Prospect Medical Holdings Inc. took a big step last week toward its goal of becoming a vertically integrated regional managed care specializing in HMO patients and the elderly.
The publicly held Culver City-based physician management company said it was buying Alta Healthcare System Inc., a private Los Angeles company that operates four small community-based hospitals, in a cash-and-stock deal valued at $104 million.
In June, Prospect closed a similarly structured $46 million deal to buy ProMed Healthcare, which owned independent physician associations in Riverside and San Bernardino counties. Bank of America financed that deal and has made a commitment for the Alta acquisition.
Prospect, bolstered by the ProMed deal, has 9,000 affiliated physicians that care for its 250,000 Southern California HMO members, including Los Angeles and Orange counties. Combine that with the Alta Healthcare acquisition, and the company is now able to provide care for its HMO members from the doctor's office to the surgical suite.
That kind of vertical integration, including its 38 percent interest in Culver City's Brotman Medical Center, should give the company more leverage with government and private insurance companies.
However, investors have yet to be convinced. Over the last several months, the company has taken on debt to fund its acquisitions, with Prospect reporting a $1.1 million net loss in the second quarter. Prospect shares, which had drifted since a $7 high in January 2006, dropped to $4 after the earnings announcement and were trading last week at around $5.78.
Prospect Chief Executive Jacob Terner said in a statement that Alta, which had $107 million in revenue and $16.9 million in operating income last year, will operate as a standalone entity, enabling each facility to retain their local identities.
Included in the deal are three general hospitals Norwalk Community Hospital, Hollywood Community Hospital, and Los Angeles Community Hospital and a psychiatric hospital, Van Nuys Community Hospital.
Terner said that Alta Chief Executive David Topper and President Sam Lee have signed multi-year agreements to stay with the company. Lee also will joint Prospect's board of directors.
Vantage Oncology Inc. has completed a $22.5 million equity financing that will enable it to expand its chain of high-tech radiation oncology centers around the country.
The El Segundo-based private company, which now operates 22 centers in ten states, has already begun putting the money to work. It recently opened two centers locally and signed six new partnerships to open eight cancer centers in four new out-of-state markets.
The two new centers are located in Sherman Oaks and West Hills, both of which involve partnerships with Bernard Lewinsky, Robert Zimmerman, Marc Botnick and other physicians at the Valley Radiotherapy Associates Medical Group.
Vantage's business model seeks to make the latest radiation therapies available, often in markets that might not normally get access so soon, by leveraging investor money to pay for the multi-million dollar equipment. It also engages hospitals and entrepreneurial local physicians to have an ownership stake.
"With the major changes in technology that were taking place when we were founded, our model made sense from a clinical, technology, financial and management perspective," said Chief Financial Officer Michael Fiore.
It typically costs $5 million to get each center up and running, most of which goes toward equipment capable of more sophisticated cancer treatment approaches, such as intensity modulated radiation therapy, which enables oncologists to target high-dose radiation at a tumor with less risk to surrounding healthy tissue.
The equity financing, Vantage's fourth round since its founding in 2002, included one new investor, Camden Partners, and additional funds from four existing investors. Investors so far have put $75 million into Vantage, which Fiore expects may be ready to go public in the next few years.
Another Abraxis Investment
It would be hard to accuse biotech billionaire Patrick Soon-Shiong of playing favorites with cross-town rivals and medical research powerhouses USC and UCLA. Just weeks after his Abraxis BioScience Inc. made a significant intellectual property deal with the Trojans, Soon-Shiong, a former UCLA researcher, announced a major investment in the Bruins' nanotechnology initiative.
Abraxis announced last week that it will provide $10 million over 10 years to fund collaborative projects at UCLA's California NanoSystems Institute, which recently moved into new facilities. Abraxis and UCLA researchers have already begun working together, a company spokeswoman said.
Employing cutting-edge tiny particles to treat diseases isn't new to Abraxis; its Abraxane treatment bonds a cancer drug to tiny Trojan Horse-like molecules to trick cancer cells into accepting them.
Staff Reporter Deborah Crowe can be reached at (323) 549-5225, ext. 232, or at firstname.lastname@example.org
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