Acquisition adds innovative pharmacy services delivery model with meaningful organic growth expected from existing customers

TORONTO, March 30, 2022 /CNW/ - CareRx Corporation ("CareRx" or the "Company") (TSX: CRRX), Canada's leading provider of pharmacy services to seniors living and other congregate care communities, announced today it has entered into a definitive asset purchase agreement to acquire Hogan Pharmacy Partners Ltd. ("Hogan"), a long-term care pharmacy serving approximately 725 residents in long-term care and retirement homes in Ontario (the "Transaction").

In connection with closing of the Transaction ("Closing"), CareRx will sign a new seven-year contract with Hogan's largest customer, a regional seniors living operator, representing approximately 85% of the beds serviced by Hogan. Hogan's customers are expected to increase their beds serviced by over 1,200 beds by the fourth anniversary of Closing based on new license allocations and other anticipated growth plans, which is expected to increase the total beds serviced to approximately 2,000.

Hogan has distinguished itself from other long-term care pharmacies in Ontario through the "Hogan Model", an award-winning, technology-enabled model of pharmacy services. The Hogan Model utilizes biometrically secured "smart" medication dispensing cabinets, 24/7 pharmacist support and a fully integrated enterprise resource planning system that reduces medication errors and waste and improves resident care and safety through a closed-loop medication system. The Hogan Model, which operates under a different commercial arrangement with customers than CareRx's current model, provides significant value-added resources to long-term care homes and residents, including freeing up nursing time to focus on direct resident care and significantly reducing wait times for first doses of medication when residents transition into long-term care homes. The Hogan Model is protected by a Canadian patent application that CareRx will acquire as part of the Transaction.

"The Hogan team has built a pharmacy services model that is truly unique amongst long-term care pharmacies," said David Murphy, President and Chief Executive Officer of CareRx. "The Hogan Model combines innovative technologies, application integration and processes with high-touch pharmacist support that effectively provides an on-site pharmacy within long-term care homes. Our acquisition of Hogan will extend our technology leadership position and provide our home partners with additional choice from a service delivery standpoint, thereby further differentiating us from our competitors."

The Transaction consideration is composed of $2.2 million of CareRx common shares ("Common Shares"), the number of which will be determined based on the volume weighted average price of the Common Shares prior to Closing, and a $2.2 million vendor take-back note (the "VTB Note") of which $1 million is repayable after 18 months, $0.4 million is repayable after 36 months, and the final $0.8 million is repayable after 48 months. To the extent that Hogan's customers do not achieve the expected additional bed growth by the fourth anniversary of Closing, the final $0.8M principal repayment on the VTB Note will be subject to downward adjustment, subject to an ability to extend the maturity date in certain circumstances.

The Transaction is expected to be immediately accretive to CareRx's earnings, with the purchase price representing an annualized run-rate Adjusted EBITDA multiple of approximately 5.7 times prior to any contribution from expected bed growth and any cost savings synergies from the integration of the operations of the two businesses.

Closing is expected to occur in May 2022.

About CareRx Corporation

CareRx is Canada's leading provider of pharmacy services to seniors living communities. We serve over 96,000 residents in over 1,600 seniors and other congregate care communities (long-term care homes, retirement homes, assisted living facilities, and group homes). We are a national organization with a large network of pharmacy fulfillment centres strategically located across the country. This allows us to deliver medications in a timely and cost-effective manner and quickly respond to routine changes in medication management. We use best-in-class technology that automates the preparation and verification of multi-dose compliance packaging of medication, providing the highest levels of safety and adherence for individuals with complex medication regimes. We take an active role in working with our home operator partners to promote resident health, staff education, and medication system quality and efficiency.

Forward-Looking Statements

This press release contains statements that may constitute "forward-looking statements" within the meaning of applicable Canadian securities legislation. These forward-looking statements include, among others, statements regarding the Company's business strategy, plans and other expectations, beliefs, goals, objectives, information and statements about possible future events, including the completion of the Transaction. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may", "will", "expect", "intend", "estimate", "anticipate" or similar expressions suggesting future outcomes or events. Such forward-looking statements reflect management's current beliefs and are based on information currently available to management.

Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those contemplated by such statements. Factors that could cause such differences include the Company's exposure to and reliance on government regulation and funding, the Company's liquidity and capital requirements, exposure to epidemic or pandemic outbreak, the highly competitive nature of the Company's industry, reliance on contracts with key customers and other risk factors described from time to time in the reports and disclosure documents filed by the Company with Canadian securities regulatory agencies and commissions. These and other factors should be considered carefully and readers should not place undue reliance on the Company's forward-looking statements. As a result of the foregoing and other factors, no assurance can be given as to any such future results, levels of activity or achievements and neither the Company nor any other person assumes responsibility for the accuracy and completeness of these forward-looking statements. The factors underlying current expectations are dynamic and subject to change.

Non-IFRS Measures

This press release includes certain measures which have not been prepared in accordance with IFRS such as "EBITDA" and "Adjusted EBITDA". These non-IFRS measures are not recognized under IFRS and, accordingly, shareholders are cautioned that these measures should not be construed as alternatives to net income determined in accordance with IFRS. The non-IFRS measures presented are unlikely to be comparable to similar measures presented by other issuers.

The Company defines "EBITDA" as earnings before depreciation and amortization, finance costs (income), net, and income tax expense (recovery). "Adjusted EBITDA" is defined as EBITDA before transaction and restructuring costs, change in fair value of contingent consideration liability, impairments, change in fair value of derivative financial instruments, change in fair value of investment, gain on disposal of property and equipment and stock-based compensation expense. The Company believes that Adjusted EBITDA is a meaningful financial metric as it measures cash generated from operations which the Company can use to fund working capital requirements, service interest and principal debt repayments and fund future growth initiatives. The Company's agreements with lenders are also structured with certain financial performance covenants which includes Adjusted EBITDA as a key component of the covenant calculation. EBITDA and Adjusted EBITDA are not recognized measures under IFRS.

SOURCE CareRx Corporation