Despite ‘unexpected challenges,’ Cardinal Health beats expectations in 4Q earnings

Share prices for Dublin, Ohio-based Cardinal Health Inc. jumped on Monday after the company’s fourth-quarter earnings report beat analysts’ expectations.

Cardinal, a $137 billion healthcare services company, which specializes in the distribution of pharmaceuticals and medical products, reported revenues of $35 billion for fourth-quarter fiscal 2018, up 7% from the fourth quarter last year.

Its 2018 revenues were up 5% from fiscal 2017.

The company reported a fourth-quarter loss of $1.1 billion primarily due to a $1.4 billion charge it took to write down the performance of its cardiovascular products subsidiary Cordis Corp. “We encountered a couple of unexpected challenges in fiscal 18 and we are addressing those issues,” said Cardinal CEO Mike Kaufmann.

Officials said they expect to see a turnaround in the Cordis segment.

“As we go into fiscal 19 we believe we are in a much better position to manage our inventory levels across our global supply chain,” said Cardinal’s Chief Financial Officer Jorge Gomez. “We are making good progress, the trends are moving in the right direction and it is one of the key elements of our turnaround plan.

The company reported operating earnings of $126 million for fiscal year 2018.

During the call, officials addressed the divestiture in Nashville-based bundled-payment startup NaviHealth, which Cardinal acquired in 2015. Kaufmann said the company got back more than it had invested in the post-acute care management company.

“We really like the NaviHealth business,” Kaufmann said. But, “there are a lot of changes in that space and we knew there was going to be significant investment needed in that space in the next 18 to 24 months. We knew that investment would not only have an impact on the P&L, but more importantly, it would have an impact on our ability to focus on the things that will drive even more value in our medical segment.”

So, Kaufmann said, Cardinal ultimately decided to sell the majority stake of NaviHealth to New York City-based equity firm Clayton, Dubilier & Rice, while still retaining the right to buy the business back after five years. “We really think this maximizes the growth potential of NaviHealth and really allows us to stay focused on the key drivers for us in medical which is turning around Cordis and landing the patient recovery business.”

Opioid accountability

During its call, Cardinal addressed briefly how it was managing potential financial and reputational risks related to the U.S. opioid crisis since it is an opioid distributor. It came after it became subject to one of several opioid risk shareholder proposals filed by the Investors for Opioid Accountability this proxy season, reported Pensions & Investments.

“We continue to be committed to this. This is something that is really important to us as a company,” Kaufmann said. He pointed to a partnership between Cardinal and Ohio State University called GenerationRX that started in 2009 and focused on prescription misuse prevention.

“[We] have been making investments steadily over the last 10 years internally and externally. I don’t see that changing that,” Kaufmann said. “At this point in time, it’s hard to see the level it will be in [fiscal] 19 versus 18, but we will continue making investments in opioids going forward because it is important to us.”

Financially, the company acknowledged uncertainty regarding a New York law passed in April requiring opioid manufacturers and distributors in the state to contribute to an aggregate $100 million annual assessment.

That means Cardinal will have to make its initial payment toward the assessment on Jan. 1, Gomez said.

“We haven’t factored any impact from the newly passed law into our guidance because there is still a lot of uncertainty for how it will be implemented,” Gomez said. “Some of the uncertainty we see is there is a significant legal challenge pending against that law, there is a lot of complexity with which the law was written and we’re awaiting some guidance from the state and there’s still a lot of uncertainty frankly in how much each participant in that market will actually pay.”

https://bit.ly/2KGfvZc

Soy diets might increase women’s bone strength

Osteoporosis, decreased physical activity and weight gain are serious health concerns for postmenopausal women. Researchers from the University of Missouri now have discovered through a new animal study that soy protein found in food might counter the negative effects of menopause on bone and metabolic health. Moreover, the researchers believe that soy protein might also have positive impacts on bone strength for women who have not yet reached menopause.

“The findings suggest that all women might see improved bone strength by adding some soy-based whole foods, such as tofu and soy milk, to their diet,” said Pamela Hinton, professor of nutrition and exercise physiology. “We also believe that soy-based diets can improve metabolic function for postmenopausal women.”

Hinton and Victoria Vieira-Potter, co-author and associate professor of nutrition and exercise physiology, studied the effects of soy versus corn-based diets on rats selectively bred to have low fitness levels. Rats were again divided between those with and without ovaries to mimic effects of menopause. Prior research has found that these rats are good models for menopausal women. They compared the impact of the soy diet on bone strength and metabolic function to rats fed a corn-based, soy-free diet.

“Prior research has shown that these rats are good models, as average American women are relatively inactive both before, and especially after, menopause,” Vieira-Potter said. “As such, understanding how dietary protein sources, such as soy, can impact metabolism and bone health in these rats can help us better understand how such diets might impact women’s health across the lifespan.”

The researchers found that the tibia bones of the rats that were fed soy were stronger compared to the rats who were fed the corn-based diet, regardless of ovarian hormone status. Moreover, they found that the soy-based diet also improved metabolic function of the rats both with and without ovaries.

“Bottom line, this study showed that women might improve bone strength by adding some soy-based whole foods to their diet,” Hinton said. “Our findings suggest that women don’t even need to eat as much soy as is found in typical Asian diets, but adding some tofu or other soy, for example foods found in vegetarian diets, could help strengthen bones.”

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Story Source:

Materials provided by University of Missouri-Columbia. Note: Content may be edited for style and length.

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Journal Reference:

1. Pamela S. Hinton, Laura C. Ortinau, Rebecca K. Dirkes, Emily L. Shaw, Matthew W. Richard, Terese Z. Zidon, Steven L. Britton, Lauren G. Koch, Victoria J. Vieira-Potter. Soy protein improves tibial whole-bone and tissue-level biomechanical properties in ovariectomized and ovary-intact, low-fit female rats. Bone Reports, 2018; 8: 244 DOI: 10.1016/j.bonr.2018.05.002

https://bit.ly/2KD9VH7

Key aspects of human cell aging reversed by new compounds

Key aspects of the ageing of human cells can be reversed by new compounds developed at the University of Exeter, research shows.

In a laboratory study of endothelial cells — which line the inside of blood vessels — researchers tested compounds designed to target mitochondria (the “power stations” of cells).

In the samples used in the study, the number of senescent cells (older cells that have deteriorated and stopped dividing) was reduced by up to 50%. The Exeter team also identified two splicing factors (a component of cells) that play a key role in when and how endothelial cells become senescent.

The findings raise the possibility of future treatments not only for blood vessels — which become stiffer as they age, raising the risk of problems including heart attacks and strokes — but also for other cells.

“As human bodies age, they accumulate old (senescent) cells that do not function as well as younger cells,” said Professor Lorna Harries, of the University of Exeter Medical School.

“This is not just an effect of ageing — it’s a reason why we age.

“The compounds developed at Exeter have the potential to tweak the mechanisms by which this ageing of cells happens.

“We used to think age-related diseases like cancer, dementia and diabetes each had a unique cause, but they actually track back to one or two common mechanisms.

“This research focuses on one of these mechanisms, and the findings with our compounds have potentially opened up the way for new therapeutic approaches in the future.

“This may well be the basis for a new generation of anti-degenerative drugs.”

Professor Harries said the goal was to help people stay healthier for longer. She added: “This is about health span and quality of life, rather than merely extending lifespan.”

In a paper published last year, the team demonstrated a new way to rejuvenate old cells in the laboratory.

However, the new research looked at precisely targeting and rejuvenating mitochondria in old cells.

Each one of our genes is capable of making more than one product, and splicing factors are the genes that make the decision about which of these products are made.

In this new work, using novel chemicals, the researchers were able to very specifically target two splicing factors (SRSF2 or HNRNPD) that play a key role in determining how and why our cells change with advancing age.

“Nearly half of the aged cells we tested showed signs of rejuvenating into young cell models,” said Professor Harries.

The researchers tested three different compounds, all developed at the University of Exeter, and found each produced a 40-50% drop in the number of senescent blood vessel cells.

The compounds in question — AP39, AP123 and RT01 — have been designed by the Exeter team to selectively deliver minute quantities of the gas hydrogen sulfide to the mitochondria in cells and help the old or damaged cells to generate the ‘energy’ needed for survival and to reduce senescence.

“Our compounds provide mitochondria in cells with an alternative fuel to help them function properly,” said Professor Matt Whiteman, also from the University of Exeter.

“Many disease states can essentially be viewed as accelerated ageing, and keeping mitochondria healthy helps either prevent or, in many cases using animal models, reverse this.

“Our current study shows that splicing factors play a key role in determining how our compounds work.”

The research was funded by Dunhill Medical Trust and the Medical Research Council.

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Story Source:

Materials provided by University of Exeter. Note: Content may be edited for style and length.

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Journal Reference:

1. Eva Latorre, Roberta Torregrossa, Mark E. Wood, Matthew Whiteman, Lorna W. Harries. Mitochondria-targeted hydrogen sulfide attenuates endothelial senescence by selective induction of splicing factors HNRNPD and SRSF2. Aging, 2018; DOI: 10.18632/aging.101500

https://bit.ly/2Ok47EB

Healthcare Real Estate Is Being Pulled In Multiple Directions

Healthcare is changing as an industry so rapidly that providers and patients struggle to stay current. For real estate, the struggle is even more pronounced.

The traditional model of decentralized primary care providers, specialist networks and inpatient hospitals has become obsolete as technology has made more and more procedures possible to perform in outpatient facilities. At the same time, many providers want to make access to healthcare a simple, short trip for patients who may not have the time or ability to drive an hour to receive the specific care they need.

“There has been a tendency toward medical malls with multiple specialties so patients can access all sorts of care; I think that has been sort of the trend,” Temple University Health System President and CEO Larry Kaiser said.

In the drive to meet those demands, many healthcare providers are expanding their real estate footprints, even in a regulatory and funding environment that is far from stable. Those who fall behind are vulnerable to mergers and acquisitions, which have become more and more prevalent, Kaiser said.

“Part of the challenge is becoming more accessible, and for big universities, they’re very centralized,” Christiana Care Health System Chief Population Health Officer Sharon Anderson said. “The challenge now is to create points of entry that are local. They don’t have to be expensive sites, but they need to be close to where people are.”

The shifting landscape of healthcare will be front and center at Bisnow’s State of Philadelphia Healthcare event at The Westin Philadelphia Aug. 16, where Kaiser and Anderson will be among the speakers.

Healthcare providers’ need to turn a profit often requires uncomfortable decisions, and as insurers and the federal government fight to undo many elements of the Affordable Care Act, providers see shrinking payments at a time when they need all the capital they can get to fuel needed expansions.

Kaiser said since the 2016 election, there has been “no good news” from the government side.

“[Insurers] have had an advantage for a very long time, and it has been a very fragmented market on the provider side,” Kaiser said. “As the providers have consolidated, they have gotten more leverage.”

Temple is in the unenviable position of being the de facto healthcare system for Philadelphia’s poorest residents, due to the lack of public hospitals in the city. With Medicare and Medicaid-funded patients making up a bulk of its care, Temple has had to take on more and more debt to keep pace — making it an unattractive partner in consolidation deals.

“We’ve explored opportunities and haven’t been particularly successful,” Kaiser said. “Part of that is because of our patient base, and part of that is that we’ve seen a lot of consolidation around us and have been left out of the dance, so to speak.”

With its challenged financial situation, Temple Health has not been able to achieve its real estate goals in recent years. What it needs above all, Kaiser said, is a new, consolidated, outpatient care tower on its central campus.

Even though it has the land, a development partner in Milwaukee-based Landmark Healthcare and the plans in hand, it does not have the capital to break ground.

“We need to consolidate our outpatient offices here,” Kaiser said. “But unfortunately, with these changes in accounting rules where our patients are considered liabilities, we’d need to take on even more debt to do this.”

Christiana Care is in a stronger position financially, and has been focusing more on increasing its local presence in communities across the region for better convenience.

Hyperlocal research will allow such centers to specialize based on what a neighborhood seems to need the most, thus reducing the needed footprint, Anderson said. But even Anderson has second thoughts about expansions these days, due to the constant change that is emblematic of healthcare technology.

“People are expanding, and I don’t quite understand why,” Anderson said. “The future of healthcare is virtual care, and to the extent that people are buying and building a lot of brick-and-mortar, it won’t be useful in the next 10 years.”

If a financially healthy provider like Christiana Care is proceeding with caution, then a cash-strapped system like Temple is in a state of deep concern. Without some sort of joint venture or collaboration, especially if the federal government continues to cut funding to healthcare, Kaiser worries about Temple’s ability to even make it to the next presidential administration.

“It becomes more challenging for us,” Kaiser said. “We look at five-year projections, and there will be some real challenges in that 2020, 2021 range. We will have to make some tough decisions at that time.”

https://bit.ly/2Mt9Mb0

Insmed gets FDA panel nod for lung disease med

-Advisory committee supports surrogate endpoint of sputum culture conversion--

--ALIS currently under FDA Priority Review; PDUFA action date set for September 28, 2018--

Insmed Incorporated (Nasdaq:INSM), a global biopharmaceutical company focused on the unmet needs of patients with rare diseases, today announced that the U.S. Food and Drug Administration’s (FDA) Antimicrobial Drugs Advisory Committee voted 12 to 2 in favor of the safety and effectiveness of ALIS (amikacin liposome inhalation suspension) for adults with nontuberculous mycobacterial (NTM) lung disease caused by Mycobacterium avium complex (MAC) who have limited or no treatment options. The committee also voted in favor of the surrogate endpoint of sputum culture conversion used in the Phase 3 CONVERT study being reasonably likely to predict clinical benefit. If approved, ALIS will be the first and only therapy in the U.S. specifically indicated for the treatment of patients with NTM lung disease caused by MAC.
“We are very pleased by the outcome of today’s advisory committee meeting, which recognized the role ALIS may be able to play in addressing the significant unmet medical need among patients suffering from NTM lung disease caused by MAC, a chronic, debilitating and potentially fatal infection,” said Will Lewis, President and Chief Executive Officer of Insmed.
https://bit.ly/2KBrWFB

Spark hit as hemophilia safety setbacks torpedo stock, burnish rival BioMarin

Every tiny gene therapy study run by a public biotech looking to make a breakthrough in curing a disease has two critical features. There’s the regulatory side, where FDA and EMA insiders need to be persuaded of their potential. And there’s the market side, where a host of analysts — real and self-appointed social media mavens — are ready to jump on any adverse event as a sign of impending defeat.

Spark $ONCE CEO Jeff Marrazzo has seen both sides up close. And his stock price is getting hammered this morning as the market zeroes in on a new update on the company’s hemophilia A program this morning overshadowed by a serious adverse event and other setbacks that the analysts quickly pounced on — overshadowing the more positive data the CEO would prefer to focus on.

Now that 12 hemophilia A patients have been dosed in their Phase I/II study, Marrazzo says that they’ve been able to track a dose-dependent response that persuaded them to move ahead into a pivotal Phase III at the high end: 2×10(12) vg/kg.

“We believe that the totality of the data supports moving into Phase III,” Marrazzo, a very careful speaker, tells me.

Researchers have observed promising responses for the first 2 patients in the study for more than a year now; step back, says Marrazzo, and you’ll see that the entire dozen patients have had a 97% drop in bleeds and 97% drop in the rate of infusions that had been needed to protect them from bleeds.

From a regulatory perspective, that’s a new standard of care to consider. But here’s where Spark — which is going right up against a more advanced BioMarin $BMRN program— encountered severe turbulence on the market side.

While 5 of the 7 patients in their chosen dose arm have experienced FVIII activity levels between 16% and 49% — hitting their projected range of 12% to 100% for up to 30 weeks — two have had setbacks. Immune responses caused their FVIII levels to drop below 5%, forcing them to switch to on-demand treatment. One chose to go into the hospital for infusions — a serious adverse event. There were also a number of ALT elevations in patients that raised concerns.

Of note, across the study, seven of the 12 participants received a tapering course of oral steroids in response to an alanine aminotransferase (ALT) elevation above patient baseline, declining FVIII levels and/or positive IFN- enzyme-linked immunospots (ELISPOTs). For these seven participants, steroids led to normalization of ALT and ELISPOTs. For all but the two above mentioned 2×1012 vg/kg cohort participants, oral steroids led to stabilization of target FVIII levels.

Spark’s shares plunged 29% after the release, which includes its Q2 numbers, hit the wire. BioMarin’s stock, meanwhile, is up about 6.5%.

Anytime you run a Phase I/II study of a new therapy like this, says the CEO, you have some learning to do about safety and efficacy. Even with the setbacks, he adds, the two patients have had good clinical outcomes, with a dramatic drop in bleeds and infusions. And with what they’ve learned from their work on hemophilia A as well as their closely-watched hemophilia B program, he added, there’s good reason to believe they can do better in Phase III.

Up to now, though, Spark has continued to run into problems with investors whose first reaction is to compare their hemophilia A program with BioMarin’s. And the BioMarin team’s performance has been winning kudos for a solid set of responses in a small group of patients. Marrazzo also likes to point out that their rival’s performance hasn’t been perfect either, but he’s not unaware that the market sees this as essentially a head-to-head affair — even if there’s no actual head-to-head study underway.

Marrazzo’s view: “We’re in the early innings of a long game. We believe with a standardized approach it will support the program as we move forward…We’re all learning this as we go,” he adds, noting that Spark is in a “very competitive race.”

He’ll be holding on to that thought today as the market reacts.

https://bit.ly/2OidNPQ

Alder Attractive Play In Migraine Market, Stifel Says Ahead Of Quarterly Report

Alder BioPharmaceuticals, Inc. ALDR 1.04% is set to release its second-quarter earnings report after the bell Tuesday, and Stifel reviewed the stock ahead of the print.

The Analysts

Stifel analyst Paul Matteis initiated coverage of Alder BioPharmaceuticals with a Buy rating and $30 price target.

The Thesis

Alder is an attractive buy due to its position in migraine prevention, Matteis said in the initiation note.

The company’s development of eptinezumab remains underappreciated by investors, but it operates in a difficult market, the analyst said.

“It won’t be easy for Alder to compete with Amgen, Novartis, Lilly and Teva (assuming the company goes it alone); however, one element of migraine that’s underappreciated — and good for Alder — is that treatment occurs at a reasonably modest number of specialized, high-volume clinics.”

Stifel projects a 90-percent chance the FDA will approve the candidate in early 2020, with the drug reaping $1 billion in gross sales by 2025.

ALDR’s main catalyst is its product, Matteis said. Eptinezumab is fast-acting and achieves full effect within 24 hours, while competitors take considerably longer to show results, he said. The treatment can offer patients the best shot at diminishing recurring migraines, the analyst said.

Despite ALDR’s minimal market share, Matteis said a 20-percent share is reasonable.

“Our model assumes that eptinezumab thrives in the severe setting and is used much more modestly in frequent episodic patients where the convenience of subcutaneous drugs, and possibly orals, may represent more of a differentiating factor.”

https://bit.ly/2KCp23L