When Arcadia Resources Inc. moved from Southfield, Mich., to Indianapolis last fall, the Indiana Economic Development Corp. crowed with pride.
In exchange for incentives worth more than $6 million, the state had landed the headquarters of a publicly traded life sciences firm with more than 5,000 employees. Even better, the company was ready to launch an innovative new product that promises to improve home health care while simultaneously reducing its cost.
A year has passed, but investors still aren't as excited about Arcadia as Indiana's economic developers. At IBJ press time, the company's stock was worth just 21 cents per share.
The main reason: It's difficult to soar with $35.5 million in debt around your neck. That's nearly $10 million more than Arcadia's current total market worth of $25.7 million.
"It's always crawl, walk, run," said Arcadia CEO Marvin Richardson. "We crawled, now we're starting to walk. What we want to do is grow the revenue so we can run."
Since moving to Indiana, Arcadia has spent its time exiting unprofitable businesses and improving cash flow. On Sept. 11, the company announced it had established a site for the production of its new DailyMed product within walking distance of its northeast-side headquarters in Precedent Office Park.
The facility is expected to house as many as 40 pharmacists, pharmacy technicians and other personnel by the end of 2008. That number could rise to 130 by the end of 2010. The company hopes to employ as many as 400 people in Indiana by 2011, it said.
Arcadia has high hopes for DailyMed. The company's foundation is in home health staffing, but it aims to sell its patients DailyMed to simplify management of their prescription drugs. If the business plan works, Arcadia wants to restructure its debt and, eventually, expand its sales into new states.
"For us, it's a simple story," Richardson said. "The heavy lifting is done fixing the business. Now it's an exciting time. We're just really starting to grow the business. We really think we're in the right space with the right product at the right time."
Arcadia's roots are primarily in providing medical professionals who can assist the homebound. Their services can be as simple as meal preparation, bathing assistance or a drive to the doctor's office. Or they can be as complicated as full-scale nursing.
In 2003, Arcadia went public through a reverse merger with Critical Home Care Inc., which was publicly traded on the Over the Counter Bulletin Board. Today, the company trades on the American Stock Exchange under the symbol KAD.
After the merger, Arcadia initiated an acquisition spree. In the next three years, it bought three different medical equipment companies in North Carolina, Indiana and Illinois, as well as four medical staffing firms in Massachusetts, Florida and Michigan. The legacy: a sprawling larger firm with annual sales topping $150 million, but also a debt-laden balance sheet.
In February 2007, Arcadia capped the spree by buying Richardson's company, Minneapolis-based PrairieStone Pharmacy LLC, which makes DailyMed. An Anderson native, Richardson holds a pharmacy degree from Purdue University. He took over Arcadia shortly after the deal.
Richardson inherited a company with a half-dozen leftover headquarters and shelves full of unrelated, unsold medical products. His immediate goal: simplify.
"Our vision for the company is keeping people at home and healthier longer," Richardson said.
Arcadia's DailyMed system is the focus of that goal. Designed for ease of use, the product looks like a Kleenex box. But rather than dispersing tissues, it dispenses pills in individual plastic packets. Richardson said most seniors don't like the complicated pill-dispensing systems on the market, most of which feature flashy electronic alarms and complex automated drawers they must refill manually.
Seniors "don't like technology; they're not particularly fond of it," he said. "And they like the box because it's simple. It's easy to use and understand."
All the intricacy is in the back end. Arcadia takes over prescription drug management entirely. The company groups all of a senior's pills together into the packets. When it's time for a dose, the senior simply tears off the next one.
It's a huge improvement for seniors who must take as many as several dozen different drugs every day, Richardson said. And because Arcadia oversees the process, it prevents the errors that commonly occur when multiple doctors and pharmacies fail to communicate.
"The statistics are this: 28 percent of nursing home admissions, 11 percent of hospitalizations, and two-thirds of all assisted-living conditions are directly related to medication noncompliance and medication errors," Richardson said. "The event that typically puts Mom or Dad in a nursing home is pharmacy."
Nursing homes are far more expensive for seniors than a partially assisted life in their own houses. And Richardson notes that the aging baby boomer generation will only increase the number of people who need Arcadia's help.
Promise vs. reality
Arcadia is hoping pilot projects with the Minnetonka, Minn.-based United Health-Care Services Inc. and the Indiana Family and Social Services Administration will prove DailyMed's health benefits and cost savings. Purdue University is working on a study to measure Arcadia's results here.
Craig Svensson, dean of Purdue's School of Pharmacy, said he's aware of people who drive long distances every week for the sole purpose of laying out their parent's weekly medications. He said DailyMed could have tremendous benefits.
"Frankly, we still dispense medication the way we have for generations, in vials of varying sizes, despite the fact there's so much new technology in other areas of our life," Svensson said. "Also, increasingly, we have health care delivered in the home. But individuals not well-trained in the health care arena are overseeing medication compliance. If medications aren't taken appropriately, we're not getting the benefit of them."
Studies like Purdue's will be key for Arcadia to make its case to customers-and investors. For now, they remain skeptical. In a Sept. 27 research report, Milford, Conn.-based Wright Investors' Service noted Arcadia's continuingly difficult financial position.
"In recent years, this stock has performed terribly. In 2002, the stock traded as high as $4.20, versus $0.19 on 9/12/2008. The stock price has fallen precipitously recently," Wright wrote. "During the past 13 weeks, the stock has fallen 74.3 percent."
Richardson pointed out that, in the last year, Arcadia has paid off more than $6 million of its legacy debt. And he noted that most of the unsecured debt is held by a pair of New York hedge funds that are also Arcadia investors, so their interest is to keep the company afloat.
Bottom line, Richardson said, Arcadia has addressed the problems left over from its acquisition spree by adding new managers and new accounting controls. He said Arcadia is now poised to expand. Richardson hopes investors will eventually catch on.
"You have to fix. You can't grow while you're bleeding. So we had to take some time and make sure we got a good management team in place, good metrics," he said. "Now that we've done that, we feel very good about growing organically."