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Diplomat differentiates itself.

FLINT, Mich. -- Diplomat Pharmacy's momentum in 2014 continued this year, with 34% growth in first quarter revenue to $625 million and 36% EBITDA (earnings before interest, taxes, depreciation and amortization) growth.

"Diplomat remains incredibly well positioned in the specialty pharmacy industry, including the specialty infusion market," says chairman and chief executive officer Phil Hagerman.

The company continues to gain share, Hagerman noted during a call discussing first quarter results. "Our high level of expertise and our extensive experience differentiate us from our peers and have continued to allow us to win disproportionate access to limited-distribution drug panels."

In the first quarter alone, Diplomat added four limited-distribution drug contracts and had a fifth drug receive an expanded indication. This compares to nine new limited-distribution drug contacts for all of 2014. And the new drugs have diverse indications, from oncology to sclerosis to cystic fibrosis.

Illustrating Diplomat's ability to pick up share, Hagerman cites its relationship with Imbruvica supplier Pharmacyclics. In November 2013 Diplomat was chosen by Pharmacyclics (which was acquired this year by AbbVie) as one of only five specialty pharmacies to distribute Imbruvica. The five comprise the first limited-distribution drug panel made up solely of independent specialty pharmacies, with Diplomat being the largest. Pharmacyclics has been extremely pleased with the panel's distribution efforts and has not added any additional specialty pharmacies to it, according to Hagerman.

At the same time Imbruvica has seen expansion of its indications beyond treatment of mantle cell lymphoma. The additional indications significantly increased the patient population, making Imbruvica one of Diplomat's top revenue-producing drugs less than two years after its launch. "This is just one example of how the drug pipeline rewards us --not only with new drugs that can quickly move the needle but also with expanded indications of existing drugs that substantially broaden our market opportunity," Hagerman said.

The company also continues to grow its high-margin businesses. First quarter growth in the specialty infusion business, as well as continued development of its strategic partnerships with retailers, health systems and pharmaceutical manufacturers, resulted in a gross margin expansion of 30 basis points.

This year's acquisition of BioRx LLC, on top of the purchases of American Homecare Federation Inc. and MedPro Rx in 2014, solidified a national presence for Diplomat in the specialty infusion market. The market represents "a natural progression," for the company, as the challenges specialty infusion patients face are nearly identical to those faced by traditional specialty pharmacy patients, Hagerman said. "This is a large and rapidly growing market with healthy margins and an exciting opportunity for Diplomat."

New business opportunities for Diplomat are gaining momentum, as evidenced by a significant increase in requests for proposals for its services. The number of RFPs in the first quarter increased more than twofold.

While organic growth is the primary driver for Diplomat, the industry remains highly fragmented and provides an opportunity to make thoughtful, strategic and accretive acquisitions, Hagerman said. "We started to build a track record of these acquisitions ... leveraging the Diplomat platform to further accelerate these companies' growth and drive them toward a full potential.

"Going forward, we will continue evaluating strategic acquisitions that could complement our core business."

The robustness of the drug pipeline bodes well for both the specialty pharmacy industry and Diplomat, he added.

There are over 1,800 specialty drags in development. Oncology continues to be a major focus, with almost 50% of the drag pipeline in that category. Hepatitis C continues to be a growing focus and offers significant opportunities with a long runway due to the success of both new and emerging therapies.

DIPLOMAT

* HEADQUARTERS

4100 S. Saginaw St.

Flint, Mich. 48507

Key pharmacy executive: Phil Hagerman, Chairman, CEO

Phone: (888) 720-4450

Fax. (800) 550-62720

Website: diplomatpharmacy.com

* TRADE CLASS--Specialty pharmacy

* PHARMACY RANK--10 in sales

** Full-year results

Pharmacy sales--$2.22 billion (+46%)

Overall sales--$2.22 billion

** Number of pharmacies--3, plus 13 support centers

** Number of states operating--12 ***

*** Diplomat ships medications to all 50 states.
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Title Annotation:TSE 2015 ANNUAL REPORT OF RETAIL PHARMACY: THE CHAINS
Publication:Chain Drug Review
Date:Aug 10, 2015
Words:660
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