Applied Therapeutics sets terms for $60 million IPO

Applied Therapeutics, a Phase 2 biotech developing therapies for diabetic cardiomyopathy, announced terms for its IPO on Monday.

The New York, NY-based company plans to raise $60 million by offering 4 million shares at a price range of $14 to $16. At the midpoint of the proposed range, Applied Therapeutics would command a fully diluted market value of $292 million.

Applied Therapeutics was founded in 2016 and plans to list on the Nasdaq under the symbol APLT. Citi, Cowen and UBS Investment Bank are the joint bookrunners on the deal. It is expected to price during the week of May 6, 2019.

Relevant Profile: APLT

https://www.renaissancecapital.com/IPO-Center/News/62915/Diabetic-cardiomyopathy-biotech-Applied-Therapeutics-sets-terms-for-$60-mil

After Hours Movers

UP AFTER EARNINGS:  Nu Skin (NUS) up 10.6%… Tandem Diabetes (TNDM) up 7.6%… Evolus (EOLS) up 5.4%… Acadia Healthcare (ACHC) up 3.1%… Teladoc (TDOC) up 2.5%… Vertex Pharma (VRTX) up 1.7%. ALSO HIGHER: ArQule (ARQL) up 5.5% after announcing China approval of derazantinib’s clinical trial application. DOWN AFTER EARNINGS: Healthcare Services (HCSG) down 20.2%… Exact Sciences (EXAS) down 1.9%… Amgen (AMGN) down 0.5%.

https://thefly.com/landingPageNews.php?id=2900497

Cancer Drug Recyclers Chosen for FDA Pilot

Two organizations devoted to recycling expensive oral cancer drugs are part of a consortium of healthcare entities recently chosen by the US Food and Drug Administration for a drug supply-chain pilot project.

Good Shepherd Pharmacy and RemediChain, two start-ups located in Memphis, Tennessee, take unused chemotherapy capsules and pills donated by individuals and cancer clinics and give them to patients who cannot afford them.

Cancer drug recycling is gaining traction in the oncology community, as evidenced by a recent essay by five prominent physicians who called the concept “medically sound” and environmentally sensible.

The basic idea is that donating unused cancer drugs is better than flushing them down the toilet or tossing them in the trash.

“I’m so excited about the FDA pilot project because it adds credibility to our innovative work, which is reclaiming high-value, life-saving prescription medicines,” said Phil Baker, PharmD, cofounder of both Good Shepherd Pharmacy and RemediChain, in an interview with Medscape Medical News.

Good Shepherd and RemediChain are small, recently established organizations with less than 10 employees. However, despite their modest beginnings, both use cutting-edge “blockchain-enabled” data technology, which works well for heavily regulated industries such as pharmaceuticals to track “medicine transfers” in the drug supply chain.

At Good Shepherd Pharmacy, medicine transfers take place when, for example, the family of a deceased metastatic breast cancer patient donates unused palbociclib (Ibrance, Pfizer) to the organization.

RemediChain, which is the logistical backbone of Baker’s recycling concept, then matches those donated medicines with the most appropriate patients in multiple US states.

The process is full of challenges, Baker said, including the fact that leftover drugs are stigmatized.

“Some needy patients may be reluctant to take donated medicines because they don’t know ‘where they’ve been,’ so to speak,” Baker said.

This is where innovative drug supply-chain management comes into play.

RemediChain, which handles donations from a variety of sources, including individuals and cancer clinics, “taps back into” the supply chain data and re-creates any missing information, such as manufacturing and expiration dates, explained Baker.

This re-creation of the “chain of custody” via blockchain technology assures a medication’s origin and quality, he commented.

Why Cancer Drugs Are Suited for Recycling

The supply of — and demand for — leftover cancer drugs is great, said Baker.

“All the new chemos are coming out as pills, but they cost $30,000 and up for 1-month. With more than 40% of cancer patients passing away, it is a double whammy: most patients can’t afford them, yet nearly half of the drugs are getting thrown away,” he told Medscape Medical News last year.

For its supply chain pilot project, the FDA chose a consortium led by the blockchain company Rymedi. The group included Baker’s two tiny Memphis start-ups, along with two huge health systems, Indiana University Health and WakeMed Hospitals and Health. Three other groups round out the consortium: Temptime/Zebra Technologies, Global Health Policy Institute, and the Center for Supply Chain Studies.

Good Shepherd Pharmacy has previous ties to Indiana University Health, said Baker, due to an oncology pharmacist at one of their cancer clinics reading a Medscape Medical News article last year about cancer drug recycling. The pharmacist then started donating unused cancer drugs to Baker’s program.

The new pilot project is the result of the federal Drug Supply Chain Security Act. The FDA wants to evaluate new tools to see if they “enhance the safety and security of the drug supply chain.”

The pharmaceutical industry was an early user of blockchain, said Baker. Drug companies use it to track products from their creation at a manufacturing facility to the pharmacy where medicines are dispensed.

Baker explained that the tracking data stops at that point.

“Once a medicine leaves the pharmacy that has purchased it, that medicine is off the grid,” he said.

There is no tracking process after a drug, for example, goes from a pharmacy to another facility (such as chemotherapy infusion clinic or a nursing home) or to a hospital in a multi-facility health system, he added. There is also no tracking once a drug is provided to an individual patient.

The FDA is interested in seeing if tracking the supply chain further is helpful and, as a result, created the pilot project.

The agency explains: “The program is intended to assist drug supply chain stakeholders in developing the electronic, interoperable system that will identify and trace certain prescription drugs as they are distributed within the United States.”

https://www.medscape.com/viewarticle/912383#vp_1

CVS Health’s Plunge Leaves Street Clamoring for Long-Term Clarity

CVS Health Corp. has a chance to spur a recovery when it reports first quarter earnings Wednesday.

Shares were hammered after a grim 2019 forecast in February, then — amid a changing U.S. drug landscape — pharmacy peer Walgreens Boots Alliance Inc. gave a dire outlook that compounded its woes, leaving CVS with a value 20 percent below where it had been.

As the initial promise of the Aetna deal fades, investors are hungry for guidance on earnings in 2020 and beyond. CVS management “should use [the] upcoming earnings and analyst day to help alleviate the uncertainty weighing on shares” Morgan Stanley analyst Ricky Goldwasser wrote in a note to clients.

The wide range of analysts’ estimates for CVS Health’s 2020 earnings indicates a “lack of clarity,” Goldwasser said. Along with long-term forecasts and potential drug pricing regulation, CVS’s plans to pay down debt and rid itself of underperforming assets are also among top investor concerns, she wrote, reiterating her overweight rating on the stock.

While expectations are low for the quarter, Barclays analyst Steve Valiquette expects reimbursement pressures, like those faced by Walgreens, are already reflected in the 2019 forecast. With $47 billion of contracts up for renewal in the 2020 selling season and only $7 billion renewed, “look for an update on wins to offset known losses in CVS’ net selling season results,” Valiquette wrote. He rates CVS overweight.

Credit Suisse analyst A.J. Rice is also looking for 2020 clarity, noting that “with leverage historically high, we are looking for visibility on earnings growth to improve.”

Just the numbers:

• 1Q adjusted EPS estimate $1.51 (range $1.48 to $1.63) (Bloomberg data)
  • Forecast $1.49-$1.53
• 1Q net revenue estimate $60.3b (range $58.7b to $61.9b) (BD)
  • Forecast $59.61b-$60.53b
• 2Q adjusted EPS estimate $1.68 (range $1.58 to $1.89) (BD)
• 2019 adjusted EPS estimate $6.78 (range $6.71 to $6.88) (BD)
  • Forecast $6.68-$6.88
• 2020 adjusted EPS estimate $7.29 (range $6.75-$8.25)
• CVS also expects to end year with:
  • Medical membership 22.7m-23.0m
  • Medical benefits ratio of 83.5%-84.5%
  • Core commercial medical cost trend of 5.5%-6.5%

Data

• 19 buys, 10 holds, 0 sells
• Avg PT $71.20 (32% upside from current price)
• Implied 1-day share move following earnings: 5.5%
• Shares fell after 7 of prior 12 earnings announcements
• Adjusted EPS beat estimates in 12 of past 12 quarters
• Shares up 1.9% in past 5 days vs SPX Index up 0.1%
• Shares down 22.7% in past year vs SPX Index up 10.9%

Timing

• Earnings release expected May 1 before market open
• Conference call website

https://www.bloomberg.com//news/articles/2019-04-30/cvs-health-plunge-leaves-street-clamoring-for-long-term-clarity?srnd=markets-vp

Exosomes Head to Wall Street As Codiak Biosciences Lines Up IPO

Do Wall Street investors believe that exosomes, the tiny bubbles once thought to be just cellular garbage bins, may be the key to treating a slew of potential diseases? The coming IPO for Codiak Biosciences will present a test case.

Codiak, a Cambridge, MA, company run by former Biogen (NASDAQ: BIIB) research chief Doug Williams, outlined plans late Monday for an IPO. The proceeds would back Codiak’s plan to use exosomes as tools to deliver drugs into the body. Codiak has yet to test the approach in humans; its first clinical tests are expected to begin next year. Codiak will trade on the Nasdaq stock exchange under the symbol “CDAK” if it completes the IPO.

Discoveries over the past decade or so have shown that exosomes are more than just cellular garbage cans. They contain plenty of important cellular material, including DNA, RNA, proteins, lipids, and other substances. They also exit and enter cells, dump their belongings, and influence how the cells they enter behave. That theoretically gives them plenty of possible uses. Codiak noted in its IPO prospectus, for instance, that exosomes may help get to targets inside of cells that have historically been “undruggable” by other means. Additionally, they could potentially expand the reach of other, newer drugmaking methods like RNA interference or CRISPR gene editing, Codiak said in the filing.

The most advanced use for exosomes, so far, is for diagnostics. With an exosome diagnostic, companies aim to isolate exosomes from body fluids—exosomes are found in all of them—and analyze them for potential genetic signatures of disease. Cambridge-based Exosome Diagnostics, which Bio-Techne bought for $250 million last year, has been using this approach to sell tests meant to detect cancer from samples of blood or urine. Exosome Sciences, of San Diego, is trying to discover exosome-based biomarkers for neurological disorders.

Attempts to use exosomes for therapeutics are less proven. Startups like Evox Therapeutics, of Oxford, UK, and Exogenus Therapeutics, of Portugal, are both in the mix. But none of these exosome-based drugs have proven themselves in human trials.

Codiak has been the field’s most high-profile effort, raising $168.2 million in venture funding since its inception in 2015 from Flagship Pioneering, Arch Venture Partners, Fidelity Management and Research, and others. Codiak initially aimed to develop both drugs and diagnostics before focusing exclusively on therapeutics. The company intends to treat a range of diseases—cancer, immune-based diseases, neurodegenerative disorders, and more.

Its first attempts are two cancer therapies known as exoSTING and exoIL-12. ExoSTING, being developed for solid tumors, activates the “STING” receptor in immune cells, which is thought to potentially help treat cancer. Codiak is developing the treatment for solid tumors that either resist or likely won’t respond to immunotherapy. ExoIL-12, meanwhile, is meant to stimulate two types of immune cells—T cells and NK cells—to attack cancer. Codiak believes both programs may overcome limitations seen with other approaches. In preclinical tests, neither provoked the “potentially toxic” immune response seen with other methods, Codiak said. Human studies of both therapies are slated to begin in 2020.

The company has a deal in place with Jazz Pharmaceuticals (NASDAQ: JAZZ) to develop up to five exosome-based drugs. In January, Codiak got $56 million up front from Jazz.

Arch holds 28.38 percent of Codiak, followed by Flagship (18.97 percent) and Fidelity (14.17 percent), according to the IPO prospectus.

Codiak is the fifth biotech to file for an IPO just this past week, joining South San Francisco, CA-based Ideaya Biosciences, Dallas-based Peloton Therapeutics, UK-based Bicycle Therapeutics, and Karuna Therapeutics, of Boston.

Here’s more on Codiak and exosome technology.

https://xconomy.com/boston/2019/04/30/exosomes-head-to-wall-street-as-codiak-biosciences-lines-up-ipo/

Community Health Systems more than quadruples net loss to shareholders

Community Health Systems more than quadrupled its net loss to shareholders in the first quarter of 2019.

The Franklin, Tenn.-based hospital chain reported Tuesday its net loss attributable to shareholders was $118 million in the three months ended March 31, compared with a $25 million net loss in the prior-year period.

For-profit CHS’ adjusted earnings before interest, taxes, depreciation and amortization dropped by 11.1% in the first quarter of 2019 to $391 million, compared with $440 million in the prior-year period.

CHS reported $3.38 billion in net operating revenue in the quarter, compared with $3.69 billion in the prior-year period. While down 8.5% year-over-year, the company’s revenue came out ahead of an estimate from Zacks Investment Research, which predicted $3.31 billion in first quarter revenue. CHS’ expenses declined 8.3% in the first quarter year-over-year.

The loss attributable to CHS’ stockholders worked out to $1.04 per share, exceeding Zacks’ loss estimate of $0.44 per share.

CHS’ same-store admissions were basically flat—down 0.1%—in the first quarter year-over-year, and adjusted admissions increased 0.8%.

CHS divested seven hospitals in the first quarter of 2019, a factor that throws consolidated admissions figures out of whack. On a consolidated basis, total admissions declined 13.4% in the quarter.

CHS said it will continue to sell hospitals throughout this year. The system fell far short of its 2018 divestiture goals.

The divestitures are part of an effort to bring down CHS’ heavy debt load, which only dropped by $7 million year-over-year and ended the first quarter of 2019 at about $13.4 billion.

CHS CEO Wayne Smith said in a statement that the company saw incremental improvement in same-store net revenue and volume across key markets. Recent investments in physician recruitment and developing new access points will continue that trend, he said.

“We remain focused on all aspects of operational excellence, with a high priority on the efficient use of our resources, diligent efforts to continuously improve processes and results, and consistent execution of our growth initiatives,” Smith said.

Smith’s total compensation grew by 42% last year to $7 million, driven mostly by quadrupled cash incentive pay because the company hit revenue and earnings targets. That’s despite the fact that CHS’ stock price fell 34% over the year to $2.82 per share on Dec. 31, 2018.

https://www.modernhealthcare.com/providers/chs-more-quadruples-net-loss-shareholders

WellCare’s first-quarter earnings lifted by Meridian deal

As WellCare Health Plans prepares to combine with rival Centene Corp., the Tampa, Fla.-based insurer’s first-quarter 2019 revenue and profit were helped by another acquisition.

WellCare’s $2.5 billion tie-up with Meridian, which closed in September, boosted the insurer’s membership rolls and premium revenue in the three months ended March 31, just as it did in the fourth quarter of 2018.

But the script is about to flip. WellCare CEO Kenneth Burdick told investment analysts Tuesday that integration planning for the Centene merger announced last month is underway and slated to close in the first half of 2020, pending approval by regulators. Medicaid membership-heavy Centene would reap the benefits of WellCare’s growing Medicare membership.

“We’re excited about the long-term opportunities for driving profitable growth as a combined company,” Burdick said. “In the near-term, our focus continues on our commitments to our members, our partners and our shareholders.”

WellCare’s revenue soared 45.5% to $6.8 billion in the first quarter compared to the same period a year ago, while its net income ballooned by 48.9% to $151.4 million. The company attributed the increases in revenue and profit to the Meridian acquisition, along with organic growth across all lines of business.

WellCare’s deal with Meridian, along with Medicaid contract wins in Florida and Arizona, helped boost its total membership to 6.3 million at the quarter’s end, an increase of 47.4% year over year. Medicaid membership experienced the most growth, rising 52.3% to 4.1 million. Most of that membership growth was located in Illinois.

But WellCare’s prescription drug plan membership also increased by more than half a million members to 1.6 million, thanks to the insurer launching a new product that “has been highly attractive in today’s market,” Burdick said. WellCare’s Medicare health plan membership grew 10.3% to 558,000.

Membership growth lead to higher revenue across the business segments. WellCare receives the bulk of its revenue from Medicaid health plans, which brought in $4.5 billion in revenue, an increase of 59.2% over the first-quarter 2018. Medicare revenue grew 18.4% to $1.8 billion, and Medicare prescription drug plan revenue increased 11.1% to $288.8 million.

WellCare’s medical loss ratio—the amount of premiums spent on medical claims and quality improvement activities—either rose or stayed flat across the business lines due to the Meridian acquisition, the company said. While the Medicaid medical loss ratio rose to 89.9% in the first quarter from 86.3% a year ago, the Medicare medical loss ratio remained at 84%. The lower the ratio, the better for the insurer.

https://www.modernhealthcare.com/insurance/wellcares-first-quarter-earnings-lifted-meridian-deal