The board of healthcare group purchasing organization Premier Inc. announced Monday that it has retained financial and legal advisers to explore a potential sale or other strategic alternatives.
“Evolving market dynamics, coupled with an uncertain and challenging operating environment, compel us to take further action to adapt and help ensure Premier is best positioned for future success,” President and CEO Michael Alkire said in a release. “While we conduct this strategic evaluation, we remain as focused as ever on supporting our members and other customers in providing high-quality, cost-effective healthcare and delivering on our mission to improve the health of communities.”
Charlotte, North Carolina-based Premier is a network that negotiates for and purchases medical supplies such as drugs and devices for more than 4,400 member hospitals and health systems.
In quarterly earnings reported last week, the company reported nine-month net revenues had fallen roughly 8.8% from the previous year. Nine-month net income attributable to stockholders had also dropped from $236 million in fiscal 2022 to $154 million in fiscal 2023.
The company’s stock had dropped roughly 14% upon announcement of the earnings, which included its second cut to projected earnings this year. This week’s news of a potential sale or other strategic move triggered a roughly 6% bump in trading price, though as of Tuesday afternoon that gain settled to just under 3%.
Alongside a full or partial sale of the company, the “broad range of potential options” being explored by the board and a newly established independent special committee includes recapitalization and partnerships, according to the notice.
Premier noted in the announcement that the review process could close without any transactions or other strategic changes. It also reaffirmed the lowered guidance released last week and said it does not expect to provide any guidance for fiscal 2024 when it shares full-year earnings in August.
“Premier plays an integral role in the U.S. healthcare system and is a key partner to hospital systems, healthcare providers and other stakeholders across the country,” Terry Shaw, chair of Premier’s board, said in the announcement. “Given the company’s strong customer relationships, significant cash generation and flexible balance sheet, Premier has a wide range of strategic options to review. The board believes that this process will help ensure the company is on the best path forward to unlock value for all of Premier’s stakeholders.”
During last week’s earnings report, Premier leadership attributed some of the company’s financial difficulties to its direct sourcing operations. In a release, Alkire said at the time that the business line “continues to be impacted by excess market supply and member inventory levels which contribute to lower demand and pricing.”
It also attributed the lowered fiscal 2023 guidance, in part, to “softer demand and delayed decision-making by members … mainly due to the current macro-economic environment.”