Big 8 health insurers made $16.6B in first half of 2018

The second-quarter earnings season is in the books, and eight of the largest insurers brought in an impressive haul.

For the first half of the year, insurers brought in a total of $285.2 billion revenue, compared to $264 billion at the same point last year.

Total earnings were also up substantially, from $13.4 billion in the first half of 2017 to more than $16.6 billion in the first six months of 2018.

UnitedHealth Group maintained its spot as the top-earning insurer, but after that, the field was substantially shaken up. Aetna jumped to second place from fifth last year, with an increase of $1.59 billion in net income to a total of $2.4 billion.

Molina also displayed an impressive comeback, coming back from a $153 million loss last year to $309 million in net income this year. Interestingly, it achieved that comeback despite almost flat revenue growth; The insurer only brought in $26 million more revenue than last year.

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Not every insurer was so fortunate. Humana, in particular, saw a large drop in earnings from last year, when it hit third place in net income with $1.8 billion. This year, it made just $684 million.

Of course, since the insurer’s revenue grew healthily over the same period, the drop in income is likely tied to its spending spree this year.

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Molina’s comeback is a more complicated story. Leaking money last year, the insurer decided to fire its CEO and CFO and pull out of two states’ ACA marketplaces. That ouster was quite the shakeup for the company, as the two executives, CEO J. Mario Molina and CFO John Molina, were founding members. As of February this year, the Molina family no longer has any official ties to the company.

However, despite continuing to report a loss in the second half of 2017, pulling back its marketplace footprint and raising premiums now seems to have done the trick. Per-member per-month premiums increased 41% over the same six-month period last year, and medical costs declined to the point where the company is no longer meeting its 80% medical loss ratio thresholdrequired by the ACA.

“This company had inconsistent processes,” Joseph Zubretsky, the company’s new CEO, said on last week’s earnings call. “It had, in some cases, poor execution in some of our local health plans and by a rigorous performance management process, leading indicators that identify the number of authorizations that are going in, so that we can head off high acuity inpatient trends that are emerging, all of these are contributing to the very favorable medical care ratios that we’re experiencing in the first half.”

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Amazon, Google, Microsoft, IBM pledge support for healthcare interoperability

Six of the world’s largest technology giants have thrown their sizable weight behind advancing interoperability in healthcare.

Microsoft, Amazon, Google, IBM, Oracle and Salesforce issued a joint statement on Monday vowing to remove the barriers to interoperability by promoting the “frictionless exchange of healthcare data” through open standards and active engagement with the healthcare industry.

“We are jointly committed to removing barriers for the adoption of technologies for healthcare interoperability, particularly those that are enabled through the cloud and AI,” the joint statement read (PDF). “We share the common quest to unlock the potential in healthcare data, to deliver better outcomes at lower costs.”

The companies made the announcement at the Blue Button Developers Conference hosted by the White House.

“The opportunity to unleash greater innovation in healthcare is here and working together we can seize it,” Dean Garfield, CEO of the Information Technology Industry Council (ITI) said in a statement.

Although all six of the technology giants were already making inroads into healthcare, the statement was a clear show of support to promote interoperability specifically.

In a blog post, Josh Mandel, the chief architect at Microsoft Healthcare who helped create Fast Healthcare Interoperability Resources, said Microsft plans to identify ways to support value-based care.

“Transforming healthcare means working together with organizations across the ecosystem,” he wrote. “Today’s joint interoperability statement reflects the feedback from our healthcare customers and partners, and together we will lay a technical foundation to support value-based care.”

“We are pleased to join others in the technology and healthcare ecosystem in this joint commitment to remove barriers and create solutions for the adoption of technologies for healthcare data interoperability,” added Gregory J. Moore MD, Ph.D., vice president of healthcare at Google Cloud. “This will enable the delivery of high quality patient care, higher user satisfaction, and lower costs across the entire healthcare ecosystem.”

https://bit.ly/2BieO8W

DOJ expands Medicare Fraud Strike Force to Newark and Philadelphia

The Department of Justice (DOJ) is adding several more cities to its Medicare Fraud Strike Force, a federal program that targets cities with high rates of fraud, waste and abuse.

A new regional division will be based in Philadelphia and Newark, New Jersey, the agency announced Monday.

The number of opioids prescribed per capita is notably high in New Jersey and Pennsylvania, according to Nicole Navas Oxman, a spokesperson for the DOJ.

The DOJ will work with U.S. Attorney’s Offices for the District of New Jersey and the Eastern District of Pennsylvania—as well as the FBI, the Office of the Inspector General at the Department of Health and Human Services and the Drug Enforcement Administration—to prosecute doctors, nurses and other licensed medical professionals for false billing schemes and the illegal prescription and distribution of dangerous narcotics.

In June, the DOJ announced its largest healthcare fraud action ever, charging more than 600 individuals in fraud schemes totaling $2 billion in losses to the federal government. Most of these cases involved opioid distribution, and the Strike Force seems to be continuing that focus.

The new task force adds to the administration’s ongoing focus on opioid-prescribing enforcement. Brian Benczkowski, assistant attorney general for the Criminal Division of the DOJ, said in the press release the opioid epidemic in the mid-Atlantic region is “staggering—and health care fraud has played a role in feeding that epidemic.”

Craig Carpenito, U.S. attorney for the District of New Jersey, highlighted several healthcare fraud cases his office has handled recently during a press event in Newark, including one where a pharmacist distributed opioids from “pill mills.”

The District of New Jersey and the Eastern District of Pennsylvania both launched opioid task forces earlier this year.

However, the Strike Force will combat other forms of fraud as well, including compounding pharmacies, bribery, kickbacks and other illegal schemes. The program, created in 2007, has been lauded for its fraud enforcement, use of data analytics and collaboration between federal and state agencies.

Fraud is a significant reason healthcare programs, including Medicare, have skyrocketed in cost and comprise an ever-increasing share of the federal budget, Carpenito noted.

Medicare Fraud Strike Forces operate in 10 other cities across the country: Baton Rouge/New Orleans, Chicago, Dallas, Detroit, Houston, Los Angeles, New York, Tampa and Washington, D.C.

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Correvio Pharma (CORV) Tops Q1 EPS by 31c, Revenues Miss

Correvio Pharma (NASDAQ: CORV) reported Q1 EPS of $0.16, $0.31 better than the analyst estimate of ($0.15). Revenue for the quarter came in at $6.2 million versus the consensus estimate of $7.07 million.

“The first half of 2018 was marked by several important achievements, including the confirmed ability to resubmit the Brinavess® (vernakalant hydrochloride, IV) New Drug Application (NDA) to the Food and Drug Administration in the United States, completion of enrollment in the SPECTRUM study in Europe, and the closing of the acquisition by Cipher Pharmaceuticals Inc. of our Canadian commercial business,” commented William Hunter, MD, CEO and President of Correvio. “On the revenue front, we continue to generate strong sales momentum. Year to date, our sales were up 16% year-over-year, but most importantly, our direct sales were up 64% year-over year. As we look ahead to the remainder of 2018, we believe we are well positioned to execute on our stated goal of providing meaningful revenue growth of 20-25% over 2017.”

https://bit.ly/2KS4l3K

Goldman Drops Alnylam From Conviction List, But Still Sees ‘Blockbuster Potential’

The FDA recently approved Alnylam Pharmaceuticals, Inc. ALNY 2.3%‘s patisiran for polyneuropathy caused by hereditary transthyretin-mediated amyloidosis in adults.

The genetic, often lethal, disease leads to abnormal buildup of amyloid protein in peripheral nerves, heart and other organs, which results in nerve as well as organ damage.

The Analyst

Goldman Sachs analyst Terence Flynn maintained a Buy rating on Alnylam and lowered the price target from $193 to $155.

The analyst removed Alnylam from Goldman’s Americas Conviction List.

The Thesis

The approval was in line with expectations, especially after the Eeuropean Union issued a positive Committee for Medicinal Products for Human Use opinion last month, Flynn said in a Monday note. (See the analyst’s track record here.)

The analyst views the cardio data included in the U.S. label as disappointing, leaving Alnylam at a disadvantage to Pfizer Inc. PFE 0.2%‘s rival drug candidate Tafamadis.

Full Phase 3 data for Tafamadis is due later this month, Flynn said.

Citing potential headwinds from the patisiran label and likely competition from Pfizer, the analyst lowered the U.S. penetration assumption for patisiran from $2.9 billion to $2.1 billion.

Alnylam shares have lost about 22 percent since they were added to the Conviction List on Dec. 15, 2017 versus a 10-percent gain for the S&P 500 Index, Flynn said.

Goldman stuck with its Buy rating on Alnylam, as it said competitive risk is already priced into the stock.

” We … continue to project blockbuster potential for Patisiran/ALN-TTR-sc02 and believe there is pipeline optionality with data from two additional [Phase 3] assets expected in 2H18-2019,” Flynn said.

https://bit.ly/2vLTT98

Mixed Reviews For Allakos As Sell-Side Starts Coverage Of Biotech

Allakos Inc ALLK 0.81%, a clinical-stage biotech company developing treatment for various eosinophil and mast-cell related diseases, offered 7.13 million shares in an IPO at $18 per share.

The Analysts

Following the IPO quiet period expiration, Goldman Sachs analyst Terrence Flynn initiated coverage of Allakos with a Neutral rating and $31 price target.

William Blair’s Tim Lugo initiated coverage of Allakos with an Outperform rating and $72 fair value estimate.

Goldman: Blockbuster Potential, But Fair Valuation

AK002, the company’s antibiotic drug in clinical development, has blockbuster potential in gastrointestinal diseases and hives/skin rash, with a peak sales potential of $1.9 billion, Goldman analyst Flynn said in a Monday note.

The drug’s mechanism of action is by binding a target called Siglec-8 found in eosinophils and mast cells, which are responsible for a variety of allergic and inflammatory diseases affecting the gastrointestinal tract, skin, eyes and lungs, among other organs.

Flynn said he sees opportunities for the candidate in severe allergic conjunctivitis and indolent systemic mastocytosis, with peak sales potential of $625 million and $388 million, respectively.

Although Goldman expects the Phase 1/2 data from four trials due in the first half of 2019 to de-risk the estimates, the firm said Allakos’ valuation is fair due to the stock’s strong performance since its IPO.

William Blair Sees Unique Positioning In Asthma, Larger Markets

AK002 is a best-in-class eosinophil depletion agent, according to William Blair’s Lugo.

“Impressive Phase 1 data in healthy volunteers suggests AK002 can deplete blood eosinophils one hour after intravenous infusion and maintain this depletion up to 84 days,” the analyst said.

Additionally, open-label data in indolent systemic mastocytosis patients showed an 83-percent response rate, vouching for its efficacy in mast cell-driven indications, Lugo said.

Lugo estimates peak sales potential of more than $4 billion using conservative penetration estimates, though he said the drug may not be marketed until 2022.

The lead asset is uniquely positioned in asthma and other larger markets due to its dual — likely complementary — mast cell and eosinophil inhibition mechanism and efficacy, according to WIlliam Blair.

AstraZeneca plc (ADR) AZN 0.03%‘s Fasenra is the gold standard in eosinophil depletion, Lugo said. Fasenra, along with the  Roche Holdings AG Basel ADR RHHBY 0.95%–Novartis AG (ADR) NVS 0.29% combo’s Xolair are FDA-approved treatments for asthma.

https://bit.ly/2KUDy6W

‘Fortnite’ reportedly poses malware risk on Android

Welcome to “Game On,” The Fly’s weekly recap of the stories powering up or beating down video game stocks. NEW RELEASES: This week’s major release is “World of Warcraft: Battle For Azeroth,” the latest expansion to Activision Blizzard’s (ATVI) immensely popular online role playing game that first launched in 2004. The expansion is available today on PC. SODERLUND LEAVES EA: Electronic Arts (EA) said today that chief design officer Patrick Soderlund has opted to leave the company. The game maker said on the matter that Soderlund has been “an agent of change and transformation.” Kotaku’s Jason Schreier later reported that the executive will leave the publisher after receiving a $20M bonus that was granted in an attempt to get him to stay, adding that Soderlund made $48.3M last year. Prior to his position as chief design officer, Soderlund served as CEO of DICE, the developer behind the “Battlefield” and recent “Star Wars Battlefront” series, Kotaku noted. ‘FORTNITE’ MALWARE RISK: The Guardian reported last week that players of Epic Games’ “Fortnite” on Android phones are at risk of becoming victims of malware infections. The risk comes after Epic’s move to bypass Google’s (GOOGL) Play Store in favor of publishing the game to its own website, the report said, citing security experts. The game is currently available on select Samsung (SSNLF) devices and will launch on other Android phones later, the Guardian noted. Epic Games is 40% owned by Tencent (TCEHY) and is part of Disney’s (DIS) Accelerator Program. TENCENT TO REMOVE CAPCOM GAME: Meanwhile, Bloomberg reported yesterday that Chinese regulators have ordered Tencent to remove Capcom’s (CCOEY) “Monster Hunter: World” from its PC downloads service. According to Bloomberg, parts of the game failed to meet regulatory standards, and the relevant authorities received a “significant amount of complaints.” NINTENDO SWITCH ONLINE: Nintendo of America (NTDOY) said last Friday that the Switch’s upcoming enhanced online service, known simply as Nintendo Switch Online, will launch in the second half of September. According to the company, the service will provide access to online play and Save Data Cloud backup in compatible games and a growing library of NES titles with added online play. The announcement came days after a Nintendo Direct outlining many of the new features in upcoming fighting game “Super Smash Bros. Ultimate,” which will have online capabilities.

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