Medworth Acquisition Corp. gathers $63.5 million in an IPO to fund an acquisition
Last month, Medworth, based in Miami, held a successful initial public offering, garnering $63.5 million in two sets of sales, with the specific goal of acquiring a company in “the specialty pharmacy, infusion pharmacy and drug distribution sectors.” (Technically, it can invest in any type of business, but the company principals are aiming at that sector.) Buyouts in drug distribution have been a constant for nearly 20 years; the difference here is both the vehicle being used for investment, and the interests of the organizers of the company.
Medworth is a “special purpose acquisition company” (SPAC), aka a “blank check” company, explains Charles Fistel, CEO. SPACs are now new; although relatively rare, many exist in real estate, high tech and other sectors. The management takes the invested capital and, in a fairly tight timeframe (Medworth has 18 months), chooses a company—typically a private business—that can benefit from an injection of capital, the professional management the acquirer brings, and employing the already-public structure of the acquiring company to become public itself. “Our ideal candidate would be a company with over $100 million in sales, a healthy profit margin, and a growth plan to take it to the next level,” he says—the next level being a company grossing $500 million to $1 billion.
Why is this valuable to biopharma companies? It depends on how those companies look out on the current landscape of distribution and pharmacy businesses, particularly in specialty pharmaceuticals. The range of offerings is broad and somewhat chaotic, ranging from single-location specialty pharmacies handling an orphan drug, to the biggest pharmacy benefit managers (PBMs) in the world, fitting specialty care into their giant mail-order and distribution-services units. “Biopharma companies would prefer to work with companies that can give them sufficient scale, and there’s a sizable gap in the mid-market range here,” says Stephen Cichy, COO.
Fistel is former CFO of Allied Medical Supply, a Miami drug distributor. Cichy is former EVP at BioScrip (part of which was acquired by Walgreens last year). Other principals include Anthony Minnuto, chairman, also of Allied Medical; Jeffrey Rein, a board member and former chairman of Walgreens; and Robert Savage, board member and former worldwide chairman of J&J’s Pharmaceutical Group.