Diplomat’s Q3 sees slight loss despite adding PBM revenue
Diplomat Pharmacy posted $1.4 billion in revenue for the third quarter, but the Flint, Mich.-based company’s net income decreased to $0.2 million for the quarter compared with $1 million in the prior-year period.
Revenue increased 22% to $1.4 billion from $1.1 billion, and gross profit grew to $93.4 million from $65.1 million in the prior-year period.
"Third quarter results were solid as we continue to successfully execute on our growth plan. Results were driven by strong specialty segment growth and PBM performance," Diplomat chairman and CEO Brian Griffin said. "We recently opened our new state-of-the-art distribution and call center facility in Chandler, Ariz., furthering our efforts to provide the highest quality patient care nationwide. Every day we put our patients first, while at the same time investing in initiatives to drive further growth and productivity."
Revenue was comprised of $1.2 billion from the company’s specialty segment and $170 million from its pharmacy benefit management segment. The PBM segment was not part of the business in the prior-year period.
The company said the increase in the specialty segment was driven by manufacturer price increases, approximately $10 million from its recent acquisitions, access to drugs that were new in the past year, and increased volume due to both payer and physician relationships. These increases were partially offset by a decrease in hepatitis C business versus the prior-year period and reimbursement compression.
Gross profit in the third quarter generated a 6.8% gross margin, compared with 5.8% gross margin in the third quarter of 2017. Gross profit was comprised of $67 million from the specialty segment and $26.3 million from the PBM segment. The gross margin increase in the quarter was primarily due to the impact of PBM acquisitions, partially offset by reimbursement compression in its specialty segment, the company said.
Net income for the quarter was $0.2 million — down from $1.0 million year over year. Diplomat cited an $8.1 million increase in interest expense due to a significant increase in outstanding debt to fund its PBM acquisitions, partially offset by a $7.6 million increase in income from operations.
Adjusted EBITDA for the third quarter was $41.9 million, up from $23.2 million a year ago, and earnings per share were $0 versus 1 cent the prior year period.
Diplomat adjusted its full-year outlook to project revenue of between $5.5 and $5.7 billion, versus the previous range of $5.5 and $5.9 billion. Its expected EBITDA range is between $164 and $170 million, which is consistent with its previous range.
Diplomat now expects diluted earnings per share to be between 10 cents and 3 cents, versus the previous range of 15 cents and 1 cent.