LLR, Quaker Carve Out Deal

Partners and Quaker BioVentures agreed to partner up in the acquisition of specialty pharmaceutical company Medmark. The duo paid $28 million to grab a stake in the business from health care insurer Highmark, which launched the company with the acquisition of Fisher’s Specialized Pharmacy Services in October 2003.

The buyout community tends to keep its distance from biotech deals. And venture firms historically have shied away from larger, control investments. But the pairing of LLR and Quaker to buy Medmark demonstrate that the lines between buyouts and VC continue to blur.

“We look at Medmark as more of a value-added services business,” LLR Vice President Scott Perricelli says. “We’re a private equity firm and we really understand how to grow niche services businesses, while Quaker has a much better understanding of the drug development pipeline.”

Plus, Perricelli describes Quaker as almost a sister fund since both firms share office space.

Medmark’s business revolves around easing the high costs associated with distributing specialty pharmaceuticals for health care insurance companies. It provides care planning, patient management and distribution services of specialty pharmaceuticals, which are used in treating chronic illnesses such as cancer, Hepatitis C and HIV.

When Highmark acquired Medmark last year, the company did so with the intention of managing the high costs of specialty pharmaceuticals, while improving the care and service for its customers. However, while the acquisition helped give Highmark more exposure to the higher cost, chronic-care patients, there was speculation that as a subsidiary of Highmark, Medmark itself would be hard-pressed to get other additional contracts from Highmark’s competitors.

With the sale to LLR and Quaker, though, expanding beyond its relationship with Highmark is on the top of the company’s priority list.

Perricelli says investors are hoping to take the business nationwide.

In the investment, LLR contributed $20 million, while Quaker put in $8 million. The investment gives the pairing a roughly 50% stake in the business going forward, with Highmark holding the balance. LLR used its $260 million LLR Equity Partners fund, which at this point is almost fully committed. The firm is in the process of raising its second fund, and expects to close on more $300 million sometime in late spring to early summer of this year.