|Investment date||April 2015|
Genoa Healthcare is the leading pharmacy provider serving behavioral health populations in the United States.
Genoa operates more than 450 pharmacies nationwide within Community Mental Health Centers (CMHCs) and other outpatient healthcare facilities. Collectively, Genoa pharmacies serve over 250,000 patients per month.
HAVING A BENEFICIAL IMPACT ON PATIENT LIVES
In 2013, the Advent Healthcare team began a dedicated sourcing effort in the behavioral health market. We saw an opportunity due to changes in regulation and increased understanding of the linkage between behavioral health diagnoses and overall healthcare costs. Genoa was one of the companies we followed closely in the space for some time.
After a transformative merger in 2015, Genoa established itself as the only large-scale provider of pharmacy services for CMHCs. We appreciated the strong cash flow profile of the company and Genoa’s attractive pharmacy-level economics.
We also took note of Genoa’s significant positive impact on patients and the larger healthcare community. “Here was a business model that impacts the wellbeing of patients’ lives in a material way,” says John Maldonado, a Managing Partner in Advent’s Boston office. “People with severe mental illness who stop taking their medications may end up in jail, on the streets, or worse. Genoa’s model of locating its pharmacies within outpatient healthcare facilities helps patients stay on their medications, which means they can often live pretty normal lives.”
When Advent agreed to acquire a 78% equity stake in the company in early 2015, Genoa operated 241 pharmacies across 35 states and Washington D.C.
At that time, fewer than 35% of CMHCs were served by a pharmacy partner. Even within those CMHCs where Genoa did have pharmacies, less than 35% of prescriptions were filled on site.
Our research showed that Genoa had plenty of room to grow within its market, both in terms of opening more pharmacies inside behavioral health outpatient facilities and capturing a larger share of the prescription volume within its existing patient population.
PICKING UP THE PACE
In the years prior to the acquisition, Genoa had been opening 25 to 35 new pharmacies each year.
Under Advent’s ownership, Genoa almost doubled that pace, opening an average of one new pharmacy each week. The company established a team of specialists who were responsible for systematically launching new pharmacies and integrating them into the broader organization.
Genoa hired a new general counsel who helped the firm to overcome legislative hurdles and win approval to operate behavioral health pharmacies in California and New York, two states with huge healthcare markets.
Meanwhile, Advent helped Genoa complete seven acquisitions that bolstered its core pharmacy operations and enabled lateral expansion into complementary businesses such as telepsychiatry and medication therapy management. Advent then supported Genoa in integrating the IT systems at these acquired companies into a single, effective platform to power future growth.
As Genoa grew, it was able to leverage its scale to reduce its drug purchasing costs and expand its payor relations department, which allowed Genoa to improve its core drug economics and increase its average gross profit per prescription.
THE TELEPSYCHIATRIST WILL SEE YOU NOW
For the first year after the acquisition, Advent mostly advised Genoa on its core strategy – how to open more pharmacies and serve more behavioral health patients in more CMHCs in more states.
In the second year, Advent started to have open strategy sessions with Genoa’s management team to consider the company’s strategy for the next 5 to 10 years, and examine potential expansion options into adjacent areas.
Ultimately, these strategy sessions helped Genoa decide to expand into the telepsychiatry field. In November 2015 , Genoa purchased telepsychiatry provider 1DocWay and rebranded the service as Genoa Telepsychiatry. With the addition of a telepsychiatry offering, Genoa was able to better serve the needs of both its patients and its CMHC partners, providing them with incremental staffing at times when and locations where they determined demand was most needed.
“Working with the team of professionals from Advent has been one of the highlights of my career,” says Genoa CEO John Figueroa. “I can talk with them about growth areas that are easily within our grasp, and then discuss our ideas and dreams for where the business should be three, five or ten years in the future.”
Genoa’s success caught the attention of multiple suitors, including UnitedHealth Group, which purchased Genoa from Advent in late 2018.