According to the company’s third quarter 2018 results, the sterile injectable product portfolio has declined by 9% in developed markets, one reason Pfizer modestly narrowed its revenue expectations for 2018.
Pfizer completed its acquisition of Hospira, a provider of injectable drugs and infusion technologies, just over three years ago, but the subsidiary has been dogged by manufacturing issues.
This has carried through to Pfizer’s financials. In its third quarter 2018 results, Pfizer narrowed its guidance on 2018 revenue from $53 to $55 billion to between $53 billion to $53.7 billion, reducing the midpoint by $650 million.
“[This] was largely related to lower-than-anticipated Essential Health revenues, primarily due to continued legacy Hospira sterile injectable product shortages in the U.S. and recent unfavorable changes in foreign exchange rates,” Pfizer CEO Ian Read said on the company’s third quarter results call.
“We see the global sterile injectables market as being a very attractive market,” said Angela Hwang, Pfizer’s group president for essential health. “It’s large, it’s growing, it has high barriers to entry due to the complexity of manufacturing. And for that reason, we are very focused on our remediation efforts as a critical success factor in this market.”
Hwang said she expects supply to improve significantly towards the end of 2019.
Drugmaker Astellas Pharma plans to invest ¥29 billion, or about $257 million, in constructing new R&D and manufacturing facilities across three sites in its home country of Japan and in Massachusetts.
Astellas’ build-out is a push to expand the company’s capabilities in cell and gene therapy, as well as in regenerative medicine and biologics.
In Japan, Astellas will build two centers, one in Toyama and the other in Tsukuba, that both are scheduled to complete in 2019. In the U.S., the drugmaker will relocate its Institute for Regenerative Medicine, with a completion date set for January 2020.
Known best in the U.S. as the developer of Xtandi (enzalutamide), Astellas is making it clear that it has broader aims.
One of the new facilities under construction, located in Tsukuba, will manufacture clinical trial materials for Phase 1 and Phase 2 studies of cell and gene therapies in Japan, the U.S., and Europe. While only 1,800 square meters in size, the facility will cost Astellas about $44 million.
In Toyama, Japan, Astellas will spend nearly $90 million to build a 8,000-square-meter facility to produce antibodies for both clinical and commercial uses. The site could also play a role in cell therapy manufacture, Astellas said.
By footprint, the largest construction will take place in the U.S., where Astellas is relocating its Institute for Regenerative Medicine to a new location measuring 24,000 square meters.
Shifting sites is aimed at accelerating R&D in regenerative medicine and cell therapy, and better supply clinical trial materials. The cost of the move and upgrades, which should complete in January 2020, will total about $124 million.
Over the past several years, Astellas has made three deals to acquire assets in gene therapy, women’s health and mitochondrial research, while largely exiting antibody-drug conjugate R&D.
Oppenheimer set a $40.00 target price on Exelixis (NASDAQ:EXEL) in a research report report published on Thursday morning. The brokerage currently has a buy rating on the biotechnology company’s stock.
HCA Healthcare beat analyst expectations for revenue in its third quarter, revised its guidance for the year and announced a quarterly cash dividend of $0.35 per share in third quarter earnings released Tuesday.
The Nashville-based hospital chain said net income spiked 78% to $759 million during the third quarter on revenue of $11.45 billion, an increase of nearly 7% for the quarter.
HCA improved its guidance and expects revenue to be between $46 and $47 billion for the year compared to previous guidance that projected revenue to be between $45.5 to $46.5 billion. Earnings per share are now expected to be between $9.05 to $9.45 per diluted share from previous expectations of $9 to $9.40 per diluted share.
HCA had a strong third quarter — reporting an uptick in admissions and surgeries — despite the hurricanes that disrupted business at some of its facilities in recent months.
On what will be his final earnings call with investors, CEO R. Milton Johnson, who is set to retire at the end of the year, said, “we saw solid volume and rate growth, increased intensity of service and excellent expense management.”
HCA said admissions increased 3.2% year over year while outpatient surgeries and inpatient surgeries increased nearly 5% and 1.1%, respectively. It’s the 18th consecutive quarter of increased same-facility admissions, executives said on the call. However, same-facility ER visits declined slightly by 0.4%.
Hurricane Florence resulted in an estimated $9 million hit to the hospital chain after it was forced to evacuate every patient from its Grand Strand Medical Center in Myrtle Beach, South Carolina.
Executives did note that results from Q3 of last year were weighed down by Hurricanes Harvey and Irma, resulting in revenue losses of $140 million. “Our robust disaster preparedness plans give us confidence when facing weather disasters like this,” Johnson said.
Looking ahead to 2019, incoming CEO Sam Hazen said the company expects to see solid growth again.
The hospital chain reported a tax benefit of $121 million, or $0.34 per share, thanks to recent tax legislation.
In September, HCA, which operates 178 hospitals and 122 outpatient surgery centers, said it signed a $1.5 billion deal to buy Mission Health, a North Carolina health system with seven facilities, its largest in Asheville.
Despite HCA’s strong performance, Community Health Systems, which also reported earnings Tuesday, struggled with 12.4% fewer admissions and a net loss of $110 million.
Community Health Systems reported third quarter net operating revenues of $3.5 billion, a 5.9% decrease compared with $3.7 billion from the same period last year but slightly higher than analyst expectations.
In its earnings release after market close Monday, the Franklin, Tennessee-based hospital operator also disclosed a massive shareholder loss in the quarter of $325 million, or $2.88 per diluted share. CHS had a net loss of $110 million, or $0.98 per diluted share, in Q3 2017.
Lower volume was partially to blame, as the quarter saw a 12.4% decrease in total admissions and a 12.2% decrease in total adjusted admissions compared with the same period in 2017. The report also pointed the finger at the financial aftershocks of its troubled purchase of Health Management Associates (HMA), along with loss from early extinguishment of debt, restructuring and taxes.
CHS, one of the largest publicly traded hospital companies in the U.S., reported its highest operating cash flow since the second quarter of 2015, according to Jefferies. The third quarter figure of $346 million is also significantly higher than the $114 million from the same quarter last year.
Similarly, volume and revenue didn’t tank as heavily on a same-store basis as they did overall. Same-facility admissions decreased just 2.3% (adjusted admissions by 0.8%) compared with a year ago. Net operating revenues actually increased by 3.2% during the quarter compared with last year, beating analyst expectations.
But declining admissions show how hospital operators continue to struggle under the fierce headwinds 2018 has blown their way so far. CHS is clearly not immune, as the 117-hospital system faces ongoing operational challenges, bringing in financial advisers earlier this year to restructure its copious long-term debt.
The 20-state hospital operator continues to deal with the fiscal fallout from its roughly $7.6 billion acquisition of Florida hospital chain HMA in 2014. The Department of Justice accused the 70-facility HMA of violating the Stark Law and the anti-kickback statute for financial gain between 2008 and 2012, activities CHS reportedly was aware of prior to the merger.
Just last month, CHS announced a $262 million settlement agreementending the DOJ investigation into HMA’s misconduct. However, that liability was adjusted during the third quarter and, taking into account interest, now totals $266 million. The fee will reportedly be paid by the end of this year.
The settlement also slapped an additional $23 million tax bill on the 19,000-bed system under recent changes to the U.S. tax code.
But that’s not the only regulatory brouhaha CHS has dealt with this quarter.
Since August, CHS has been under civil investigation over EHR adoption and compliance. Annual financial filings show that the company received more than $865 million in EHR incentive payments between 2011 and 2017 through the Health Information Technology for Economic and Clinical Health Act, payments that investigators believe may have been overly inflated.
To deal with the burden, CHS has continued its portfolio-pruning strategy into the third quarter (although a recent Morgan Stanley report notes the system has a very high concentration of weak facilities, and those at risk of closing, relative to its peers).
During 2018 so far, CHS has sold nine hospitals and entered into definitive agreements to divest five more. The earnings report also divulged CHS is pursuing additional sale opportunities involving hospitals with a combined total of at least $2 billion in annual net operating revenues during 2017, taken in tandem with the hospitals already sold.
The ongoing transactions are currently in various stages of negotiation, the report notes, but CHS “continues to receive interest from potential acquirers.”
CHS is cast in a better light when balance sheet adjustment and non-cash expenses are discarded, as well. Adjusted EBITDA was $372 million compared with $331 million for the same period in 2017, representing a 12.4% increase and suggesting the company can still generate cash flow for its owners in a more friendly atmosphere than the one Q3 provided.
But, though Q2 results were a bright spot in an otherwise gloomy year for the massive hospital operator, its shares have lost about 30% of their value since the beginning of the year (compared to the S&P 500’s decline of roughly 0.5%).
Credit: Rebecca Pifer / Healthcare Dive; Yahoo Finance data
Jefferies believes that CHS should improve its balance sheet and drive positive same-store volume growth, along with speeding up divestitures to raise cash to pay down debt, in order to improve its stock performance.
Anthem beat analyst expectations during its third quarter with a net income increase of nearly 29% to $960 million for the quarter on revenue of $23.2 billion, a 3.7% increase.
Despite a slide in membership in the payer’s local group, Medicaid and individual business segments, Anthem reported an 18% increase in members in its Medicare unit, according to Q3 earnings reported Wednesday.
The nation’s second largest insurer raised its guidance with the expectation that adjusted net earnings for 2018 will be greater than $15.60 per share.
Anthem has come under fire from providers this year for a number of controversial policies designed to help drive down care costs. In some states, the payer has begun denying certain emergency room claims if the visit is later decided to have not been a medical emergency. A recent report found that were that policy to be adopted universally by commercial insurers, one in six ER visits would be denied coverage.
But so far the backlash hasn’t hurt revenue for the Blues payer. Similarly, Aetna and UnitedHealth Group and Centene have all reported revenue increases for Q3. Cigna releases its earnings report Thursday.
Anthem’s significant profit growth in the third quarter was driven by an increase in its government accounts, mainly large gains in Medicare enrollment, and an improved benefit expense ratio.
Overall, the payer’s membership declined nearly 2% to a total of 39.5 million members during Q3. The decline was largely due to Anthem scaling back its footprint in the individual exchange business, a 59% drop off in enrollment. Declines were offset by the nearly 18% growth in its Medicare business, now covering 1.76 million lives.
The Indianapolis-based insurer also saw slight declines in its Medicaid and local group segments.
The company’s local group segment remains its largest in terms of enrollment with 15.7 million members. National accounts represent the second largest enrollment group with 13.4 million members.
“Third quarter membership met expectations and we expect growth to accelerate in the fourth quarter,” CEO Gail Boudreaux told investors Wednesday morning.
The insurer improved its benefit expense ratio to 84.8% from 87% during the prior year. Benefit expense ratio is a key metric that measures spending on members’ claims compared to the revenue the payer generates from premiums.
“Our third quarter medical cost performance was strong and reflects the impact of our value-based, integrated care arrangements,” Boudreaux said.
During the third quarter, Anthem repurchased 1.5 million shares for $397 million. The company paid a quarterly dividend of $0.75 per share during the third quarter. It also expects to pay another $0.75 per share quarterly dividend during the fourth quarter.
Anthem’s aggressive moves to push procedures like imaging to outpatient settings and taking a hard line on emergency room visits has drawn fire from doctors and other critics.
Researchers in JAMA earlier this month wrote that if a similar Anthem policy were widely adopted by other commercial payers then as many as 1 in 6 patients could be denied coverage for seeking care in the ER.
“This cost-reduction policy could place many patients who reasonably seek ED care at risk of coverage denial,” the JAMA authors wrote.
Here’s a timeline of the moves of the second biggest U.S. health insurer, the reaction and impact.
2017
May – Anthem began warning some members that it would no longer pay for ER visits that were later deemed a non-emergency by the insurer, calling it needed due to a spike in what they consider unnecessary emergency visits. The policy seeks to change patient behavior and steer them to less-expensive venues, but some worried it would have a chilling effect on members who forgo needed care because of the fear they’d later be on the hook for the entire bill. Anthem had initially rolled out the ER policy in Kentucky in 2015 and has since expanded in to four other states: Missouri, Georgia, Ohio and Indiana.
July – Anthem said it would no longer pay for certain outpatient imaging at hospital-owned facilities due to significant cost variation between them. That move was a win for the less-expensive freestanding facilities that are likely to see increased volume. There are some exceptions to the rule, such as if a person is experiencing an emergency and needs a particular scan. The policy was initially implemented in just a handful of states.
2018
Feb. 13 – Atlanta-based Piedmont Hospital and five sister facilities sued Blue Cross Blue Shield of Georgia and its parent company, Anthem, after the payer stopped paying for imaging in hospitals and emergency department visits that weren’t deemed an emergency. Two months after filing a lawsuit against the insurer, Piedmont and Anthem could not agree to contract terms, putting thousands of patients out-of-network. The governor of Georgia threatened to intervene if the two could not come to terms. A deal was reached in April and the lawsuit was voluntarily dropped. Northeast Georgia Health System is also suing in a similar case.
Feb. 16 – Facing backlash, Anthem added some exceptions to its policy of denying emergency department claims it later deems medically unnecessary. Anthem said it would pay for ER visits when a patient is referred by a provider and when a patient is out of state, in addition to other exceptions.
Feb. 23 – After pushback from the American Medical Association, Anthem canceled plans to cut provider reimbursement by up to 25% for evaluation and management services when a different service is performed that same day. AMA said the move could increase costs, delay care and force patients to return for unnecessary visits.
March 8 – UnitedHealth Group is looking to cut down on expensive ER claims under a new policy that took effect March 1, Modern Healthcare reported. The move follows Anthem’s controversial policy to curb ER costs and utilization among its members in certain states.
June 5 – Blue Cross and Blue Shield of Texasdelayed the ER policy for 60 days after intense criticism from physicians and the state’s insurance department. After working out “sticking points” with the department, the policy went into effect in August, the Houston Chronicle reported.
June 12 – Saint Joseph Health System in Mishawaka, Indiana, has not been able to negotiate new terms with Anthem because it objects to the payer’s policy of rejecting emergency department claims it reviews and finds were not medically necessary. The two were later able to reach an agreement, according to the South Bend Tribute.
July 17 – The American College of Emergency Physicians and the Medical Association of Georgia filed suit against Anthem’s Blue Cross Blue Shield of Georgia in connection to the controversial ER policy. The suit alleges the policy violates the prudent layperson standard, prudent layperson standard, which requires payers cover ER care based on the patient’s symptoms and not the ultimate diagnosis.
Looking forward:
A report from Sen. Claire McCaskill, D-Mo., cast doubt on the effectiveness of the program from the patient’s perspective.
Anthem denied coverage to 12,200 ER claims in three states between July 2017 and December 2017. Anthem almost always reversed its initial decision to deny payment after patients challenged those denials, according to the report.
However, Anthem expected the policy to result in annual cost savings of almost $3 million per year in Missouri alone, McCaskill’s report found.
It’s still unclear whether Anthem’s controversial policies will be adopted more widely by other insurers looking to find leverage to push back against provider pricing.
Meanwhile, providers are pursuing M&A in an attempt to gain the upper hand. Consolidation in Illinois and Texas alone have created behemoth regional players.
