SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 000-25769
ACCREDO HEALTH, INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 62-1642871
------------------------------------- -----------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1640 CENTURY CENTER PKWY, SUITE 101, MEMPHIS, TN 38134
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(ZIP CODE)
(901) 385-3688
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NO CHANGE
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
OUTSTANDING AT
OCTOBER 26,
CLASS 2001
COMMON STOCK, $0.01 PAR VALUE................ 26,050,775
NON-VOTING COMMON STOCK, $0.01 PAR VALUE..... 0
---------
TOTAL COMMON STOCK........................... 26,050,775
==========
ACCREDO HEALTH, INCORPORATED
INDEX
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Income (unaudited)
For the three months ended September 30, 2000 and 2001
Condensed Consolidated Balance Sheets
June 30, 2001 and September 30, 2001 (unaudited)
Condensed Consolidated Statements of Cash Flows (unaudited)
For the three months ended September 30, 2000 and
2001
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Part II - OTHER INFORMATION
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Note: Items 1, 2, 3 and 4 of Part II are omitted because they are not
applicable.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
ACCREDO HEALTH, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(000'S OMITTED, EXCEPT SHARE DATA)
(UNAUDITED)
Three Months Ended
September 30,
-----------------------
2001 2000
--------- --------
Net patient service revenue $ 122,295 $ 95,597
Other revenue 3,907 3,769
Equity in net income of joint ventures 446 211
--------- --------
Total revenues 126,648 99,577
Cost of services 107,012 85,008
--------- --------
Gross profit 19,636 14,569
General & administrative 8,481 6,636
Bad debts 1,055 1,552
Depreciation and amortization 691 1,013
--------- --------
Income from operations 9,409 5,368
Interest income, net 514 374
Minority interest in consolidated subsidiary (319) (149)
--------- --------
Income before income taxes 9,604 5,593
Provision for income taxes 3,727 2,229
--------- --------
Net income $ 5,877 $ 3,364
========= ========
Cash dividends declared on common stock $ -- $ --
========= ========
Earnings per share:
Basic $ 0.23 $ 0.15
Diluted $ 0.22 $ 0.14
See accompanying notes to condensed consolidated financial statements.
ACCREDO HEALTH, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(000'S OMITTED, EXCEPT SHARE DATA)
(Unaudited)
September 30, June 30,
2001 2001
-------- --------
ASSETS
Current assets:
Cash and cash equivalents $ 53,324 $ 54,520
Marketable securities 5,500 2,000
Patient accounts receivable, less allowance for
doubtful accounts of $11,477 at September 30, 2001
and $10,808 at June 30, 2001 80,530 76,952
Due from affiliates 2,352 2,440
Other accounts receivable 14,251 13,275
Inventories 33,797 30,711
Prepaids and other current assets 995 537
Deferred income taxes 5,016 4,703
-------- --------
Total current assets 195,765 185,138
Property and equipment, net 10,081 8,195
Other assets:
Joint venture investments 3,256 2,809
Goodwill and other intangible assets, net 92,863 93,102
-------- --------
Total assets $301,965 $289,244
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 92,678 $ 88,611
Accrued expenses 5,729 7,168
Income taxes payable 2,470 1,071
-------- --------
Total current liabilities 100,877 96,850
Deferred income taxes 2,301 2,122
Minority interest in consolidated joint venture 1,321 1,102
Stockholders' equity:
Undesignated Preferred Stock, 5,000,000 shares
authorized, no shares issued -- --
Common Stock, $.01 par value; 50,000,000 shares authorized;
26,042,753 and 25,954,232 shares issued and outstanding at
September 30, 2001 and June 30, 2001, respectively 260 259
Additional paid-in capital 163,509 161,091
Retained earnings 33,697 27,820
-------- --------
Total stockholders' equity 197,466 189,170
-------- --------
Total liabilities and stockholders' equity $301,965 $289,244
======== ========
See accompanying notes to condensed consolidated financial statements.
ACCREDO HEALTH, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(000'S OMITTED)
(UNAUDITED)
Three Months Ended
September 30,
2001 2000
-------- --------
OPERATING ACTIVITIES:
Net income $ 5,877 $ 3,364
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 691 1,013
Provision for losses on accounts receivable 1,055 1,552
Deferred income tax benefit (150) (392)
Compensation resulting from stock transactions 46 46
Tax benefit of disqualifying disposition of stock options 1,662 1,138
Minority interest in income of consolidated joint venture 319 149
Changes in operating assets and liabilities:
Patient receivables and other (5,608) (4,065)
Due from affiliates 88 (601)
Inventories (3,086) 31
Prepaids and other current assets (459) 43
Accounts payable and accrued expenses 2,626 (5,416)
Income taxes payable 1,400 229
-------- --------
Net cash provided by (used in) operating activities 4,461 (2,909)
INVESTING ACTIVITIES:
Purchases of marketable securities (3,500) --
Purchases of property and equipment (2,339) (548)
Business acquisitions and joint venture investments -- (103)
Change in joint venture investments, net (546) (11)
-------- --------
Net cash used in investing activities (6,385) (662)
FINANCING ACTIVITIES:
Decrease in long-term notes payable -- (37,200)
Issuance of common stock 728 89,589
Payment of costs related to public offerings -- (544)
-------- --------
Net cash provided by financing activities 728 51,845
-------- --------
Increase (decrease) in cash and cash equivalents (1,196) 48,274
Cash and cash equivalents at beginning of period 54,520 10,204
-------- --------
Cash and cash equivalents at end of period $ 53,324 $ 58,478
======== ========
See accompanying notes to condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2001
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and with the instructions to
form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary to present fairly the condensed consolidated financial
position, results of operations and cash flows of Accredo Health, Incorporated
(the "Company" or "Accredo" ) have been included. Operating results for the
three-month period ended September 30, 2001, are not necessarily indicative of
the results that may be expected for the fiscal year ended June 30, 2002.
The balance sheet at June 30, 2001 has been derived from the audited financial
statements at that date but does not include all of the information and
footnotes required by accounting principles generally accepted in the United
States for complete financial statements.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K for the
year ended June 30, 2001.
2. STOCKHOLDERS' EQUITY
During the quarter, employees exercised stock options to acquire 88,521 shares
of Accredo common stock at a weighted average exercise price of $8.23 per share.
3. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share (in thousands, except share data) :
Three Months Ended
September 30,
---------------------------
2001 2000
----------- -----------
Numerator for basic and diluted income per
share to common stockholders:
Net income $ 5,877 $ 3,364
=========== ===========
Denominator:
Denominator for basic income per
share to common stockholders -
weighted-average shares 25,996,817 23,017,730
Effect of dilutive stock options 852,080 1,293,672
----------- -----------
Denominator for diluted income per
share to common stockholders -
adjusted weighted-average shares 26,848,897 24,311,402
=========== ===========
Earnings per common share:
Basic $ 0.23 $ 0.15
Diluted $ 0.22 $ 0.14
4. GOODWILL AND OTHER INTANGIBLE ASSETS
At the beginning of the quarter ended September 30, 2001, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 142, Goodwill and Other
Intangible Assets. The Company is providing transitional, pro-forma, disclosure
in the table below for net income and earnings per share for the comparative
prior period as if SFAS No. 142 had also been adopted in that period (in
thousands, except for earnings-per-share amounts).
Three Months Ended
September 30,
------------------------
2001 2000
--------- ---------
Reported net income $ 5,877 $ 3,364
Add back: Goodwill amortization -- 358
--------- ---------
Adjusted net income $ 5,877 $ 3,722
========= =========
Basic earnings per share:
Reported net income $ 0.23 $ 0.15
Goodwill amortization -- 0.01
--------- ---------
Adjusted net income $ 0.23 $ 0.16
========= =========
Diluted earnings per share:
Reported net income $ 0.22 $ 0.14
Goodwill amortization -- 0.01
--------- ---------
Adjusted net income $ 0.22 $ 0.15
========= =========
The impact of the adoption of SFAS No. 142 resulted in an increase in net income
of approximately $440,000 and an increase in diluted earnings per share of
approximately $0.016 for the quarter.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
FORWARD LOOKING STATEMENTS
Some of the information in this quarterly report contains forward-looking
statements that involve substantial risks and uncertainties. You can identify
these statements by forward-looking words such as "may," "will," "expect,"
"anticipate," "believe," "intend," "estimate" and "continue" or similar words.
You should read statements that contain these words carefully for the following
reasons:
- - the statements discuss our future expectations;
- - the statements contain projections of our future earnings or of our
financial condition; and
- - the statements state other "forward-looking" information.
There may be events in the future that we are not accurately able to predict or
over which we have no control. The risk factors discussed below, as well as any
cautionary language in this quarterly report, provide examples of risks,
uncertainties and events that may cause our actual results to differ materially
from the expectations we describe in our forward-looking statements. Examples of
these risks, uncertainties and events include the availability of new drugs, our
relationships with the manufacturers whose drugs we handle, competitive or
regulatory factors affecting the drugs we handle or their manufacturers, the
demand for our services, our ability to expand through joint ventures and
acquisitions, our ability to maintain existing pricing arrangements with
suppliers, the impact of government regulation, our need for additional capital,
the seasonality of our operations and our ability to implement our strategies
and objectives.
Investors in our common stock should be aware that the occurrence of any of the
events described in the risk factors discussed elsewhere in this quarterly
report and other events that we have not predicted or assessed could have a
material adverse effect on our earnings, financial condition and business. In
such case, the trading price of our common stock could decline and you may lose
all or part of your investment.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 2000
REVENUES
Total revenues increased 27% from $99.6 million to $126.6 million from the three
months ended September 30, 2000 to the three months ended September 30, 2001.
Net patient service revenues increased 28% from $95.6 million to $122.3 million
from the three months ended September 30, 2000 to the three months ended
September 30, 2001. We continue to experience growth in all of our core products
for the treatments of multiple sclerosis, growth hormone disorders, hemophilia
and Gaucher Disease as a result of the addition of new patients as well as
additional sales to existing patients. We also experienced increased sales of
intravenous immunoglobulin ("IVIG") due to the acquisition of Pharmacare
Resources, Inc. in May 2001 as well as same store growth of this product.
COST OF SERVICES
Cost of services increased 26% from $85.0 million to $107.0 million from the
three months ended September 30, 2000 to the three months ended September 30,
2001 which is commensurate with the increase in our revenues discussed above. As
a percentage of revenues, cost of services decreased from 85.4% to 84.5% from
the three months ended September 30, 2000 to the three months ended September
30, 2001 resulting in gross margins of 14.6% and 15.5% for the three months
ended September 30, 2000 and 2001, respectively. Gross margins for the
individual products have remained relatively stable; however, a change in
product mix resulted in an increase in the composite gross margin in the three
months ended September 30, 2001. The primary drivers for the improvement in
gross margins were increased revenues from hemophilia factor and IVIG, which
have lower acquisition costs as a percentage of revenue than most of the other
products we distribute.
GENERAL AND ADMINISTRATIVE
General and administrative expenses increased from $6.6 million to $8.5 million,
or 29%, from the three months ended September 30, 2000 to the three months ended
September 30, 2001. This increase was primarily the result of increased salaries
and benefits associated with the expansion of our reimbursement, sales and
marketing, administrative and support staffs and the addition of office space
and related furniture and fixtures to support the revenue growth. General and
administrative expenses represented 6.7% of revenue in both of the three-month
periods ended September 30, 2000 and 2001.
BAD DEBTS
Bad debts decreased from $1,552,000 to $1,055,000 from the three months ended
September 30, 2000 to the three months ended September 30, 2001. As a percentage
of revenues, bad debt expense decreased from 1.6% to .8% from the three months
ended September 30, 2000 to the three months ended September 30, 2001. The
decrease in bad debts as a percentage of revenues is primarily due to the
increased percentage of our revenues that was reimbursed by prescription card
benefits versus major medical benefit plans. The majority of the reimbursement
provided by prescription card benefit plans is subject to much lower co-payment
and deductible amounts (typically $10-$15 per prescription) resulting in lower
bad debt.
DEPRECIATION AND AMORTIZATION
Depreciation expense increased from $368,000 to $452,000 from the three months
ended September 30, 2000 to the three months ended September 30, 2001 as a
result of purchases of property and equipment associated with our revenue growth
and the expansion of our leasehold facility improvements. Amortization expense
decreased from $645,000 to $238,000 from the three months ended September 30,
2000 to the three months ended September 30, 2001. The decrease is primarily due
to the adoption of SFAS 142, Goodwill and Other Intangible Assets, during the
first quarter of fiscal year 2002. The application of the non-amortization of
goodwill provisions of the pronouncement resulted in a reduction in amortization
expense of approximately $612,000 in the three months ended September 30, 2001.
INTEREST INCOME, NET
Interest income, net, increased from $374,000 to $514,000 from the three months
ended September 30, 2000 to the three months ended September 30, 2001. The
increase is due to an increase in the average amount of cash invested during the
quarter.
INCOME TAX EXPENSE
Our effective tax rate decreased from 39.9% to 38.8% from the three months ended
September 30, 2000 to the three months ended September 30, 2001. The decrease in
the effective tax rate is primarily due to the adoption of the non-amortization
provisions of SFAS 142 discussed above. The difference between the recognized
effective tax rate and the statutory rate is primarily attributed to state
income taxes.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2001, working capital was $94.9 million, cash and cash
equivalents were $53.3 million, marketable securities were $5.5 million and the
current ratio was 1.9 to 1.0.
Our net cash that was provided by operating activities was $4.5 million for the
three months ended September 30, 2001. During the three months ended September
30, 2001, accounts receivable increased $3.6 million, inventories increased $3.1
million and accounts payable, accrued expenses and income taxes increased $4.0
million. These increases are due primarily to our revenue growth and the timing
of the collection of receivables, inventory purchases and payments of accounts
payable.
Net cash used in investing activities was $6.4 million for the three months
ended September 30, 2001. Cash used in investing activities consisted primarily
of $2.3 million for purchases of property and equipment, $3.5 million for net
purchases of marketable securities, which have an initial maturity date of
greater than 90 days, and $.6 million of undistributed earnings from our joint
ventures.
Net cash provided by financing activities was $.7 million for the three months
ended September 30, 2001 which was from the proceeds of stock option exercises.
Historically, we have funded our operations and continued internal growth
through cash provided by operations. We anticipate that our capital expenditures
for the fiscal year ending June 30, 2002 will consist primarily of additional
computer hardware, a fully integrated pharmacy and reimbursement software system
and costs to build out and furnish additional space needed to meet the needs of
our growth. We expect the cost of our capital expenditures in fiscal year 2002
to be approximately $7.5 million, exclusive of any acquisitions of businesses.
We expect to fund these expenditures through cash provided by operating
activities and/or borrowings under the revolving credit agreement with our bank.
In addition, in connection with two of our acquisitions that were completed in
1999 and 2001, we may be obligated to make up to $6.9 million in earn-out
payments during the next twelve months.
We have a revolving credit facility under the terms of our existing credit
agreement. The agreement has an initial commitment of $30 million. We may
increase the commitment up to $60 million upon (i) 15 days written notice, (ii)
the payment of an additional commitment fee and (iii) delivery of a current
compliance certificate demonstrating no event of default exists and will not
exist following the increase in the commitment. All outstanding principal and
interest on loans
made under the credit agreement is due and payable on December 1, 2003. There
were no borrowings under the credit agreement during the three months ended
September 30, 2001.
Interest on loans under the credit agreement accrues at a variable rate index
based on the prime rate or the London Inter-Bank Offered Rate for one, two,
three or six months (as selected by us), plus a margin depending on the amount
of our debt to cash flow ratio as defined by the credit agreement and measured
at the end of each quarter for prospective periods.
Our obligations under the credit agreement are secured by a lien on
substantially all of our assets, including a pledge of all of the common stock
or partnership interest of each of our subsidiaries in which we own an 80% or
more interest.
The credit agreement contains operating and financial covenants, including
requirements to maintain a certain debt to equity ratio and minimum leverage and
debt service coverage ratios. In addition, the credit agreement includes
customary affirmative and negative covenants, including covenants relating to
transactions with affiliates, uses of proceeds, restrictions on subsidiaries,
limitations on indebtedness, limitations on capital expenditures, limitations on
mergers, acquisitions and sales of assets, limitations on investments,
prohibitions on payment of dividends and stock repurchases, limitations on debt
payments (including payment of subordinated indebtedness) and other
distributions. The credit agreement also contains customary events of default,
including events relating to changes in control of our company.
While we anticipate that our cash from operations, along with the short-term use
of the revolving credit facility will be sufficient to meet our internal
operating requirements and growth plans for at least the next 12 months, we
expect that additional funds may be required in the future to successfully
continue our growth beyond such period. We may be required to raise additional
funds through sales of equity or debt securities or seek additional financing
from financial institutions. There can be no assurance, however, that financing
will be available on terms that are favorable to us or, if obtained, will be
sufficient for our needs.
RISK FACTORS
You should carefully consider the risks and uncertainties we describe below
before investing in Accredo. The risks and uncertainties described below are NOT
the only risks and uncertainties that could develop. Other risks and
uncertainties that we have not predicted or evaluated could also affect our
company.
If any of the following risks occur, our earnings, financial condition or
business could be materially harmed, and the trading price of our common stock
could decline, resulting in the loss of all or part of your investment.
WE ARE HIGHLY DEPENDENT ON OUR RELATIONSHIPS WITH A LIMITED NUMBER OF
BIOPHARMACEUTICAL SUPPLIERS AND THE LOSS OF ANY OF THESE RELATIONSHIPS COULD
SIGNIFICANTLY IMPACT OUR ABILITY TO SUSTAIN OR GROW OUR REVENUES.
We derive a substantial majority of our revenue and profitability from our
relationships with Biogen, Genzyme, MedImmune and Genentech. The table below
shows the concentration of our revenue derived from these relationships as a
percentage of revenue for the periods indicated:
THREE MONTHS FISCAL YEAR ENDED
ENDED -------------------------------
SEPTEMBER 30, JUNE 30, JUNE 30, JUNE 30,
2001 2001 2000 1999
Biogen, Genzyme,
MedImmune & Genentech 69% 72% 72% 73%
Our agreements with these suppliers are short-term and cancelable by
either party without cause on 60 to 90 days prior notice. These agreements also
generally limit our ability to handle competing drugs during and, in some cases,
after the term of the agreement, but allow the supplier to distribute through
channels other than us. Further, these agreements provide that pricing and other
terms of these relationships be periodically adjusted for changed market
conditions or required service levels. Any termination or adverse adjustment to
any of these relationships could have a material adverse effect on a significant
portion of our business, financial condition and results of operations.
OUR ABILITY TO GROW COULD BE LIMITED IF WE DO NOT EXPAND OUR EXISTING BASE OF
DRUGS OR IF WE LOSE PATIENTS.
We focus almost exclusively on a limited number of complex and
expensive drugs that serve small patient populations. The drugs that we
currently sell are prescribed for Multiple Sclerosis, Gaucher Disease,
Hemophilia and Autoimmune Disorders, Growth Hormone-Related Disorders, Crohn's
Disease, and Respiratory Syncytial Virus.
Due to the small patient populations that use the drugs we handle, our
future growth is highly dependent on expanding our base of drugs. Further, a
loss of patient base or reduction in demand for any reason of the drugs we
currently handle could have a material adverse effect on a significant portion
of our business, financial condition and results of operation.
OUR BUSINESS WOULD BE HARMED IF DEMAND FOR OUR PRODUCTS AND SERVICES IS REDUCED.
Reduced demand for our products and services could be caused by a
number of circumstances, including:
- - patient shifts to treatment regimens other than those we offer;
- - new treatments or methods of delivery of existing drugs that do not
require our specialty products and services;
- - a recall of a drug;
- - adverse reactions caused by a drug;
- - the expiration or challenge of a drug patent;
- - competing treatment from a new drug or a new use of an existing drug;
- - the loss of a managed care or other payor relationship covering a
number of high revenue patients;
- - the cure of a disease we service; or
- - the death of a high-revenue patient.
THERE IS SUBSTANTIAL COMPETITION IN OUR INDUSTRY, AND WE MAY NOT BE ABLE TO
COMPETE SUCCESSFULLY.
The specialty pharmacy industry is highly competitive and is continuing
to become more competitive. All of the drugs, supplies and services that we
provide are also available from our competitors. Our current and potential
competitors include:
- - other specialty pharmacy distributors;
- - specialty pharmacy divisions of wholesale drug distributors;
- - pharmacy benefit management companies;
- - hospital-based pharmacies;
- - retail pharmacies;
- - home infusion therapy companies;
- - comprehensive hemophilia treatment centers; and
- - other alternative site health care providers.
Many of our competitors have substantially greater resources and more
established operations and infrastructure than we have. We are particularly at
risk from any of our suppliers deciding to pursue its own distribution and
services and not outsource these needs to companies like us. A significant
factor in effective competition will be an ability to maintain and expand
relationships with managed care companies, pharmacy benefit managers and other
payors who can effectively determine the pharmacy source for their enrollees.
IF ANY OF OUR RELATIONSHIPS WITH MEDICAL CENTERS ARE DISRUPTED OR CANCELLED, OUR
BUSINESS COULD BE HARMED.
We have significant relationships with four medical centers that
provide services primarily related to hemophilia, growth hormone-related
disorders and respiratory syncytial virus. For the fiscal years ended June 30,
2000 and 2001 and the quarter ended September 30, 2001, we received
approximately 12%, 4% and 5%, respectively, of our earnings before income taxes
and extraordinary item from equity in the net income of unconsolidated joint
ventures.
We own 80% of one of our joint ventures with Children's Home Care, Inc.
and the financial results of this joint venture are included in our consolidated
financial results. This consolidated joint venture represented approximately 13%
of our income before income taxes for the quarter ended September 30, 2001.
Our agreements with medical centers have terms of between one and five
years, and may be cancelled by either party without cause upon notice of between
one and twelve months. Adverse changes in our relationships with those medical
centers could be caused, for example, by:
- - changes caused by consolidation within the hospital industry;
- - changes caused by regulatory uncertainties inherent in the structure of
the relationships; or
- - restrictive changes to regulatory requirements.
Any termination or adverse change of these relationships could have a
material adverse effect on our business, financial condition and results of
operations.
IF ADDITIONAL PROVIDERS OBTAIN ACCESS TO FAVORABLY PRICED DRUGS WE HANDLE, OUR
BUSINESS COULD BE HARMED.
We are not eligible to participate directly in the federal pricing
program of the Public Health Service, commonly known as PHS, which allows
hospitals and hemophilia treatment centers to obtain discounts on clotting
factor. Increased competition from hospitals and hemophilia treatment centers
may reduce our profit margins.
OUR ACQUISITION AND JOINT VENTURE STRATEGY MAY NOT BE SUCCESSFUL, WHICH COULD
CAUSE OUR BUSINESS AND FUTURE GROWTH PROSPECTS TO SUFFER.
As part of our growth strategy, we continue to evaluate joint venture
and acquisition opportunities, but we cannot predict or provide assurance that
we will complete any future acquisitions or joint ventures. Acquisitions and
joint ventures involve many risks, including:
- - difficulty in identifying suitable candidates and negotiating and
consummating acquisitions on attractive terms;
- - difficulty in assimilating the new operations;
- - increased transaction costs;
- - diversion of our management's attention from existing operations;
- - dilutive issuances of equity securities that may negatively impact the
market price of our stock;
- - increased debt; and
- - increased amortization expense related to intangible assets that would
decrease our earnings.
We could also be exposed to unknown or contingent liabilities resulting
from the pre-acquisition operations of the entities we acquire, such as
liability for failure to comply with health care or reimbursement laws.
FLUCTUATIONS IN OUR QUARTERLY FINANCIAL RESULTS MAY CAUSE OUR STOCK PRICE TO
DECLINE.
Our results of operations may fluctuate on a quarterly basis, which
could adversely affect the market price of our common stock. Our results may
fluctuate as a result of:
- - lower prices paid by Medicare or Medicaid for the drugs that we sell,
including lower prices resulting from recent revisions in the method of
establishing average wholesale price ("AWP");
- - below-expected sales or delayed launch of a new drug;
- - price and term adjustments with our drug suppliers;
- - increases in our operating expenses in anticipation of the launch of a
new drug;
- - product shortages;
- - inaccuracies in our estimates of the costs of ongoing programs;
- - the timing and integration of our acquisitions;
- - changes in governmental regulations;
- - the annual renewal of deductibles and co-payment requirements that
affect patient ordering patterns;
- - our provision of drugs to treat seasonal illnesses, such as respiratory
syncytial virus;
- - physician prescribing patterns; and
- - general political and economic conditions.
OUR BUSINESS WOULD BE HARMED IF THE BIOPHARMACEUTICAL INDUSTRY CEASES RESEARCH,
DEVELOPMENT AND PRODUCTION OF THE TYPES OF DRUGS THAT ARE COMPATIBLE WITH THE
SERVICES WE PROVIDE.
Our business is highly dependent on continued research, development,
manufacturing and marketing expenditures of biopharmaceutical companies, and the
ability of those companies to develop, supply and generate demand for drugs that
are compatible with the services we provide. Our business would be materially
and adversely affected if those companies stopped outsourcing the services we
provide or failed to support existing drugs or develop new drugs. Our business
could also be harmed if the biopharmaceutical industry undergoes any of the
following developments:
- - supply shortages;
- - adverse drug reactions;
- - drug recalls;
- - increased competition among biopharmaceutical companies;
- - an inability of drug companies to finance product development because
of capital shortages;
- - a decline in product research, development or marketing;
- - a reduction in the retail price of drugs from governmental or private
market initiatives;
- - changes in the Food and Drug Administration ("FDA") approval process;
or
- - governmental or private initiatives that would alter how drug
manufacturers, health care providers or pharmacies promote or sell
products and services.
OUR BUSINESS COULD BE HARMED IF THE SUPPLY OF ANY OF THE PRODUCTS THAT WE
DISTRIBUTE BECOMES SCARCE.
The biopharmaceutical industry is susceptible to product shortages.
Some of the products that we distribute, such as IVIG and blood-related
products, are collected and processed from human donors. Accordingly, the supply
of these products is highly dependent on human donors and their availability has
been constrained from time to time. An industry wide recombinant factor VIII
product shortage has existed for some time, as a result of the manufacturers
being unable to increase production to meet rising global demand. Future
availability of product is unclear and we are not certain when the manufacturers
will return to normal product allocations. If these products, or any of the
other drugs that we distribute, are in short supply for long periods of time,
our business could be harmed.
IF SOME OF THE DRUGS THAT WE PROVIDE LOSE THEIR "ORPHAN DRUG" STATUS, WE COULD
FACE MORE COMPETITION.
Our business could also be adversely affected by the expiration or
challenge to the "orphan drug" status that has been granted by the FDA to some
of the drugs that we handle. When the FDA grants "orphan drug" status, it will
not approve a second drug for the same treatment for a period of seven years
unless the new drug is chemically different or clinically superior. The "orphan
drug" status applicable to drugs that we handle expires as follows:
- - Cerezyme(R) expired May 2001;
- - AVONEX(R) expires May 2003; and
- - REMICADE(TM) expires September 2005.
The loss of orphan drug status could result in competitive drugs
entering the market, which could harm our business.
OUR ABILITY TO CONTINUE TO PROVIDE AVONEX(R) COULD BE AFFECTED BY A PENDING
CHALLENGE THAT BIOGEN IS INFRINGING ON A PATENT.
Our ability to continue to service AVONEX(R) could also be affected by
a pending challenge bY Berlex Laboratories, Inc. that Biogen is infringing on a
Berlex patent in the production of AVONEX(R). Berlex is seeking, among other
things, a
permanent injunction restraining Biogen froM manufacturing AVONEX(R). If the
permanent injunction is granted or if Biogen is unable tO continue to supply
AVONEX(R) on terms favorable to us, our business could be harmed. In AugusT 2000
the Federal District Court for the District of Massachusetts granted summary
judgment in Biogen's favor ruling that AVONEX(R) does not infringe on a Berlex
patent, and in September 2000 the Court entered a final judgement in favor of
Biogen dismissing the District Court Case. Berlex has appealed this decision to
the U.S. Federal District Court of Appeals.
RECENT INVESTIGATIONS INTO REPORTING OF AVERAGE WHOLESALE PRICES COULD REDUCE
OUR PRICING AND MARGINS.
Many government payors, including Medicare and Medicaid, pay us
directly or indirectly at the drug's average wholesale price (or AWP) or at a
percentage off AWP. We have also contracted with a number of private payors to
sell drugs at AWP or at a percentage off AWP. AWP for most drugs is compiled and
published by a private company, First DataBank, Inc. In February 2000, First
DataBank published a Market Price Survey of 437 drugs, which was significantly
lower than the historic AWP for a number of the clotting factor and IVIG
products that we sell.
Various federal and state government agencies have been investigating
whether the reported AWP of many drugs, including some that we sell, is an
appropriate or accurate measure of the market price of the drugs. As reported in
the Wall Street Journal, there are also several whistleblower lawsuits pending
against various drug manufacturers. These government investigations and lawsuits
involve allegations that manufacturers reported artificially inflated AWP prices
of various drugs to First DataBank. Bayer Corporation, one of the Company's
suppliers of clotting factor, recently agreed to pay $14 million in a settlement
with the federal government and 45 states regarding these charges. Bayer also
entered into a 5 year corporate integrity agreement with the government, in
which Bayer agreed to provide average selling prices of its drugs to the
government. In a separate action involving alleged inflated pricing, TAP
Pharmaceutical Products agreed to pay federal and state governments $875 million
to settle charges associated with the marketing of Lupron.
A number of state Medicaid agencies have revised their payment
methodology as a result of the Market Price Survey. The Centers for Medicare and
Medicaid Services ("CMMS") had also announced that Medicare intermediaries
should calculate the amount that they pay for certain drugs by using the lower
prices on the First DataBank Market Price Survey. However, the proposal to
include clotting factor in the lower Medicare pricing was withdrawn. Instead,
CMMS has announced that it will seek legislation that would establish payments
to cover the administrative costs of suppliers of clotting factor as a
supplement to lower AWP pricing for factor.
On September 21, 2001, the United States House Subcommittees on Health
and Oversight & Investigations held hearings to examine how Medicare reimburses
providers for the cost of drugs. In conjunction with that hearing, the U.S.
General Accounting Office issued its Draft Report recommending that Medicare
establish payment levels for part-B prescription drugs and their delivery and
administration that are more closely related to their costs, and that payments
for drugs be set at levels that reflect actual market transaction prices and the
likely acquisition costs to providers.
On October 26, 2001, a proposed class action lawsuit was filed in
California by a Los Angeles based physician on behalf of thousands of patients,
third party payors and the state of California. This lawsuit, which names
several pharmaceutical manufacturers as defendants, alleges that the inflation
of AWP violates the California Unfair Competition law.
We cannot predict the eventual results of the government
investigations, lawsuits and the changes made by First DataBank. If reduced
average wholesale prices for the drugs that we sell are ultimately adopted as
the standard by which we are paid by government payors or private payors, this
could have a material adverse effect on our business, financial condition and
results of operation, including reducing the pricing and margins on certain of
our products.
OUR BUSINESS COULD BE HARMED BY CHANGES IN MEDICARE OR MEDICAID.
Changes in the Medicare, Medicaid or similar government programs or the
amounts paid by those programs for our services may adversely affect our
earnings. For example, these programs could revise their pricing based on new
methods of calculating the AWP for drugs we handle. For the fiscal years ended
June 30, 2000 and 2001 and the quarter ended September 30, 2001, we estimate
that approximately 18%, 19%, and 18% respectively of our gross patient service
revenues consisted of reimbursements from federal and state programs, excluding
sales to private physicians whose ultimate payor is typically Medicare. Any
reductions in amounts reimbursable by government programs for our services or
changes in regulations governing such reimbursements could materially and
adversely affect our business, financial condition and results of operations.
OUR BUSINESS WILL SUFFER IF WE LOSE RELATIONSHIPS WITH PAYORS.
We are highly dependent on reimbursement from non-governmental payors.
For the fiscal years ended June 30, 2000 and 2001 and the quarter ended
September 30, 2001, we derived approximately 82%, 81% and 82% respectively of
our gross patient service revenue from non-governmental payors (including
self-pay), which included 5%, 4% and 3%, respectively for those periods, from
sales to private physician practices whose ultimate payor is typically Medicare.
In fiscal year 2001 and
the quarter ended September 30, 2001, our private payor, Aetna, Inc. and
affiliates accounted for approximately 15% of the Company's revenue.
Many payors seek to limit the number of providers that supply drugs to
their enrollees. For example, we were selected by Aetna, Inc. as one of three
providers of injectible medications. From time to time, payors with whom we have
relationships require that we and our competitors bid to keep their business,
and there can be no assurance that we will be retained or that our margins will
not be adversely affected when that happens. The loss of a payor relationship,
for example, our relationship with Aetna (which is terminable on 90 days
notice), or an adverse change in the financial condition of a payor like Aetna,
could result in the loss of a significant number of patients and have a material
adverse effect on our business, financial condition and results of operations.
WE RELY HEAVILY ON A SINGLE SHIPPING PROVIDER, AND OUR BUSINESS WOULD BE HARMED
IF OUR RATES ARE INCREASED OR OUR PROVIDER IS UNAVAILABLE.
Almost all of our revenues result from the sale of drugs we deliver to
our patients and principally all of our products are shipped by a single
carrier, FedEx. We depend heavily on these outsourced shipping services for
efficient, cost effective delivery of our product. The risks associated with
this dependence include:
- - any significant increase in shipping rates;
- - strikes or other service interruptions by our primary carrier, FedEx,
or by another carrier that could affect FedEx; or
- - spoilage of high cost drugs during shipment, since our drugs often
require special handling, such as refrigeration.
DISRUPTION IN NEW YORK CITY AND IN U.S. COMMERCIAL ACTIVITIES GENERALLY
FOLLOWING THE SEPTEMBER 2001 TERRORIST ATTACKS ON THE U.S. MAY ADVERSELY IMPACT
OUR RESULTS OF OPERATIONS, OUR ABILITY TO RAISE CAPITAL OR OUR FUTURE GROWTH.
Our operations have been and may continue to be harmed by the recent
terrorist attacks on the U.S. For example, transportation systems and couriers
that we rely upon to deliver our drugs have been and may continue to be
disrupted, thereby causing a decrease in our revenues. In addition, we may
experience a rise in operating costs, such as costs for transportation, courier
services, insurance and security. We also may experience delays in receiving
payments from payors that have been affected by the attacks, which, in turn,
would harm our cash flow. The U.S. economy in general may be adversely affected
by the terrorist attacks or by any related outbreak of hostilities. Any such
economic downturn could adversely impact our results of operations, impair our
ability to raise capital or impede our ability to continue growing our business.
OUR BUSINESS COULD BE HARMED IF PAYORS DECREASE OR DELAY THEIR PAYMENTS TO US.
Our profitability depends on payment from governmental and
non-governmental payors, and we could be materially and adversely affected by
cost containment trends in the health care industry or by financial difficulties
suffered by non-governmental payors. Cost containment measures affect pricing,
purchasing and usage patterns in health care. Payors also influence decisions
regarding the use of a particular drug treatment and focus on product cost in
light of how the product may impact the overall cost of treatment. Further, some
payors, including large managed care organizations and some private physician
practices, have recently experienced financial trouble. The timing of payments
and our ability to collect from payors also affects our revenue and
profitability. If we are unable to collect from payors or if payors fail to pay
us in a timely manner, it could have a material adverse effect on our business
and financial condition.
IF WE ARE UNABLE TO MANAGE OUR GROWTH EFFECTIVELY, OUR BUSINESS WILL BE HARMED.
Our rapid growth over the past several years has placed a strain on our
resources, and if we cannot effectively manage our growth, our business,
financial condition and results of operations could be materially and adversely
affected. We have experienced a large increase in the number of our employees,
the size of our programs and the scope of our operations. Our ability to manage
this growth and be successful in the future will depend partly on our ability to
retain skilled employees, enhance our management team and improve our management
information and financial control systems.
WE COULD BE ADVERSELY AFFECTED BY AN IMPAIRMENT OF THE SIGNIFICANT AMOUNT OF
GOODWILL ON OUR FINANCIAL STATEMENTS.
Our formation and our acquisitions of Southern Health Systems, Inc.,
Hemophilia Health Services, Inc., Sunrise Health Management, Inc., Pharmacare
Resources, Inc., NCL Management, Inc. and the specialty pharmacy businesses of
Home Medical of America, Inc. resulted in the recording of a significant amount
of goodwill on our financial statements. The goodwill was recorded because the
fair value of the net assets acquired was less than the purchase price. There
can be no assurance that we will realize the full value of this goodwill. We
evaluate on an on-going basis whether events and circumstances indicate that all
or some of the carrying value of goodwill is no longer recoverable, in which
case we would write off the unrecoverable goodwill in a charge to our earnings.
We are not presently aware of any persuasive evidence that any material
portion of our goodwill will be impaired and written off against earnings. As of
September 30, 2001, we had goodwill, net of accumulated amortization, of
approximately $89.5 million, or 30% of total assets and 45% of stockholders'
equity.
Since our growth strategy may involve the acquisition of other
companies, we may record additional goodwill in the future. The possible
write-off of this goodwill could negatively impact our future earnings. We will
also be required to allocate a portion of the purchase price of any acquisition
to the value of non-competition agreements, patient base and contracts that are
acquired. The amount allocated to these items could be amortized over a fairly
short period. As a result, our earnings and the market price of our common stock
could be negatively impacted.
WE RELY ON A FEW KEY EMPLOYEES WHOSE ABSENCE OR LOSS COULD ADVERSELY AFFECT OUR
BUSINESS.
We depend on a few key executives, and the loss of their services could
cause a material adverse effect to our company. We do not maintain "key person"
life insurance policies on any of those executives. As a result, we are not
insured against the losses resulting from the death of our key executives.
Further, we must be able to attract and retain other qualified, essential
employees for our technical operating and professional staff, such as
pharmacists. If we are unable to attract and retain these essential employees,
our business could be harmed.
WE MAY NEED ADDITIONAL CAPITAL TO FINANCE OUR GROWTH AND CAPITAL REQUIREMENTS,
WHICH COULD PREVENT US FROM FULLY PURSUING OUR GROWTH STRATEGY.
In order to implement our growth strategy, we will need substantial
capital resources and will incur, from time to time, short- and long-term
indebtedness, the terms of which will depend on market and other conditions. We
cannot be certain that existing or additional financing will be available to us
on acceptable terms, if at all. As a result, we could be unable to fully pursue
our growth strategy. Further, additional financing may involve the issuance of
equity securities that would reduce the percentage ownership of our then current
stockholders.
OUR INDUSTRY IS SUBJECT TO EXTENSIVE GOVERNMENT REGULATION AND NONCOMPLIANCE BY
US OR OUR SUPPLIERS COULD HARM OUR BUSINESS.
The marketing, sale and purchase of drugs and medical supplies is
extensively regulated by federal and state governments, and if we fail or are
accused of failing to comply with laws and regulations, we could suffer a
material adverse effect on our business, financial condition and results of
operations. Our business could also be materially and adversely affected if the
suppliers or clients we work with are accused of violating laws or regulations.
The applicable regulatory framework is complex, and the laws are very broad in
scope. Many of these laws remain open to interpretation, and have not been
addressed by substantive court decisions.
The health care laws and regulations that especially apply to our
activities include:
- - The federal "Anti-Kickback Law" prohibits the offer or solicitation of
compensation in return for the referral of patients covered by almost
all governmental programs, or the arrangement or recommendation of the
purchase of any item, facility or service covered by those programs.
The Health Insurance Portability and Accountability Act of 1996, or
HIPAA, created new violations for fraudulent activity applicable to
both public and private health care benefit programs and prohibits
inducements to Medicare or Medicaid eligible patients. The potential
sanctions for violations of these laws range from significant fines, to
exclusion from participation in the Medicare and Medicaid programs, to
criminal sanctions. Although some "safe harbor" regulations attempt to
clarify when an arrangement will not violate the Anti-Kickback Law, our
business arrangements and the services we provide may not fit within
these safe harbors. Failure to satisfy a safe harbor requires analysis
of whether the parties intended to violate the Anti-Kickback Law. The
finding of a violation could have a material adverse effect on our
business.
- - The Department of Health and Human Services recently issued regulations
implementing the Administrative Simplification provision of HIPAA
concerning the maintenance and transmission and security of electronic
health information, particularly individually identifiable information.
The new regulations, when effective, will require the development and
implementation of security and transaction standards for all electronic
health information and impose significant use and disclosure
obligations on entities that send or receive individually identifiable
electronic health information. Failure to comply with these
regulations, or wrongful disclosure of confidential patient information
could result in the imposition of administrative or criminal sanctions,
including exclusion from the Medicare and state Medicaid programs. In
addition, if we choose to distribute drugs through new distribution
channels such as the Internet, we will have to comply with government
regulations that apply to those distribution channels, which could have
a material adverse effect on our business.
- - The Ethics in Patient Referrals Act of 1989, as amended, commonly
referred to as the "Stark Law," prohibits physician referrals to
entities with which the physician or their immediate family members
have a "financial relationship." A violation of the Stark Law is
punishable by civil sanctions, including significant fines and
exclusion from participation in Medicare and Medicaid.
- - State laws prohibit the practice of medicine, pharmacy and nursing
without a license. To the extent that we assist patients and providers
with prescribed treatment programs, a state could consider our
activities to constitute the practice of medicine. If we are found to
have violated those laws, we could face civil and criminal penalties
and be required to reduce, restructure, or even cease our business in
that state.
- - Pharmacies and pharmacists must obtain state licenses to operate and
dispense drugs. Pharmacies must also obtain licenses in some states to
operate and provide goods and services to residents of those states. If
we are unable to maintain our licenses or if states place burdensome
restrictions or limitations on non-resident pharmacies, this could
limit or affect our ability to operate in some states which could
adversely impact our business and results of operations.
- - Federal and state investigations and enforcement actions continue to
focus on the health care industry, scrutinizing a wide range of items
such as joint venture arrangements, referral and billing practices,
product discount arrangements, home health care services, dissemination
of confidential patient information, clinical drug research trials and
gifts for patients.
- - The False Claims Act encourages private individuals to file suits on
behalf of the government against health care providers such as us. Such
suits could result in significant financial sanctions or exclusion from
participation in the Medicare and Medicaid programs.
THE MARKET PRICE OF OUR COMMON STOCK MAY EXPERIENCE SUBSTANTIAL FLUCTUATIONS FOR
REASONS OVER WHICH WE HAVE LITTLE CONTROL.
Our common stock is traded on the Nasdaq National Market. Since our
common stock has only been publicly traded for a short time, an active trading
market for the stock may not develop or be maintained. Also, the market price of
our common stock could fluctuate substantially based on a variety of factors,
including the following:
- - future announcements concerning us, our competitors, the drug
manufacturers with whom we have relationships or the health care
market;
- - changes in government regulations;
- - overall volatility of the stock market;
- - changes in earnings estimates by analysts; and
- - changes in operating results from quarter to quarter.
Furthermore, stock prices for many companies fluctuate widely for
reasons that may be unrelated to their operating results. These fluctuations,
coupled with changes in our results of operations and general economic,
political and market conditions, may adversely affect the market price of our
common stock.
SOME PROVISIONS OF OUR CHARTER DOCUMENTS MAY HAVE ANTI-TAKEOVER EFFECTS THAT
COULD DISCOURAGE A CHANGE IN CONTROL, EVEN IF AN ACQUISITION WOULD BE BENEFICIAL
TO OUR STOCKHOLDERS.
Our certificate of incorporation, our bylaws and Delaware law contain
provisions that could make it more difficult for a third party to acquire us,
even if doing so would be beneficial to our stockholders.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our exposure to the impact of financial market risk is currently not
significant. Our primary financial market risk exposure consists of interest
rate risk related to interest income from our short term investments in money
market and high quality short term debt securities with maturities of twelve
months or less that we intend to hold to maturity. We have invested and expect
to continue to invest a substantial portion of our excess cash in such
securities. Generally, if the overall average return on such securities had
decreased 10% from the average return during the quarter ended September 30,
2001, then our interest income would have decreased, and pre-tax income would
have decreased approximately $51,000 during the period. This amount was
determined by considering the impact of a hypothetical change in interest rates
on our interest income. Actual changes in rates may differ from the hypothetical
assumptions used in computing this exposure.
In prior periods, we have used derivative financial instruments to manage our
exposure to rising interest rates on our variable-rate debt, primarily by
entering into variable-to-fixed interest rate swaps. Since we currently do not
have an outstanding balance on our revolving line of credit nor any outstanding
interest rate swap agreements, we do not have an exposure to financial market
risk associated with our revolving line of credit or any derivative financial
instruments.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On October 1, 2001 we entered into a distribution agreement with MedImmune,
Incorporated to distribute Synagis(R) during the 2001-2002 respiratory syncytial
virus season. The distribution agreement can be terminated by either party upon
30 days notice.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
None
(b) Reports on Form 8-K
None
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
November 14, 2001 Accredo Health, Incorporated
BY: /s/ David D. Stevens
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David D. Stevens
Chairman of the Board and
Chief Executive Officer
/s/ Joel R. Kimbrough
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Joel R. Kimbrough
Senior Vice President, Chief
Financial Officer and Treasurer