By Zacks Equity Research
‎

Following the completion of the MTS Medication Technologies acquisition, Omnicell Inc. (OMCL) has increased its fiscal 2012 guidance. The market reacted positively to the news, with shares gaining 3% on Wednesday to $14.37.

MTS Medication products are mostly used by institutional clients to supply long-term care and non-acute care facilities with medication packages to follow prescriptions. Currently, the company serves 6,000 pharmacies across the world, providing automated packaging systems designed to improve the dispensing and administration of medications. Omnicell's gain from the acquisition is expected to be strong, improving its growth prospects in the upcoming period.

The synergies from the acquisition of a medication adherence packaging systems provider have prompted Omnicell to revise its expectation upwards. MTS Medication will continue to operate as a wholly-owned subsidiary of Omnicell but with the same brand name.

On the heels of the newly included MTS Medication business, Omnicell raised its 2012 adjusted EPS guidance to the range of 75 cents to 81 cents from its previous full-year adjusted EPS guidance of 67 cents to 72 cents. The acquisition also drove management's revenues expectation to the range of $307 to $315 million from the earlier range of $263 to $267 million.

Product backlog (comprising Omnicell acute care medication and supply management products) for fiscal 2012 is expected to remain in the range of $138 to $142 million (unchanged from the previous guidance). The company does not expect MTS Medication's products will impact its fiscal 2012 product backlog. In addition, for the second quarter of 2012, Omnicell expects adjusted earnings per share in the range of 17 to 18 cents on revenues of $74 million.

This critical problem of medication non-adherence is alarming as the current data shows that it costs up to $290 billion annually and is the cause of death for approximately 125,000 people a year. According to the Centers for Medicare and Medicaid Services ("CMS"), 11% of all hospital admissions are related to this issue.

Omnicell remains optimistic regarding the acquisition of MTS as it will enable the company to access MTS' automated medication adherence packaging equipment and consumables. This will allow the company to offer a complete automated medication management system across the acute and non-acute range of patient care.

Omnicell strongly believes that together with MTS, it will emerge as a market leader for medication management solutions across the broad range of health care beyond the acute care setting. The company also expects this to deliver superior results while lowering costs considerably.

However, several macroeconomic uncertainties, as well as intense competition from major players such as CareFusion Corporation (CFN) and McKesson Automation (MCK), remain concerns. Currently, Omnicell retains a short-term Zacks No. 2 rank ("buy").

Headquartered in Mountain View, Calif., Omnicell operates in a niche automated medication distribution industry and stands to benefit from favorable demographic trends and regulatory environments, as well as a shortage of nursing staff.

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