Firm Branches Out to Avoid Dependence on Single Product
Moving away from its longtime dependency on a single product, Newport Pharmaceuticals International Inc. on Thursday completed the acquisition of a mail-order pharmacy company from Caremark Inc. in a cash-and-stock transaction worth $12 million.
Newport said the acquisition of America’s Pharmacy Inc. creates a new source of badly needed revenue, while Caremark said shedding the unit will allow it to focus on its core businesses.
“I think it’s an exciting opportunity for us,” said Judith Woodward, a Newport vice president. The Newport Beach-based company still will pursue federal approval of its drug Isoprinosine--considered by some a potential AIDS medicine--but the purchase allows Newport “to expand into other product areas,” she said.
Caremark, which also is headquartered in Newport Beach, acquired Iowa-based America’s Pharmacy for an estimated $6 million in late 1985. The unit, until recently, had been losing money, said Larry Watts, a Caremark spokesman. However, API had not been up for sale and the purchase offer was unsolicited, he said.
“I think Caremark wasn’t happy with what it thought was going to be a dynamic company but turned out to be a problem,” said David Saks, an analyst with the Baltimore brokerage of Alex Brown & Sons Inc. “Newport seems to need the revenues.”
One Annual Profit
Indeed, 19-year-old Newport had only one annual profit--$647,000 during its fiscal 1985--virtually all of which came from overseas sales of Isoprinosine.
“On a long-term basis, the acquisition of API will put us in the position of making profits,” Woodward said. “When that might happen, I can’t say.”
The acquisition of API--which reported about $14 million in revenues during the fiscal year ended June 30--is the first in a series of acquisitions that Newport hopes will reduce its dependence on Isoprinosine.
“We are looking at companies and products that are expected to achieve profitability in a relatively short time frame,” she said. “We are not looking for development-stage products.”
