ExcelleRx Eyes New Markets

John George

Staff Writer

Center City-based excelleRx is planning to expand its presence in the organ-transplant and chronic-pain markets.

The plans of the 6-year-old company, a leading provider of medication management services for hospices, received a huge boost last week when it raised $37 million from a group of venture capital firms.

Calvin H. Knowlton, excelleRx's founder and CEO, said part of the money will be used to adapt the company's proprietary technology to new segments of the health-care industry.

"Right now, the way medicine is prescribed is based largely on the preferences of the prescriber," he said. "What we are saying is instead of preferences, let's use evidence."

Knowlton said the company has already started applying its technology in the chronic-pain and transplantation areas.

"We believe our model will work in any area that involves multiple medications and high risk or high cost," he said.

Patients who receive organ transplants take more than a dozen drugs every day to manage their health and keep their body from rejecting their new organ.

"What we can provide is evidence showing which drug cocktail works best" for different types of patients, Knowlton said.

The company has created a pharmaceutical-care infrastructure that combines its proprietary technology for gathering patient data with the medical expertise of its staff of pharmacists and clinicians to determine the appropriate use of medications for enhancing quality of life of patients, and controlling costs.

"We are collecting information every day on what medicine people are taking, why they are taking it, how it is affecting their quality of life and, if they stopped taking something, why they stopped," Knowlton said.

The company's primary customers are 300 hospices which, on any given day, are caring for 21,000 patients with terminal illnesses.

ExcelleRx staff members, based at support centers in Philadelphia and Tempe, Ariz., work with caregivers at the hospices and the patients' doctors to determine, prospectively, what medication regimen would be the most appropriate. They use databases with information related to the care delivered to hundreds of thousands of patients in their recommendations.

"Something like 99 percent of the time, our recommendations are accepted," Knowlton said.

ExcelleRx is paid on a per-diem basis by hospices, which are also paid on a daily basis by health insurers and government health-insurance programs.

By using his company's services, Knowlton said, a hospice can reduce expenses associated with sending out nurses to care for patients who did not respond positively to a prescription regimen that excelleRx would have flagged as being not the best standard of care.

A small portion of the company's business involves distributing medicine. The company operates central prescription-processing centers in Philadelphia and Memphis, Tenn., that ship more than 10,000 prescriptions daily.

Last year, excelleRx's sales topped $50 million. Knowlton expects its revenue to approach the $100 million mark this year. With the expansion, the company may improve its operating margin, which for several years has hovered between 5 percent and 10 percent.

A native of South Jersey who was raised in Cinnaminson, Knowlton has launched, and later sold, a handful of health-care-related companies during in his career. Prior to creating excelleRx, he was teaching health-care ethics and pharmacy administration at the Philadelphia College of Pharmacy and Sciences (now the University of the Sciences) in West Philadelphia.

Knowlton said excelleRx, which has grown to about 250 employees, did not reach profitability until it adopted a centralized business model in 1999.

Initially, he said, the company's business model involved operating more than a dozen regional support centers and affiliated distribution centers.

"That didn't work," Knowlton said. "We were having different recommendations coming out of different centers. We ended up losing a ton of money."

In 1999, excelleRx adopted its current centralized model allowing all data to be gathered, integrated, evaluated and disseminated from one site.

With plans for an initial public stock offering on the horizon, excelleRx decided to bring in venture capitalists with experience in taking a company public.

Part of the funds raised last week is being allocated to repurchase stock from some of company's early nonmanagement stockholders.

The $37 million equity investment in excelleRx was led by Philadelphia-based LLR Partners Inc.

"We are extremely excited about our investment in excelleRx," said Howard Ross, a partner in LLR. Ross praised the company's growth prospects, service offerings and management team. "Since the company's founding in 1996, excelleRx has grown to become the largest medication management company serving the hospice industry and we look forward to helping the company as it continues growing its leading market position."

Other investors were Wachovia Capital Partners of Charlotte, N.C., the principal investing arm of Wachovia Corp.; and Primus Venture Partners of Cleveland.

Neal Morrison, a Wachovia partner, believes excelleRx, as the market leader in the hospice industry, has "significant opportunities to leverage their experience to other complementary markets."

John George can be reached at jgeorge@bizjournals.com.

Copyright © 2003 American City Business Journals Inc.

This article posted March 23, 2003.