Osceola Creates Company to Combine Compounders

Osceola Capital has partnered with industry veteran Jacob Beckel to launch Revelation Pharma as a platform investment to begin a consolidation of the 503A pharmacy compounding sector.

As it begins its consolidation, Revelation Pharma will target 503A compounding pharmacies that have annual revenue of at least $1.5 million and EBITDA of at least $250K. Sub sectors of specific interest include hormone replacement therapy, integrative health, anti-infectives, analgesics, and veterinary.

503A compounding pharmacies, a designation of the United States Food and Drug Administration (FDA), produce products in accordance with patient-specific prescriptions and are required by the state boards of pharmacy to comply with the USP (United States Pharmacopeia) and its guidelines. Traditionally, 503As prepare prescriptions for patients that are unable to accept the commercial dosage form of a drug product or are allergic to one of its ingredients. In these cases, compounding pharmacies make the proper dosage form or proper ingredient profile for the product and dispense it to the individual for home use only.

Other compounding pharmacies operate under the FDA’s 503B guidelines and produce large batches of products that are not patient-specific and are used in clinics, hospitals and surgery centers.

Prior to teaming up with Osceola Capital, Mr. Beckel was the founder and CEO of AnazaoHealth, a Florida-headquartered 503A and 503B (located in Nevada) pharmacy. Over an 18-year period, AnazaoHealth acquired and integrated 13 add-on acquisitions. In May 2015, the business was sold to Fagron NV, a Belgium-headquartered, multinational, and publicly traded compounding company, for approximately $98 million. At that time, AnazaoHealth’s revenues were approximately $30 million with a TTM EBITDA of $16 million. This equals a 6x TTM EBITDA enterprise valuation multiple.

“The 503A pharmacy compounding segment has been historically fragmented and presents a unique opportunity for consolidation,” said Mr. Beckel. “Cost of compliance is increasing, making it difficult for smaller service providers to operate efficiently. Our vision is to bring together many high-quality compounders and build a best in class 503A compounding business that has a strong culture of collaboration, compliance, and innovation.”

Joining Osceola and Mr. Beckel at Revelation Pharma is Richard Case, a lower middle-market healthcare services M&A professional. Most recently, Mr. Case was the CEO of Hospital Couriers, a provider of healthcare-related delivery services to acute-care facilities, physician networks, blood banks, pharmaceutical companies, and laboratories. At Revelation Pharma, Mr. Case serves as the chief executive officer, overseeing all day-to-day operations as well as strategic initiatives and M&A activities.

Yesterday, Revelation Pharma announced the buy of Pensacola, Florida-based Everwell Specialty Pharmacy which was founded in 2003 by Chris Schulte. Everwell, a 503A pharmacy, specializes in anti-infectives and serves patients throughout Florida and the Southeast US.

The compounding pharmacy sector – both 503A and 503B – has seen significant private equity activity over the past few years. In 2019, Webster Equity Partners and MedEquity Capital acquired Belmar Pharmacy, a Colorado-based operator of both 503A and 503B pharmacies that serves tens of thousands of patients across the US. In 2020, Belmar acquired APS Pharmacy, a Palm Harbor, Florida-based 503A pharmacy that specializes in hormone replacement therapy (injectable testosterone); as well as compounds for autism, opioid addiction, and allergies.

“Osceola has had a long-standing relationship with Jacob Beckel and we are excited to have the opportunity to formally partner with him and the Revelation Pharma team on this investment,” said Ben Moe, a managing partner at Osceola. “We believe there are significant organic and M&A opportunities for growth in this segment.”

The formation of Denver-headquartered Revelation is Osceola’s eighth platform for its first fund which closed at its hard cap in June 2020 with $125 million of capital.

Osceola makes control investments of up to $20 million in companies that have revenues of $5 million to $50 million and EBITDA of $2 million to $10 million. Sectors of interest include business services, healthcare services, tech-enabled services and industrial services. The firm was founded in 2014 and is headquartered in Tampa.

© 2021 Private Equity Professional | March 25, 2021

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