Top drug-benefit manager buys PolyMedica for $1.5b

Massachusetts is about to lose another corporate headquarters -- but not many jobs.

In a $1.5 billion deal made public yesterday, Wakefield's PolyMedica Corp., a mail-order company that sells drugs and supplies to diabetes patients, agreed to sell itself to Medco Health Solutions Inc., the country's biggest manager of drug benefits.

Despite PolyMedica's impressive size -- it ranks as one of the largest publicly traded life sciences firms based in Massachusetts -- it has a tiny footprint here, muting the local impact of the sale.

PolyMedica has 2,300 employees, mostly in Florida. In Massachusetts it operates only a modest corporate headquarters and marketing office in Wakefield. Some of the 20 employees who work there will probably be retained after the deal is completed later this year, the company said.

Medco's chief executive, David Snow Jr., said the deal gave Medco access to a booming business: providing drugs and supplies to millions of Americans with diabetes. Though diabetes patients account for only 5 percent of the population, they account for 15 percent of the money spent on drugs, he said.

"It is second only to high cholesterol," Snow said.

The business is also growing. In the fiscal year that ended in March, PolyMedica recorded $675 million in revenue, up 37 percent from the year before.

According to the terms of the deal, Medco, of Franklin Lakes, N.J., agreed to buy PolyMedica for $53 per share, a 17 percent premium to PolyMedica's closing price on Monday. PolyMedica shares closed at $51.69, up $6.40, on the Nasdaq stock exchange yesterday.

PolyMedica's chief executive, Patrick Ryan, said the company had been in talks to sell for a couple of months. He said it decided to formally solicit bids after several companies expressed interest.

He said a deal with Medco, which is already a significant business partner, made the most sense and would benefit investors and customers.

"It's an outstanding outcome," said Ryan, who declined to give details on the other bidders. "We will be able to set the benchmark of standard of care for people who suffer from diabetes."

The deal could also benefit Ryan and a few other PolyMedica senior executives.

If Ryan is let go after the merger, he stands to receive $19.1 million in termination benefits, including $5.3 million in cash, $8.3 million in accelerated stock awards, and $5.6 million to pay the resulting tax bill, according to the company's recent proxy filing with the Securities and Exchange Commission.

Keith Jones, chief operating officer, would receive $7.6 million if he loses his job after the sale, and company president Stephen Farrell would receive $4.8 million.

On July 9, PolyMedica said it had modified some of the terms of its severance pacts to help retain the executives and "provide economic security to certain key employees" in the event they are let go after the company is sold or taken over.

The company has changed drastically since it was founded as a biotech company in 1988. Originally named Emerging Sciences Inc., it initially focused on developing ways to administer drugs through a patch.

The company was renamed PolyMedica in 1990, went public in 1992, and evolved through a series of acquisitions and divestitures.

The key deal came in 1996 when it acquired Liberty Medical Supply, a Florida business that provided supplies to diabetes patients through the mail. Over the past decade, that has become PolyMedica's main business. It now sells drugs, blood sugar testing equipment, insulin, syringes, and other supplies to nearly 1 million diabetes patients.

PolyMedica also has operations in several other states, including a call center in Maine. It built a state-of-the-art drug manufacturing facility in Woburn in 1997, but Ryan said the company sold the plant years ago.

Todd Wallack can be reached at twallack@globe.com.