The latest hospital operator to claim the Nashville area as a corporate home doesn't cater to humans.
Instead, patients seen at the more than two dozen hospitals run by Pet DRx Corp. are dogs, cats and other animals whose owners are willing to spend serious cash on their sick pets.
The company, which moved its headquarters from San Jose, Calif., to Brentwood earlier this year, is among players vying for some of the $43.4 billion that Americans are expected to spend on their pets this year, according to the American Pet Products Association, a Greenwich, Conn.-based trade group.
Pet DRx, for instance, gets a significant amount of business at its 25 hospitals from specialty care in areas such as oncology and dermatology in addition to general care, said Steve Johnson, president of the company.
"Just about everything that you can do for a human is now being offered for pets," he said.
But in an economic downturn, spending on food, health care, boarding and grooming for Fido or Fluffy isn't immune to people trimming their discretionary spending.
The resulting slower traffic at some of Pet DRx's hospitals — all of which are in California — and operational issues as executives have sought to merge newly acquired hospitals have caused the company to fall short of growth forecasts the last two financial quarters.
That has led management to suspend projecting growth in sales and other indicators pending completion of a review of operations and its acquisitions pipeline.
Jeff Blaeser, an analyst at Morgan Joseph & Co. in New York, said spending more time investigating potential acquisitions — especially since some hospitals it acquired fell below expectations — is among changes that Pet DRx could make.
The company also could be looking at ways to better retain veterinarians and other staff members, some of whom have left locations to retire or set up shop elsewhere.
Johnson said his industry has seen much less effects from the U.S. economic downturn compared to other industries such as retail shops. But he also cited a recent survey of pet owners in the United Kingdom that showed more people choosing euthanasia over treatment of treatable conditions as they start to feel a financial pinch.
Clinics may spread outUnder Pet DRx's business model, the company seeks to acquire a cluster of veterinary hospitals or clinics in a region. Some are merged to create a larger hospital with the company hoping to improve results through buying supplies in bulk, adding new services, or operating for longer hours to improve convenience for pet owners.
Since announcing the deal a year ago under which the company (formerly XLNT Veterinary Care Inc.) would merge with a shell company to become publicly traded, officials have doubled the number of hospitals. That all of Pet DRx's locations are in California should be no surprise given that one of every eight pets in America lives there.
Now, under a management team that includes Johnson, whose background is in the dialysis industry, Pet DRx wants to make acquisitions in other parts of the country where people have a higher percentage of disposal income to spend on their pets.
Markets the company has discussed include Washington, D.C., and Atlanta and Florida cities Tampa and Orlando.
Before Pet DRx, Johnson was vice president of operations for the MidSouth region of Nashville-based Renal Care Group and president of the Phoenix, Ariz.-based Western business unit of its acquirer Fresenius Medical Care North America. Both operated dialysis clinics.
Johnson sees similarities in spreading operations over multiple facilities.
After Pet DRx raised $36 million when it went public, analysts expected it to make acquisitions at a quicker pace. Now, the company expects to move at a slower pace until Pet DRx addresses certain issues. Johnson offered no specific timetable for additional deals.
Chain isn't for everyoneWhile there are some willing sellers, not everyone is interested in joining a larger chain, observers said. Michael Brannom, a veterinarian who runs Mobley Veterinary Clinic in Nashville, said he often gets inquiries from chain operators, but his owners aren't interested in selling.
"It doesn't appeal to me because you lose some of your independence," he said.
Johnson, however, sees opportunities for more consolidation in an industry in which more than 80 percent of practices have five or fewer veterinarians. Such practices often don't have the money to add new technology. And as older veterinarian/owners look to retire in coming years, many could find it difficult to sell their practices to younger veterinarians not interested in running a business.
"We do expect to have rapid (acquisition) growth over the coming years," Johnson said. "It's a very rewarding industry because you're helping people out by helping their animals that need help."
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