NexPhase makes 5x its money on Comprehensive Pharmacy Services

  • Sources: transaction valued north of $500 mln
  • Both sponsors and strategics participated in Harris Williams-run process
  • Memphis company is nation’s lgst provider of outsourced pharmacy services, followed by Cardinal Health unit

NexPhase Capital generated an approximately 5x return on Comprehensive Pharmacy Services, according to a source familiar with the situation.

Frazier Healthcare Partners said April 16 it had acquired CPS, the Memphis provider of services and technology to help pharmacies manage and drive down drug costs.

Buyouts reported in August that NexPhase, whose members in 2016 spun out of Moelis Capital Partners, hired Harris Williams to evaluate a sale of CPS.

Terms of the transaction, which closed in March, weren’t disclosed. The deal was valued north of $500 million, the source and a second said.

Consistent with expectations, the process was competitive, encompassing both sponsors and strategic buyers. One of the sources characterized strategics as those in the universe of drug distribution as well as large hospital-services-type companies.

Founded in 1971, CPS provides pharmacy services, IT and data informatics to more than 700 hospitals and health systems.

The company works with pharmacists on issues relating to hyperinflated drug prices, medication reconciliation, centralized distribution, regulatory and compliance and 340B programs, among other things.

CPS represents the largest provider of outsourced pharmacy services to hospitals in the U.S., followed by a unit of Cardinal Health. Cardinal provides inpatient pharmacy services to some 75 hospitals.

The area is viewed as having tremendous room for growth. Only around 15 percent of hospital pharmacies in the U.S. outsource these services today, a source previously said.

Don Nickleson, former chairman of CPS, will remain on the board. Calvin “CJ” Johnson holds the CEO post.

For NexPhase, CPS is among a portfolio of legacy assets inherited from Moelis, which initially invested in CPS in November 2012.

The New York firm, which targets entrepreneur-owned lower-middle-market companies, is investing out of NexPhase Capital Fund III.

Action Item: Check out NexPhase’s Form ADV here: