Pharmacy's buyer hints at firings

Omnicare chief says firm seeks to end `redundancies' with NeighborCare

August 04, 2005|By M. William Salganik | M. William Salganik,SUN STAFF

The chief executive of Omnicare Inc. said yesterday that his company will "eliminate certain functional redundancies" as it absorbs Baltimore-based NeighborCare Inc., but provided little further detail on potential job loss, and gave only broad indications of the timing of any changes.

Omnicare, based in Kentucky, completed the purchase of NeighborCare last week for $1.9 billion in cash and assumed debt. Analysts and industry experts have said they expect Omnicare to eliminate most or all of NeighborCare's 500 headquarters jobs in Baltimore.

Omnicare CEO Joel Germunder, speaking yesterday to analysts in a conference call to discuss the company's earnings, said Omnicare is "seeking the best talent and the best systems" from Omnicare and NeighborCare. He said NeighborCare's chief operating officer, Robert A. Smith, would remain with the combined company, but he didn't discuss any other executives.

Germunder estimated that the combination of primarily institutional pharmacies (filling prescriptions for residents of nursing homes and assisted-living facilities), would generate savings of $125 million to $140 million in 2006, but said the company was not projecting any savings this year.

Of those future savings, he said about half would come from Omnicare's greater purchasing power for medicines, and the rest would come from combining operations - both headquarters functions and networks of institutional pharmacies throughout the country. He said the company expected to get "a good chunk" of the integration completed during 2006.

Although both companies derive the lion's share of their revenue as institutional pharmacies, Omnicare also has a clinical trials unit, and NeighborCare operates 32 retail pharmacies, as well as respiratory services and group purchasing units - all new business lines to Omnicare. "We find these businesses interesting, and we are evaluating how they fit into our future plans," Germunder said.

At the same time, Omnicare reported earnings of $61.7 million, or 59 cents a share, for the quarter that ended June 30, in line with analysts' projections. For the second quarter of last year, Omnicare earned $60.4 million, or 55 cents a share. Revenue was $1.1 billion, up from $1.0 billion in the year-earlier quarter.

With the NeighborCare combination, Omnicare now projects revenue of $6 billion a year, and contracts to serve 1.4 million nursing home beds. Omnicare was by far the largest institutional pharmacy in the country even before swallowing NeighborCare.

Omnicare shares yesterday gained $4.59, or 9.7 percent, to close at $51.69.

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