Pfizer first-quarter results miss estimates as key drug sales fall short

Pfizer Inc (PFE.N) on Tuesday reported lower-than-expected first-quarter revenue as demand for some key drugs and international sales fell short of estimates, sparking a 5.1 percent drop in shares of the largest U.S. drugmaker.

The company, which is exploring a sale of its consumer healthcare business but has seen potential suitors drop out, said it has not received an acceptable offer at this time.

“If we can’t get value, we’ll retain it and invest in it,” Chief Executive Officer Ian Read told analysts. A final decision is still expected this year.

Read, whose previous attempts at huge acquisitions of AstraZeneca (AZN.L) and Allergan (AGN.N) were thwarted, said the company does not need a megamerger to drive future growth.

“I don’t see that we need a transformative deal or see one at an appropriate value,” Read said, adding that drugs in development and newer medicines will be able to drive future growth.

He said the company has 15 potential blockbuster medicines in the pipeline that could be launched by 2022.

Pfizer also sees opportunities to significantly expand sales of prostate cancer drug Xtandi for treating less advanced patients, and arthritis drug Xeljanz for ulcerative colitis. U.S. regulatory decisions on the expanded uses are expected later this year.

Pfizer posted adjusted earnings of 77 cents per share that topped analysts’ average expectations by 4 cents, according to Thomson Reuters I/B/E/S, on lower taxes and cost of goods sold. It did not raise its full-year earnings or revenue forecasts.

Despite strong growth, sales of oral rheumatoid arthritis drug Xeljanz and blockbuster breast cancer treatment Ibrance missed expectations largely due to inventory stocking issues but are likely to rebound, analysts said.

Injected arthritis drug Enbrel was hit by competition from cheaper biosimilars outside the United States. Vaccines and other older drugs, such as Lyrica, Premarin and Celebrex all fell short of analysts’ estimates.

Ibrance sales rose 37.4 percent to $933 million, while analysts looked for $956.6 million. Xeljanz sales totaled $326 million, missing the Wall Street outlook by about $72 million.

Total revenue rose 1 percent to $12.91 billion, while analysts expected $13.13 billion.

SunTrust Robinson Humphrey analyst John Boris said he expected stronger international sales, given favorable foreign exchange rates.

“If you remove the FX tailwind it would have been a much more substantial miss,” he said, adding that it was disappointing Pfizer did not raise its 2018 forecasts after rivals, such as Merck & Co (MRK.N) and AbbVie (ABBV.N), raised their outlooks after reporting first-quarter results.

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Pfizer still expects adjusted full-year earnings of $2.90 to $3.00 per share on revenue of $53.5 billion to $55.5 billion.

Net profit rose to $3.56 billion, or 59 cents per share, for the quarter, from $3.12 billion, or 51 cents, a year earlier.

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Pill for breast cancer diagnosis may outperform mammograms

As many as one in three women treated for breast cancer undergo unnecessary procedures, but a new method for diagnosing it could do a better job distinguishing between benign and aggressive tumors.

Researchers at the University of Michigan are developing a pill that makes tumors light up when exposed to infrared light, and they have demonstrated that the concept works in mice.

Mammography is an imprecise tool. About a third of breast cancer patients treated with surgery or chemotherapy have tumors that are benign or so slow-growing that they would never have become life-threatening, according to a study out of Denmark last year. In other women, dense breast tissue hides the presence of lumps and results in deaths from treatable cancers. All that, and mammograms are notoriously uncomfortable.

“We overspend $4 billion per year on the diagnosis and treatment of cancers that women would never die from,” said Greg Thurber, U-M assistant professor of chemical engineering and biomedical engineering, who led the team. “If we go to molecular imaging, we can see which tumors need to be treated.”

The move could also catch cancers that would have gone undetected. Thurber’s team uses a dye that responds to infrared light to tag a molecule commonly found on tumor cells, in the blood vessels that feed tumors and in inflamed tissue. By providing specific information on the types of molecules on the surface of the tumor cells, physicians can better distinguish a malignant cancer from a benign tumor.

Compared to visible light, infrared light penetrates the body easily—it can get to all depths of the breast without an X-ray’s tiny risk of disrupting DNA and seeding a new tumor. Using a dye delivered orally rather than directly into a vein also improves the safety of screening, as a few patients in 10,000 can have severe reactions to intravenous dyes. These small risks turn out to be significant when tens of millions of women are screened every year in the U.S. alone.

But it’s not easy to design a pill that can carry the dye to the tumor.

“To get a molecule absorbed into the bloodstream, it needs to be small and greasy. But an imaging agent needs to be larger and water-soluble. So you need exact opposite properties,” Thurber said.

Fortunately, they weren’t the only people looking for a molecule that could get from the digestive system to a tumor. The pharmaceutical company Merck was working on a new treatment for cancer and related diseases. They got as far as phase II clinical trials demonstrating its safety, but unfortunately, it wasn’t effective.

“It’s actually based on a failed drug,” Thurber said. “It binds to the target, but it doesn’t do anything, which makes it perfect for imaging.”

The targeting molecule has already been shown to make it through the stomach unscathed, and the liver also gives it a pass, so it can travel through the bloodstream. The team attached a molecule that fluoresces when it is struck with infrared light to this drug. Then, they gave the drug to mice that had breast cancer, and they saw the tumors light up.

The research is described in a study in the journal Molecular Pharmaceutics, titled, “Oral administration and detection of a near-infrared molecular imaging agent in an orthotopic mouse model for breast cancer screening.”

More information: Sumit Bhatnagar et al, Oral Administration and Detection of a Near-Infrared Molecular Imaging Agent in an Orthotopic Mouse Model for Breast Cancer Screening, Molecular Pharmaceutics (2018). DOI: 10.1021/acs.molpharmaceut.7b00994

https://bit.ly/2I4zVOs

American Well Moves Into Hospital-Based Telehealth With Avizia Deal

April 30, 2018

American Well, a national provider of telehealth services, said it has agreed to buy Avizia , which provides virtual access to doctors inside of hospitals and health systems across the country.

The deal, announced at the American Telemedicine Association meeting in Chicago, will help American Well move from treating routine maladies like pink eye and conditions that help patients avoid a doctor’s office visit to more tertiary services, offering a menu of services from partner physicians and hospitals around the world. Financial terms of the deal weren’t disclosed, but the privately held companies said it should close late in the second quarter of this year.

The companies said the Avizia acquisition will “bring American Well a comprehensive acute care capability , including the best in class hospital-based cart lineup and custom software workflows for more than 40 clinical specialties, including telestroke and tele-behavioral health.”

American Well’s proposed acquisition comes as telehealth services are poised to take off in coming years thanks to the approval this year by Congress of a federal budget that includes expanded access to virtual doctor visits for Americans covered by private Medicare Advantage plans. It could be a huge boon to American Well and rivals like MDLive and Teladoc and an array of startups getting into the business of offering access to physicians and patients via smart phone, tablet or computer. Employers and private insurers like UnitedHealth Group, Anthem and Cigna are already embracing the trend as a way to make healthcare more convenient and avoid costly and unnecessary trips to the emergency room or a more expensive physician’s office.

By adding Avizia, American Well hopes to set itself apart from rivals. American Well said its telehealth options will be further “enhanced” for its clients that include health systems, health insurers, allowing them to “choose one comprehensive single platform solution.”

“American Well helps providers treat patients who are not in the room,” Dr. Ido Schoenberg, chairman and CEO of American Well. “We do that by effectively connecting the four key players in the ecosystem: consumers, providers, payers and innovators. “We share Avizia’s passion and relentless commitment to enabling better care anywhere.”

Avizia’s telehealth platform brings doctors from around the world inside hospitals for consultations with more than “1,300 hospital deployments.” “The company has a significant global presence in over 38 countries, with strong clinical use cases across behavioral health, chronic care, stroke, pediatrics and urgent care at over 70 health systems,” Avizia and American Well said in their joint statement.

https://bit.ly/2HDdsbM

Molina cost-cutting offsets first-quarter premium revenue dip

Molina Healthcare’s aggressive restructuring might be paying off: The insurer reported modest earnings in the first quarter of 2018 following a tough close to 2017.

The Long Beach, Calif.-based company reported first-quarter net income of $107 million, compared with $77 million for 2017’s first quarter. The company said that’s partly due to lowered medical and administrative costs, in addition to scaled-back restructuring expenses.

“The financial results that we announced today reflect the progress we are making towards our goal of sustainable margin recovery,” Molina CEO Joe Zubretsky said on a conference call Monday.

Premium revenue dropped 7% in the first quarter of 2018 year-over-year, which Zubretsky said was the direct result of a nearly 60% average price hike across its Affordable Care Act policies. Despite that premium increase, Zubretsky said Molina’s marketplace policies remain competitive; the company still has more than 450,000 marketplace members, a number that exceeds its own forecasts. More members are choosing bronze plans over silver ones, which Zubretsky said is a margin-neutral change.

Cost-cutting efforts spurred a modest drop in Molina’s general and administrative expense ratio, to 7.6% in the first quarter of 2018 from 8.9% at the same time in 2017. The company’s medical-care ratio fell to 86.1% in that time, down from 88.4% in the first quarter of 2017.

Overall expenses dropped 8.2% in the first quarter of 2018 to $4.4 billion, down from $4.8 billion in the first quarter of 2017.

Molina recently eliminated about 100 positions, a move it expects will save more than $10 million per year, Zubretsky said.

“We will continue to restructure inefficient processes and find opportunities for head count reductions, as doing so has a very short payback,” he said.

About a year ago, Molina laid off 10% of its workforce, or about 1,500 employees.

Molina took on $25 million in restructuring costs in the first quarter, far lower than in previous quarters.

The company’s total revenue was down 5.2%, ending the quarter at $4.6 billion, compared with $4.9 billion in the first quarter of 2017.

Medicare and Medicaid revenue were essentially flat during the quarter.

Molina failed to secure Medicaid contracts in Florida this year, and Zubretsky said the insurer plans to challenge that decision.

“While we are somewhat disappointed with this outcome, it does not alter our course,” he said. “We will continue to pursue a major entrenchment in Florida.”

Molina has also submitted Medicaid bids in Texas, Washington and Puerto Rico. Puerto Rico is overhauling its Medicaid model to an island-wide plan instead of multiple plans that compete, a change that will feature minimum medical loss ratios.

“These changes require intense scrutiny on our part,” Zubretsky said.

https://bit.ly/2KrBuEf

CMS gives post-acute providers a pay bump, plus a new value-based payment

Post-acute providers could see a boost to Medicare payments starting next year, and even a new value-based payment model, as part of a set of new federal proposals.

In a late-Friday rule dump, the Centers for Medicare & Medicaid Services (CMS) proposed both statutory payment bumps as well as some policy changes that are likely to make providers very happy.

For fiscal 2019, the agency is proposing a $340 million, or 1.8% Medicare reimbursement boost to hospice providers, up from a 1% boost from the previous year.

Skilled nursing facilities will also see an $850 million increase in Medicare payments thanks to a mandated increase by the 2018 Bipartisan Budget Act.

Additionally, inpatient psychiatric facilities and rehabilitation facilities are likely to see similar payment increases from the previous year, with a $50 million and $75 million, or a 0.98% and 0.9% respective increases for fiscal year 2019.

Similar to its hospital payment rule, CMS issued a request for information regarding possible revisions to Conditions of Participation to include electronic data sharing requirements.

Other policy changes proposed by CMS include allowing rehabilitation physicians to conduct meetings remotely and loosening of prescriptive documentation requirements. The agency also proposed reducing quality measure reporting for rehab and psychiatric facilities.

CMS takes another leap into value

In yet another move to reduce provider burden and lower costs, the agency is also planning a new value-based payment arrangement for skilled nursing facilities. The agency proposed a Patient Driven Payment Model, a type of value-based payment arrangement that would tie reimbursements to patient outcomes while also reduce reporting burdens.

Providers and insurers have been asking the agency to make a bigger commitment to value-based arrangements. Lately, private insurers have been launched their own programs as a way to lower costs.

Under the new CMS model, patients will have a greater opportunity to select facilities with services tailored to their needs, giving patients more choice, a major goal of the Trump-era department. The model, slated for October 2019, is intended to replace the Resident Classification System, a case-mix model, which has had a rocky reputation (PDF) with both providers (PDF) and policy advisers (PDF).

“As people face rising healthcare costs in other clinical settings, we need to leverage advances in technology that help to modernize our programs in a way that benefits patients,” CMS administrator Seema Verma said in an accompanying statement.

CMS said the model would reduce administrative spending for nursing facilities by $2 billion over 10 years and would go into effect Oct. 19 if the rule is finalized.

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According to the American Hospital Association (PDF), providers spend $39 billion on administrative costs related to regulatory compliance.

The agency said that when taken together with the recent proposed overhaul of the Meaningful Measures initiative, the proposed policy changes should save providers about four million hours in 2019 and 2020.

The comment period for the proposals ends June 26 and a final decision on the rules is expected by July.

https://bit.ly/2I0L42D

Why insurers are spending billions to acquire physician practices

A couple of giant proposed healthcare mergers have garnered a lot of attention in recent months. People want to know what CVS’ $69 billion deal for Aetna or Cigna’s $52 billion agreement to buy Express Scripts can tell us about the future of U.S. healthcare.

But a clearer picture of how the industry is changing might actually come from a string of smaller, less heralded deals.

Insurers are snapping up physician practices. UnitedHealth Group, the largest U.S. health insurance company, agreed in December to pay $4.9 billion for DaVita Medical Group, whose physicians serve some 1.7 million people a year in nearly 300 clinics. That’s the largest recent deal, but it was at least the fourth acquisition of a medical provider group by the company in 2017.

Overall, 147 transactions last year involved physician practices, according to Bloomberg BNA. More multibillion-dollar acquisitions are to be expected this year.

Why? Insurers, employers and the government—the “payers” in the American health system—realize they need to pay for outcomes rather than procedures. In other words, they’ve come to understand that the fee-for-service model is broken, even if it still accounts for the bulk of the money flowing through the system.

More and more, insurers want to compensate doctors based on what they achieve rather than how many procedures they do. No wonder insurers want to own medical practices. It’s easier to improve healthcare services and rein in costs if you control what gets done in doctors’ offices, not insurance company cubicles. As much as an insurance organization wants to encourage getting a flu shot, for example, it’s doctors and nurses who actually talk to patients and administer shots.

Does this mean that your doctor is soon going to be an insurance company employee? Not necessarily. Most medical offices are too small to be swept up by insurers, which are looking for specific characteristics.

The most attractive targets for acquisition will be:

1. Physician-led. Cost-control and quality improvement are more likely to happen when practitioners themselves have a stake in the outcome. Groups in which physicians are no longer in control of the operations and outcomes of medical care tend to be less effective. And hospital-led medical groups tend to focus on filling beds—the most expensive way to provide medical care.
2. Strong in primary care. Primary care is the entry point for most patients and where doctors are focused on the whole patient, not just one condition. It’s a strong platform for any practice’s future growth—and the key to preventing illness rather than just treating it.
3. Diversified. Covering enough specialties to provide a broad spectrum of patient care is important for patient retention and satisfaction, with access to strong cardiology, endocrinology and gastroenterology being key.
4. Wired. A medical group must have up-to-date technology to collect and analyze patient data. Higher quality outcomes and lower costs come hand in hand when better data and information are available. Real-time analytics drive better prevention and enable strong physician groups to achieve better population health outcomes.

Driving these transactions isn’t just a sense among insurers that the only way to grow their business is through owning medical practices. There’s also the influence of public policy and government programs—specifically, the growth of Medicare Advantage. MA is an option for Medicare beneficiaries in which an individual signs up for a health plan instead of receiving their care through the fee-for-service delivery system. Medicare Advantage, also known as Medicare Part C, has grown steadily and now accounts for over a third of all enrollees in the government’s retiree healthcare program.

A key provision in MA, introduced in the Affordable Care Act, pays plans on the basis of quality measures. In fact, it’s impossible to run a profitable Part C plan without continually improving population cholesterol levels, glycemic control for diabetic patients, and immunization rates. These are all outcomes driven by clinical care, so a focus on physicians is central to such improvement.

What do patients ultimately want? Lower cost, higher quality and more transparency around their choices. By aligning more directly with physician-directed care, through acquisitions as well as contracts, plans are able to provide just that.

These acquisitions also show the power of partnership between the federal government and private sector in healthcare.

Healthcare always entails a balancing act between public and private interests. In this case, Medicare is on the right track by making it more lucrative for health plans to serve patients’ interests.

Dan Mendelson is president and founder of Avalere Health and a former healthcare policy adviser in the White House Office of Management and Budget.

https://bit.ly/2Kq3rws

Gilead, Alphabet's Verily to collaborate

Gilead Sciences (GILD) and Verily Life Sciences, an Alphabet company (GOOG), announced a scientific collaboration using Verily’s Immunoscape platform to identify and better understand the immunological basis of three common and serious inflammatory diseases: rheumatoid arthritis, inflammatory bowel disease and lupus-related diseases. In this first large-scale deployment of Immunoscape, a unique platform for generating immunological data and insights, Verily will analyze biological samples and clinical disease and treatment response data from patients participating in current and future Gilead clinical trials. This three-year collaboration represents the broadest effort to date to interrogate the activity of specific subtypes of immune cells to better understand disease signatures and treatment response, and has the potential to guide future drug discovery and development with the goal of improving outcomes for people living with these diseases. Verily’s state-of-the-art Immunoscape platform combines immunogenomic phenotyping and advanced computational analysis techniques to profile the molecular characteristics of inflammatory diseases at high resolution. Through the collaboration, Gilead will provide clinical data and thousands of immune cell samples from participants before, during and after administration of novel drugs in the company’s ongoing Phase 2 and Phase 3 clinical studies. This effort may lead to important new insights into these inflammatory diseases, including identifying molecular signatures that can help physicians to select a therapy or dosing tailored to a specific subgroup of patients, which could improve treatment results and avoid side effects. The data generated in this collaboration may also enable better characterization of subtypes of inflammatory diseases to help scientists identify new molecular targets leading to new therapies.

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