CHRONIMED MAIL-ORDER PHARMACY TARGETING ORPHAN AND CHRONIC DISEASE
CHRONIMED MAIL-ORDER PHARMACY TARGETING ORPHAN AND CHRONIC DISEASE patients, the company said in a Feb. 10 preliminary prospectus for an initial public offering. Minnetonka, Minn.-based Chronimed is seeking to carve out a niche among patients with specific chronic conditions, including diabetes, organ transplant recipients and cystic fibrosis, for its mail-order sales of prescription drugs, medical products and educational materials. Chronimed's growth strategy, the prospectus notes, involves a three-pronged plan to develop and increase mail order sales by: "1) increasing the number of diabetes and organ transplant patients it serves; 2) expanding its services to meet the special needs of persons with other chronic conditions; and 3) initiating relationships with pharmaceutical companies to develop programs to distribute maintenance prescription drugs." Chronimed currently supplies drugs and medical products to diabetes and organ transplant patients and has begun programs for patients with cystic fibrosis and epilepsy. As part of its effort to expand services, the company also is developing programs for phenylketonuria (PKU), Crohn's disease, lupus, myasthenia gravis, Hansen's disease, scleroderma and schizophrenia. The National Organization of Rare Disorders (NORD) currently distributes Sandoz' antitransplant rejection drug Sandimmune (cyclosporine) through Chronimed to organ transplant patients who are unable to pay for the drug. According to the prospectus, Chronimed's participation in the Sandimmune indigent patient program fits into the company's proposed "focus on the needs of relatively small patient populations," which enables Chronimed to work with specific drugs including orphan products. Sandimmune mail-order sales by Chronimed generated 33% of the company's $2.5 mil. in prescription drugs sales in the fiscal year ended June 30, 1991 and 53% of the $2.8 mil. in sales for the six months ended Dec. 31. Approximately 7% and 15% of Chronimed's total revenues for the two periods were derived from the sales of Sandimmune. "If the company were unable to purchase Sandimmune...its results of operations would be materially and adversely affected," the prospectus notes. In addition to Sandimmune, Chronimed stocks over 1,500 drugs and medical products. On the diabetes front, Chronimed "has sole U.S. distribution rights to the Disetronic Insulin Pump, one of two insulin pumps currently sold in the U.S." The Disetronic pump is manufactured by a Swiss firm of the same name. The company is currently negotiating with an unnamed company "regarding an exclusive agreement to distribute selected nutritional products to individuals with metabolic and bowel disorders such as cystic fibrosis, PKU and Crohn's disease," the prospectus notes. The initial public offering is for 2.4 mil. shares at $6 per share. The company expects to net approximately $10.8 mil. from a successful offering. Chronimed will use $1.6 mil. to repay debt, with the remainder set aside for working capital. Underwriters for the proposed offering are Hambrecht & Quist and Punk, Ziegel & Knoell. Among executive officers, Dennis Burton, who is VP-pharmacy services and Steven Crees, VP-diabetes services, bring relevant experience to the company. Both men have mail-order pharmacy backgrounds, Burton from Rite Aid and Crees from Baxter Travenol. Chronimed was founded in 1985 as Diabetes Center and took the name Chronimed in 1991. The company signed its first voluntary contract service agreement for insulin supply in 1986 with Med Centers Health Care, a nonprofit corporation managed by a subsidiary of Aetna Life and Casualty Insurance. Chronimed has 60 full-time employees, including eight pharmacists, and operates two distribution facilities located in the Minneapolis-St. Paul suburb of Minnetonka and in San Francisco. Chronimed also has six retail stores located in Minnesota, Utah, Florida, Iowa and Arizona. Chronimed also publishes books, pamphlets and magazines featuring health care themes. Living Well With Diabetes, Chronimed's first magazine, was developed by the International Diabetes Center, a division of the Park Nicollet Medical Foundation, which is a principal shareholder of the company.
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