Piper Jaffray analyst David Amsellem says the settlement with the Department of Justice does not mean there isn’t downside risk in shares of Insys Therapeutics. For a $600M market capitalization, investors are getting a sublingual form of buprenorphine that was “roundly rejected” by an FDA panel in May, a cannabidiol product that has yet to demonstrate proof-of-concept in a well-controlled trial, a product in Syndros that has minimal sales after approximately one year of active promotion, and a declining asset in Subsys that has limited profitability, Amsellem tells investors in a research note following Insys’ Q2 results. The analyst does not believe the shares are “adequately risk-adjusted.” He reiterates an Underweight rating on Insys with a $4 price target.
Friday, August 10, 2018
Cantor sees ‘many reasons’ for UnitedHealth acquiring Athenahealth
Numerous media sources yesterday cited a Dealreporter story indicating that UnitedHealth (UNH) is now in the second round of bidding for Athenahealth (ATHN), Cantor Fitzgerald analyst Steven Halper tells investors in a research note partially titled “It’s Crazy but Not So Crazy.” There are “many reasons” why UnitedHealth’s Optum would benefit from the acquisition of Athenahealth, the analyst contends. He points out that Optum has a large presence in the Boston area and that Athenahealth is located principally in Watertown, Massachusetts. Further, UnitedHealth “can certainly afford” the deal given its strong balance sheet and cash flow, Halper adds. With or without the deal, the analyst expects UnitedHealth will deploy capital and grow its various Optum businesses over time. He reiterates an Overweight rating on the shares with a $300 price target.
Thursday, August 9, 2018
Surgery Partners has another strong quarter, revenues increased 54.2%
Brentwood, Tenn.-based Surgery Partners reported its second quarter 2018 financial results, reporting $444.8 million in revenues.
Here’s what you should know.
1. Reported revenues increased 54.2 percent year over year.
2. Surgery Partners increased its surgical cases 17.8 percent to 131,646 during the quarter.
3. Surgery Partners’ quarterly net losses were $27.4 million.
4. The company’s EBITDA increased 49.5 percent year over year to $55.4 million for the quarter.
5. Surgery Partners announced a diluted net loss of $0.57 per share.
6. Same-facility revenues increased 3 percent year over year. While revenue per case increased 4.5 percent, same-facility cases decreased 1.4 percent for the quarter.
7. Surgery Partners is maintaining its full-year 2018 guidance. The company expects revenues of $1.75 billion for the year and an adjusted EBITDA of $240 million.
8. The company also maintained it acquisition expectations, with a goal to acquire between $80 million and $100 million in assets.
Surgery Partners CEO Wayne DeVeydt said, “Our second-quarter results were highlighted by strong year-over-year revenue and surgical case growth, as well as continued investments in our infrastructure that position the company for long-term success. During the quarter, we made excellent progress in realigning our organizational structure with our strategic and financial goals. We are confident that these organizational and structural changes will improve operational efficiency and energize our team as we focus on building a strong, sustainable short-stay surgical business that can capitalize on opportunities and deliver strong growth.”
Ligand Offers $43M Cash to Acquire Vernalis
Ligand to gain broad portfolio of partnered and unpartnered programs, a self-funding R&D group and approximately $32 million of net cash
Ligand Pharmaceuticals Incorporated (LGND) and Vernalis plc (VER.L) announce that Ligand has declared its firm intention to acquire the entire issued and to be issued shares of Vernalis through a UK scheme of arrangement conditional on approval by the Vernalis shareholders. Vernalis is a structure-based drug discovery biotechnology company with a broad pipeline of partnered programs and ongoing collaborations.
Under the terms of the proposed UK scheme of arrangement, Ligand would pay Vernalis shareholders £0.062 per share in cash, valuing Vernalis at approximately £32.8 million, equivalent to approximately $43 million. This proposal – which requires approval by a majority of the shareholders representing at least 75% or more in value of the company’s outstanding shares voting on the transaction – has received the support and irrevocable undertakings from the Board of Directors of Vernalis and its two largest shareholders, who own in aggregate approximately 67% of the outstanding shares of the company.
On March 15, 2018 Vernalis announced that as part of its then-ongoing strategic review, it had decided to commence a formal sales process with Evercore serving as financial advisor. As part of its strategic review Vernalis has substantially completed the closure of its US commercial operations and remains on track to have completed this by 30 September 2018. If Ligand’s offer is approved by Vernalis shareholders, the transaction is expected to close in October 2018.
The acquisition of Vernalis would provide Ligand with the following:
- A portfolio of more than 8 fully-funded partnered programs, or shots on goal, including programs in the respiratory, oncology and CNS sectors. Partners include Corvus, Verona, Celgene, Servier, Menarini, Tris and CTI.
- A 70-person R&D team based in Cambridge, England focused on fragment- and structure-based drug discovery and partnering, with an active portfolio of collaboration agreements generating over $8 million per year of service revenue matched by a comparable level of costs, and partnerships that have the potential to generate additional near-term shots on goal. Ongoing collaboration partners include Servier, Daiichi Sankyo, Lundbeck, Asahi Kasei and an undisclosed Japanese partner.
- An established compound library and additional early-stage, unpartnered programs in oncology, CNS and other areas that will provide business development out-licensing and corporate formation opportunities.
- Expected cash on hand as of June 30, 2018 of £27.3 million or approximately $36 million. Ligand estimates incurring additional deal costs of approximately $4 million, resulting in $32 million of net cash to Ligand from the transaction.
- United Kingdom-based operations that would provide a platform to more efficiently pursue investment and acquisition opportunities in Europe and the United Kingdom.
Ligand 2018 Financial Outlook
Currently the transaction is anticipated to close in the fourth quarter of 2018. With a fourth quarter close, revenue and operating expense impact from Vernalis is currently expected to be small and mostly offset each other. Beyond 2018, research business revenue is expected to approximate expenses with longer-term milestones and royalties being accretive to future Ligand earnings.
Amazon said planning to open primary care clinics at Seattle headquarters
Online retail giant Amazon’s foray into tackling healthcare costs might just start with really convenient primary care.
Specifically, primary care clinics for its employees located right at its Seattle headquarters, CNBC reported Thursday afternoon.
According to the report, the technology company is in discussions to open clinics, hiring a small number of doctors for a limited group of employees by the end of this year. They have plans to expand in early 2019, the network reported.
The idea of large employers housing primary care clinics is not entirely novel among corporate players, and Apple announced earlier this year that it was launching medical clinics for its employees.
This report comes just more than six months after Amazon announced a partnership with JPMorgan Chase and Berkshire Hathaway to try to curb rising health costs by creating solutions aimed at their employee bases with an eye toward an impact on U.S. healthcare at large. To lead the effort to drive new innovations, the group announced it hired reknowned doctor and author Atul Gawande.
Everyone from major insurers to large employers has been closely watching for news from the partnership, with National Business Group on Health President Brian Marcotte opining that Amazon’s ability to interact with a massive number of consumers on a routine basis could actually bring the consumerism and disruption to the industry promised by so many others.
However, despite its transformation of retail using technology, Amazon has also found out just how complex that job can be.In April, CNBC reported Amazon decided to scrap plans to sell drugs to hospitals. Experts said the move was at least in part because hospitals are very set in their ways when it comes to supply chain management.
This is part of a shift on the part of employers in becoming more aggressive about empowering their employees to make better health choices, said Rita Numerof, president of St. Louis, Missouri-based healthcare consulting firm Numerof & Associates. The impact of what Amazon is doing will only be as good as the program design, the expectations that they and their employees have, the measures that are in place, their clinicians and their execution, she said.
That being said: “I would never bet against Amazon and I have great confidence that they’ll do it well,” said Numerof, author of the book Bringing Value to Healthcare: Practical Steps for Getting to a Market-Based Model. “And under Atul Gawande’s leadership, he’s very concerned about transparency and quality and appropriateness of care and engagement of the consumer so I think that this has high probability of being very successful.”
Sean Hartzell, an associate principal specializing in health care at ECG Management Consultants in Washington, D.C., said the market will respond to this news because of the sheer size and technical capability of Amazon.
He said he’ll be watching to see how players like UnitedHealthcare, which has so many pieces of the healthcare business under its umbrella, will respond to this move. But he’s also interested in seeing how other major employers respond as Amazon’s plans become more clear.
“I think you could very easily see you could almost have a primary care on-call service, not unlike if you go back to the beginning of the heady days of the dot-com era, I think we’re there again. You’re going to be here at the office all the time and we’re going to have a dry cleaner for you, we’re going to have meals, we’re going have these cool things for you to ‘play’ with,” Hartzell said. “As that cohort of employees is aging, now healthcare is becoming more important than a dry cleaning service and the ability to get a slushy drink whenever you want. If I play that out, now they’re saying: ‘You want health care benefits? We’ll do you one better and offer a primary care service that you can go to any time.’ ”
AI can save US insurers $7B in admin costs, Accenture says
- U.S. insurers can unlock $7 billion in total value — 10-15% of operating expenses — in 18 months by using artificial intelligence to automate certain core administrative functions, according to a new study from Accenture.
- The savings could stem from streamlining core functions for payers across the board, including customer service, billing, enrollment, claims and quality and compliance. Automating these functions for an individual health plan would bring in $1.5 million in operating income for every 100 full-time employee by the end of next calendar year for large and small payers alike, the report concludes.
- In 2017, 72% of payer executives said that, within the year, AI would be among the top three strategic priorities for their organizations, according to a separate Accenture survey, adding to industry buzz around the technology’s potential. The top three current areas to target for near-term value were anticipating and resolving customer questions, improving the benefits loading and design process and accelerating prior authorization and clinical review of claims.
Although AI in healthcare is still going through growing pains, it holds big potential — especially for insurers under pressure to stay competitive in a continually shifting industry.
In addition to mounting consumer cost concerns and rising deductibles, payer loyalty is low. The Accenture study touted the benefits of using strategic AI initiatives to drive capital in the midst of this market disruption, changes that require payers to forgo traditional sources of unlocking value.
The consultants pointed to six areas of an insurer's operating model. The largest savings reside in managing customer interactions and applying AI technologies to anticipate, and respond to, customer demands.
If used adroitly, AI could unlock $2.1 billion for health insurers in this one domain alone, followed by managing membership and billing ($1.4 billion), managing and supporting reimbursement ($1.1 billion), managing network and providers ($1.0 billion), performing health management ($900 million) and managing quality improvement and compliance ($500 million).
"The premise of the piece is that there's both significant value in focusing health plans' operations first, and that's where the quantitative value, the monetized value, comes,” Richard Birhanzel, managing director of Accenture's payer business, told Healthcare Dive.
"But it also creates foundational value," he noted, stressing that to set up and implement AI systems, an organization must address underlying data architecture constraints and determine its data network needs.
Birhanzel spelled out AI's usefulness in each of the outlined six categories. In managing customer interactions, for example — the biggest slice of the pie — AI is equipped to predict what a customer will ask based on prior calls or other system data, and then help a call center representative to have a more efficient and targeted interaction to satisfy that customer's needs.
It's about a virtual agent, Birhanzel said, or "taking some of the simple things that people ask about and answering them without human intervention, being able to anticipate need" and "infusing the conversation with just-in-time information based on what the customer is asking of the call center."
Accenture's analysis highlights two other areas insurers should target for near-term value: improving the benefits loading and design process and accelerating prior authorization and clinical review of claims.
The study also provides targeted AI and machine learning proposals for each area that could demonstrate near-term operating income impact, such as implementing robotic process automation (RPA) to auto-approve prior authorization requests — something Express Scripts is already doing, aided by its $3.6 billion acquisition of eviCore in 2017.
The report defines AI to mean "collection of multiple technologies enabling machines to sense, comprehend, act and learn, so they can perform administrative and clinical healthcare functions." Birhanzel stressed that AI augments, as opposed to replaces, human activity and will not directly threaten employees' jobs.
According to a survey of over 12,000 participants conducted by consultancy PwC in 2016, lack of trust and a need for the human element were the biggest hurdles to using AI in healthcare.
Birhanzel argued that AI can allow employees to focus on decision-making and processes that require human intervention, and create institutional capacity as payers will no longer have to "scale future jobs in areas that can be automated" or tackled by AI.
Other obstacles include weak existing infrastructure, ill-defined governance structure and bad or ill-fitting vendors.
One real world example is the recent expansion of IBM and Anthem's digital infrastructure contract. IBM has implemented more than 30 bots and automates more than 70% of Anthem's monthly high-volume repetitive tasks.
Although this study focused on payers, hospital systems can also reap the benefits of AI automation — benefits that, according to the report, can win over disgruntled customers who have been asked to bear increasing out-of-pocket costs and who now demand personally-tailored service.
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