(Reuters) - Shares of Diplomat Pharmacy Inc (N:DPLO) tumbled 20 percent on Thursday after the company acquired a second pharmacy benefit manager in less than a month, sparking concerns it is expanding into a business that is under heightened regulatory scrutiny.
The specialty pharmacy said on Wednesday that it would buy Missouri-based pharmacy benefit manager LDI Integrated Pharmacy Services for $388 mln in cash and $80 mln in stock. The company last week said it would buy National Pharmaceutical Services.
Some analysts were not excited by the company's latest move, noting there are long-term questions on the viability of the pharmacy benefit manager (PBM) market.
Baird analyst Eric Coldwell said the deal is at a time when PBMs are trying to diversify and are arguably on the downslope and in a price war.
"We see many stock risks in this deal and it feels like Diplomat overpaid for another asset that makes it look more and more like the rest of our supply chain coverage," said Eric Coldwell, downgrading the stock to "neutral" from "overweight".
PBMs negotiate drug benefits for health insurance plans and employers, and along with others in the pharmaceutical supply chain, have been weighed down by intense scrutiny over soaring drug prices. (http://reut.rs/2yOvkIi)
Mizuho analyst Ann Hynes said integrating the two PBMS in short order could be a challenge.
But on a conference call on Wednesday discussing the deal Diplomat Chief Executive Philip Hagerman said the company has all the capabilities and resources to both compete and thrive in the PBM market space.
Until Thursday's steep decline, Diplomat's shares had climbed about 51 percent this year.
Cowen & Co analyst said the deals help the company transition towards a broader healthcare company, with the business model similar to that of CVS Health (N:CVS) and Express Scripts (O:ESRX), which trade at lower valuations.
Diplomat currently trades at 22.9x forward 12-month earnings, compared with 11.1x for CVS Health and 7.9x for Express Scripts, according to Thomson Reuters data.