Magellan net income dropped by 96% in Q1

The Scottsdale, Arizona-based for-profit managed care company experienced a horrid Q1 across nearly all financial metrics.

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KEY TAKEAWAYS

After net income dropped by $86 million in 2018, Magellan Health continued its slide into 2019.

Earnings per share dropped by 95.6% while adjusted earnings per share fell by 50.6%.

CEO Barry Smith said he’s still “pleased with the actions” Magellan completed in Q1.

Magellan Health put another brutal quarter in the books with net income totalling $4 million, down 96% year-over-year, according to its Q4 earnings report released Thursday morning.

The for-profit managed care company reported earnings per share (EPS) that dropped by 95.6% and adjusted EPS that fell by 50.6%.

While revenues were a lone bright spot for the Scottsdale, Arizona-based company in Q4 2018, the same could not be said in Q1.

Net revenues fell 3.6% year-over-year to $1.7 billion, segment profit fell by 18% to $45.6 million, and adjusted net income slid 54% to $9.6 million.

In the Q4 2018 earnings report, CFO Jonathan Rubin stated that some of the losses faced by Magellan Health were attributable to “out-of-period and non-recurring items,” adding that he does not expect these circumstances to have a material impact in 2019.

In Thursday’s earnings report, he reiterated his confidence in the company’s “long-term growth strategy,” adding that the fundamentals of the business “remain strong.”

C-SUITE PERSPECTIVE:

“Overall, our Healthcare results were solid, and our Pharmacy results for the quarter were impacted by some unfavorable out-of-period and timing items related to network costs,” Barry M. Smith, CEO of Magellan Health, said in a statement. “I’m pleased with the actions we completed during the first quarter in 2019 which represent significant progress towards achieving our margin improvement plan. We’re seeing the benefits of the strong leadership we’ve put in place over the last six months, particularly in our MCC segment. We have a clear path to achieve our full year earnings guidance, and I’m confident in the team and our ability to execute.”

Magellan Health’s cash flows from operations totalled $35.4 million down from $81 million in Q1 2018, due to what the company said were “unusually” high cash flows in 2018 as a result of the “favorable timing of working capital.”

Meanwhile, the company’s unrestricted cash and investments reached $194.9 million at the end of Q1, with $88.4 million related to excess capital and undistributed earnings.

The company stated that it would reaffirm its 2019 guidance but “modestly” lowered its net revenue guidance to a range between $7 billion to $7.2 billion, down from a range of $7.2 billion and $7.5 billion.

ADDITIONAL MAGELLAN Q1 EARNINGS REPORT HIGHLIGHTS:

• Restricted cash and investments decreased by $58.8 million to $468.8 million by the end of Q1.
• Magellan’s pharmacy management segment profit declined $7.2 million during the year, totalling $8.3 million.
• Healthcare segment profit was $45 million in Q1, down $900,000 year-over-year.

https://www.healthleadersmedia.com/finance/magellan-healths-net-income-drops-96-q1

CMS stops Medicaid from paying home health union dues

The CMS finalized a rule on Thursday to no longer allow unions for home healthcare workers to get dues paid via state Medicaid payments.

The rule, which overturns a 2014 rule, no longer allows a state to divert payments from Medicaid to anyone but the provider with few exceptions. The agency charges that the 2014 rule that allowed unions to get dues from payments stretches the meaning of the federal statute and must be struck down.

“This final rule is intended to ensure that providers receive their complete payment, and that any circumstance where a state redirects part of a provider’s payment is clearly allowed under the law,” CMS Administrator Seema Verma said in a statement.

The final rule, which was originally proposed in July 2018, maintains that it does not prohibit home healthcare workers from joining a union.

“The effect of this final rule is the elimination of one method of getting payment from A to B,” the final rule said. “It in no way prevents healthcare workers from purchasing health insurance, enrolling in trainings, or paying dues to a union or other association.”

The rule is the latest in a larger fight over union rights with the Trump administration. Some critics charge that the rule is a backdoor attempt to curb the power of unions because it creates an extra step for workers to pay union dues.

“Why can I and most workers have payroll deductions that can contribute to health insurance, my retirement savings, my union dues, but these workers can’t?” asked Caitlin Connolly, director of social insurance for the pro-union advocacy group National Employer Law Program. “We know that most union members and workers like teachers, firefighters and police officers are also making these contributions through payroll deductions.”

Advocates of right-to-work laws, which state that an employee in a unionized workplace doesn’t have to pay dues, say that the CMS rule protects taxpayer dollars.

“While the rule will still need to be robustly enforced, today’s announcement is an encouraging action toward stopping union bosses from unlawfully using public payment systems to intercept tax dollars intended for providers caring for those in need,” said Mark Mix, president of the National Right to Work Legal Defense Foundation, a nonprofit that pursues litigation in favor of right-to-work.

https://www.modernhealthcare.com/government/cms-stops-medicaid-paying-home-health-union-dues

Pharmacy benefits profitability concerns send Cigna shares lower

Investor concerns that Cigna Corp’s pharmacy benefits business would not generate the profits expected from its $52 billion acquisition of Express Scripts sent the health insurer’s shares down more than 5 percent on Thursday.

On a conference call to discuss the company’s first-quarter results, Cigna Chief Executive David Cordani said performance at its health services unit, which includes the pharmacy benefits management (PBM) business, was in line with expectations.

But analysts wanted to know how PBM profits would hold up under the increased transparency that the Trump administration and U.S. legislators have been pushing for, including calls to pass along rebates from drugmakers to consumers.

Investors are likely worried that margins in the pharmacy benefits business could be affected by a more competitive environment, and that Cigna may have to cut prices in order to grow, Bernstein analyst Lance Wilkes said of Thursday’s stock decline.

“When you look at just the number of questions (Cigna was asked) on PBMs and PBM margins, that was probably an indication that it was catching the market by surprise,” Wilkes said.

“They beat earnings but this probably tarnished the beat a little bit,” he added.

PBM profits typically come from drug discounts and administrative fees, and are partly tied to drug prices. Any decline in discounts on prescription medicines would likely eat into profits.

Cigna said it continued to expect earnings of $20 to $21 per share in 2021, and that it was making “very good progress” integrating Express Scripts into its business.

The acquisition put Cigna in direct competition with CVS Health Corp, which acquired health insurer Aetna to go with its PBM and retail pharmacy businesses, as well as UnitedHealth Group Inc and its PBM unit, Optum.

Cigna said it expects to retain 96 percent to 98 percent of pharmacy services customers in 2020. CVS on Wednesday said it expected a retention rate in the mid-90’s.

Excluding items, Cigna earned $3.90 per share in the quarter, beating the average analyst estimate by 17 cents, according to IBES data from Refinitiv.

Cigna raised both ends of its 2019 adjusted revenue forecast range by $1 billion and now expects between $132.5 billion and $134.5 billion.

The health insurer also raised its full-year forecast for adjusted income from operations to between $16.25 and $16.65 per share from $16 to $16.50.

Sales at the company’s integrated medical unit that sells commercial and government health plans rose nearly 13 percent to $9.2 billion in the quarter.

Net income rose 49.5 percent to $1.37 billion, while adjusted revenue of $33.43 billion and topped Wall Street estimates of $33.11 billion.

https://www.reuters.com/article/us-cigna-results/pharmacy-benefits-profitability-concerns-send-cigna-shares-lower-idUSKCN1S80SB

Acadia hopes for new indications for Nuplazid

Knockout interim data from Acadia’s trials of its antipsychotic in schizophrenia and dementia could make for early approval. But the chances of this are not high.

Acadia’s antipsychotic Nuplazid seems to have just about weathered the storm of safety concerns that sprang up around a year ago, with first-quarter 2019 sales of $63m, a jump of 29% year-on-year. Now Acadia’s attention is turning to expanding the indications for which Nuplazid may be used.

Nuplazid, a 5-HT2A inverse agonist currently approved for Parkinson’s disease psychosis, is in two crucial phase III trials both due to read out in the coming months. First up is the Enhance study in patients with an inadequate response to schizophrenia drugs, top-line data from which are expected mid-year.

The 380 patients in this study will take a background antipsychotic plus either Nuplazid – 10, 20 or 34mg per day, taken as two pills – or placebo. The primary endpoint is the change from baseline score on the positive and negative syndrome scale at six weeks. The company has said that approved schizophrenia drugs have shown an effect size of 0.25-0.5, so this could be a benchmark for approval, provided safety is clean.

The drug’s performance in phase II was mixed. In 423 patients with schizophrenia who had responded to earlier treatment, Nuplazid significantly enhanced the efficacy of Risperdal but actually lowered the efficacy of Haldol. At least safety was fairly benign, with no significant changes in treatment-emergent adverse events when Nuplazid was added to the other drugs.

If Nuplazid defies its phase II track record and scores a hit in Enhance, it probably stands a good chance of approval owing to the significant unmet need among patients who respond inadequately to other antipsychotics. Nothing is approved for this particular niche – it is separate to treatment-resistant schizophrenia, for which clozapine is approved.

But the risk that a confirmatory trial will be required even in the event that Enhance is a success is a sizeable one.

Hallucinations and delusions

Another schizophrenia study of Nuplazid, the phase II Advance in negative symptoms, ought to yield top-line data at the end of 2019. Before that, interim data from the phase III Harmony study in dementia-related psychosis will emerge.

Harmony is testing Nuplazid’s ability to prevent relapse in 356 patients with hallucinations and delusions associated with dementia-related psychosis. All patients were given 34mg of the drug for 12 weeks after which the non-responders were kicked off the trial. The responders were then randomly assigned to placebo or Nuplazid dosed at 20 or 34mg per day; the primary outcome is the time from randomisation to relapse in this latter, 26-week double-blind period.

According to Stifel analysts there is a slim chance that if positive, the interim data could be considered pivotal by the FDA. If the interim readout is not a total knockout Harmony will continue until its scheduled conclusion in 2020.

A look at Acadia’s pipeline, and the corresponding consensus forecasts compiled by EvaluatePharma, shows how enormously reliant on Nuplazid the company is. Schizophrenia is forecast to bring in $249m in 2024, though this primarily comes from the inadequate response indication, so a result in negative symptoms would be a boost.

Nuplazid’s use in dementia-related psychosis could add $267m to the group’s 2024 revenues. Acadia’s only other asset is the insulin-like growth factor 1 regulator trofinetide, which the sellside sees making just $57m in 2024 in the neurological condition Rett syndrome – peanuts compared with a forecast total of $1.7bn for Nuplazid.

ACADIA’S PIPELINE
			Annual WW indication sales ($m)
Product	Indication	Indication status	2018	2020e	2022e	2024e	Indication launch
Nuplazid	Parkinson’s disease	Marketed	224	453	783	950	May 2016
Nuplazid	Schizophrenia	Phase III	–	15	101	249	Dec 2020
Nuplazid	Alzheimer’s disease	Phase III	–	11	100	267	Dec 2020
Nuplazid	Psychosis, acute	Phase III	–	–	–	–	–
Nuplazid	Other neurological indications	Phase III	–	–	–	–	–
Nuplazid	Depression	Phase II	–	–	41	170	Dec 2021
Trofinetide Oral	Rett syndrome	Phase II	–	–	8	57	Dec 2022
Trofinetide Oral	Fragile X syndrome	Phase II	–	–	–	–	–
Source: EvaluatePharma.

https://www.evaluate.com/vantage/articles/events/upcoming-events/upcoming-events-acadia-hopes-new-indications-nuplazid

Amgen granted orphan status for lung cancer treatment

The FDA granted Amgen orphan status for its treatment of KRAS p.G12C-positive non-small cell lung cancer

https://thefly.com/landingPageNews.php?id=2903221

Endo wins appeals court ruling upholding Opana ER patent

Bloomberg says

https://thefly.com/landingPageNews.php?id=2903256

STAAR Surgical hit on FDA rejection of EVO marketing application

STAAR Surgical Company (STAA -20.9%) is down on modestly higher volume in early trade in reaction to its disclosure that the FDA has rejected its supplemental marketing application seeing approval for its EVO/EVO+ Visian Implantable Collamer Lens for myopia and EVO/EVO+ Visian Toric Implantable Collamer Lens for myopia with astigmatism.

The agency stated that the application was not complete enough to allow for review. Apparently, there were not enough data and analyses to prove safety and efficacy.

The company says it will continue its discussions with the regulator, including any new clinical data needed for a refiling.

https://seekingalpha.com/news/3458720-staar-surgical-21-percent-fda-rejection-evo-marketing-application