Diplomat names new president, reports Q2 earnings

FLINT, Mich. — Diplomat Pharmacy is transitioning into new leadership as it moves into the last half of its fiscal year. Alongside its Q2 earnings report, the company on Monday appointed Joel Saban president, effective Aug. 7, as Paul Urick departs the company to pursue other interests. Urick will stay on as president emeritus during a 90-day transition period.

“During his tenure, Paul has served us in multiple leadership roles since he joined Diplomat with the acquisition of Burman's Specialty Pharmacy in June 2015 and has provided decisive, strategic leadership which continues to benefit our patients and our partners,” chairman and CEO Phil Hagerman said. “We want to thank Paul for his significant contribution and commitment to the company.”

Saban was Catamaran’s EVP operations from June 2010 to January 2016, overseeing the 3,200-employee staff of the company’s retail, mail and specialty operations, as well as cost of goods contracting and vendor relations. Before Catamaran he was SVP industry relations at CVS Health from 1997 to 2010, overseeing brand pharmaceutical industry relations, including contract negotiation and administration, financial analysis and strategic business development. He is a member of the Academy of Managed Care Pharmacy and the Pharmaceutical Care Management Association.

“After following Diplomat's success for several years, I am honored to join their team,” Saban said. “Diplomat continues to transform in this rapidly evolving industry and I am committed to their strategies, continued growth, and emphasis on services for patients and partners.”

Saban will be tasked with navigating the company’s roadmap and driving growth — which continues steadily, according to Diplomat’s second quarter earnings. For the quarter ended June 30, Diplomat increased its revenue 3.5% to $1.13 billion. Diplomat said its revenue growth was driven by roughly $83 million in revenue from its acquisitions, $63 million from the impact of manufacturer price increases and $32 million from drugs introduced in the last year. The company’s year-over-year revenue increase, excluding the impact of contract losses, was about $160 million or 15%.

As revenue increased, Diplomat saw a slight dip in its gross margin percentage, with its $84.8 million profit generating a 7.5% gross margin, compared with the 7.6% gross margin it saw in the same period last year. The company attributed this to an increase in direct and indirect remuneration, or DIR, fees. Diplomat also saw its selling, general and administrative expenses increase by $10 million over the prior-year period, due to the growth of its administratively and clinically complex infusion and oncology business. SG&A as a percentage of revenue was 7.1%, compared with 6.4% last year, due largely to the increase amortization related to acquisitions and increased operating complexity that accompanied its new acquisitions and drugs.

As a result of both changes in gross profit, gross margin and SG&A, net income attributable to Diplomat was $3.6 million, compared with $8.5 million in Q2 2016.

"I'm very pleased with our solid second quarter results, which saw continued strength in oncology and infusion, up 25% and 20% year over year, respectively,” Hagerman said. “In the first half of 2017, a transition year for Diplomat, we have made promising strides in our, higher margin, tuck-in acquisition strategy in infusion, as well as with our managed care strategy.  In addition, we are seeing customers start to embrace our expanded service division.”

He also is optimistic about the impact Saban will have.

“I look forward to partnering with Joel and our talented senior leadership team to accelerate our strategic plan,” he said. “We remain focused on driving profitable growth with a continued emphasis on quality and innovation to deliver strong shareholder returns over the long term.”