were discussed in greater detail on Curative's fourth
quarter and full-year 2003 financial results conference call held on Wednesday,
February 25, 2004.
The notes proposed to be issued by Curative to finance its acquisition of CCS
have not been registered under the Securities Act of 1933, as amended, or
securities laws of any state or other jurisdiction and may not be offered or
sold in the United States absent registration or an applicable exemption from
registration requirements. The press release shall not constitute an offer to
sell or the solicitation of any offer to buy these securities, nor shall there
be any sale of these securities in any state or jurisdiction in which such an
offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such state or jurisdiction.
1. Transaction Q&A
Q: What is Critical Care Systems' business?
A: Critical Care Systems is a leading national provider of specialty
infusion pharmaceuticals and comprehensive clinical services. CCS'
strategy is based upon the successful operation of community-based
branches that respond to local market needs, with support from regional
and corporate resources. CCS focuses on its four core infusion
therapies including Anti-infective Therapy, Total Parenteral Nutrition,
Hemophilia Factor Products and immunoglobulin (IVIG), which account for
approximately 75% of the Company's net revenue. In order to accommodate
certain referral sources, however, the typical branch offers a total of
15-20 therapies delivered intravenously or via injection to patients in
their homes.
Q: How does Critical Care Systems' business fit with Curative's existing
Specialty Pharmacy Services business?
A: CCS' business includes the distribution of Clotting Factor Products and
IVIG. The transaction increases Curative's presence in these existing
therapies creating immediate scale to compete more effectively in these
areas, while maintaining each company's focus on the high-touch, high
service level segment. The transaction will also add key complementary new
therapy lines, including Total Parenteral Nutrition and Anti-infective
Therapy. The ability to service the wider array of disorders/disease states
creates an untapped opportunity to better utilize each company's key assets.
For example; Curative will gain the ability to provide its existing product
lines under payor contracts already serviced by Critical Care Systems. At
present, Critical Care Systems has approximately 150 payor contracts,
primarily managed care. The high service component of these four key
therapies also differentiates us from competitors in the higher volume,
lower margin specialty injectables area. Additionally, the fit provides
greater payor diversity given the complementary balance among government
and private payors, thereby reducing overall payor concentration.
Q: What is Total Parenteral Nutrition (TPN)?
A: TPN is a solution that contains one or more of the following: amino
acids, dextrose, fatty acids, electrolytes, trace elements, minerals
and vitamins. Accordingly, TPN is mixed for each patient specifically
and requires a high degree of pharmacy manipulation. Patients requiring
these life-sustaining nutrients suffer from conditions such as
inflammatory bowel disease, short bowel syndrome, pancreatitis or other
gastrointestinal illnesses that prohibit oral digestion. TPN therapy is
also utilized to augment the nutritional status of patients with
cancer, hyperemesis and eating disorders. Accordingly, certain patients
require TPN for life, while others may only need short-term therapy.
Q: What is Anti-infective Therapy?
A: Anti-infective therapy involves the infusion of anti-infective
(antibiotic, antifungal and antiviral) medications for the treatment of
a variety of infectious episodes, such as osteomyelitis (bone
infections), bacterial endocarditis (infection of the heart valves),
wound infections, infections associated with HIV/AIDS, cancer,
post-transplant treatment protocols and infections of the kidneys and
urinary tract. Anti-infective drugs are more effective when infused
directly into the patient's blood as compared to oral formulation. A
vast majority of CCS' patients have recently been discharged from a
hospital and require daily treatment for an average of 24 days. A CCS
or contracted nurse will visit the patient's home five times on average
to educate, train and monitor the patient.
Q: How long has Critical Care Systems been in business?
A: Critical Care Systems was founded in 1991. In the past several years,
CCS has grown steadily by successfully opening new branches across the
United States. In December 2000, Thoma Cressey Equity Partners, a
leading private equity investor, completed a recapitalization of CCS
and has held a significant interest in CCS since that time.
Q: How does Critical Care Systems provide its services?
A: CCS operates an integrated network of company-owned, community-based
pharmacy branches that respond to local market needs, with support from
regional and corporate resources. CCS employs more than 600 professionals,
including nurses, pharmacists, reimbursement and support staff, skilled in
the provision of specialty pharmacy services and home infusion therapies.
Each local team works collectively to meet the needs of its patients by
building and maintaining long-term relationships with physicians, hospitals
and payors. CCS requires each of its branch locations to be
JCAHO-accredited. Newly opened branches have provisional accreditation
prior to their JCAHO survey.
Q: What is the Critical Care Systems' service area?
A: At present, Critical Care Systems has 28 branch locations in both major
metropolitan areas and secondary markets in 17 states throughout the
Northeast, Midwest, South and West regions of the United States.
Q: Who will comprise the management team of the combined organization?
A: Joseph Feshbach will continue to serve as Curative's Chairman and Chief
Executive Officer. John Prior will continue his role as President of SHS.
Concurrent with the closing of the acquisition, Mr. Paul F. McConnell,
President and Chief Operating Officer of CCS will assume the role of
President and Chief Operating Officer of Curative Health Services. Mr.
William Tella, President of the Specialty Pharmacy Services Business Unit,
has agreed to remain on board to support the integration efforts, after
which time he will pursue other business endeavors. The rest of the
Curative executive team will remain intact. Additional key CCS management
team members will be retained under the terms of separately executed
employment agreements. The combined leadership strength between the two
organizations is a significant asset in this acquisition.
Q: What is Critical Care Systems' current employee headcount?
A: Critical Care Systems has approximately 700 employees.
About Curative Health Services
Curative Health Services, Inc., through its two business units, Specialty
Pharmacy Services and Specialty Healthcare Services, seeks to deliver
high-quality results and exceptional patient satisfaction for patients
experiencing serious or chronic medical conditions.
Curative's Specialty Pharmacy Services business unit provides services to help
patients manage the health care process, and offers related pharmacy products to
patients for chronic and critical disease states including Hemophilia, Immune
System Disorders, Respiratory Syncytial Virus (RSV), Multiple Sclerosis,
Rheumatoid Arthritis and Cancer.
Curative's Specialty Healthcare Services ("SHS") business unit is an industry
leader in chronic wound care management. SHS provides a broad continuum of
services to health care providers through a nationwide network. This national
network of hospital-based Wound Care Center(R) programs has offered
comprehensive treatment to over 375,000 patients.
About Critical Care Systems
Nashua, New Hampshire-based Critical Care Systems (CCS) is a leading national
provider of specialty infusion pharmaceuticals and comprehensive clinical
services. CCS provides a full range of infusion therapies, parenteral nutrition
support and bio-pharmaceutical products delivered intravenously to patients in
their homes by an experienced clinical team of professionals. Positioned to meet
the needs of local medical communities in the markets it serves, CCS continues
to expand upon the 28 branches it currently operates by opening new locations in
key geographic markets.
For more information about Curative Health Services, visit www.curative.com.
Additional information about Critical Care Systems is available at
www.criticalcaresystems.com.
The press release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors,
which may cause the actual results, performance or achievements of the Company,
or industry results, to be materially different from any future results,
performance, or achievements expressed or implied by such forward-looking
statements. Factors that might cause such differences include, but are not
limited to, risks associated with our pending acquisition of Critical Care
Systems including, but not limited to, receipt of regulatory approvals required
for the transaction, completion of financing and other associated conditions,
uncertain market conditions that the proposed bond offering and expansion of the
Company's credit facility are subject to, integration risks and costs, risks of
client retention, risks associated with the operations of the acquired business,
as well as risks in our current businesses such as the termination or
non-renewal of a material number of contracts, an inability to obtain new
contracts, changes in the government regulations relating to the Company's
Specialty Pharmacy Services or Specialty Healthcare Services business units,
changes in the regulations governing third party reimbursements for the
Company's services, manufacturing shortages of products sold by Curative's
Specialty Pharmacy Services business unit, and the other risks and uncertainties
detailed in the Company's filings with the Securities and Exchange Commission.
Readers of this release are referred to the Company's Annual Report on Form 10-K
for the year ended December 31, 2002 and Quarterly Report on Form 10-Q for the
quarter ended September 30, 2003, for further discussion of these and other
factors that could affect future results.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
Not required.
(b) Pro Forma Financial Information
Not required.
(c) Exhibit
None.
Signature
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.
CURATIVE HEALTH SERVICES, INC.
Date: March 9, 2004 By: /s/ Thomas Axmacher
---------------------------
Thomas Axmacher
Chief Financial Officer