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Friday, November 1, 2019

AbbVie Narrows Adjusted Profit Guidance

AbbVie Inc. (ABBV) on Friday raised the lower end of its full-year adjusted profit guidance as it reported better-than-expected adjusted profit and sales.
The biopharmaceutical company narrowed its adjusted per-share earnings guidance to between $8.90 and $8.92 from between $8.82 to $8.92. The guidance excludes $3.82 a share of intangible asset amortization expense and non-cash charges, the company said.
AbbVie lowered its per-share earnings guidance to between $5.08 and $5.10 from between $5.69 and $5.79. The metric includes a non-cash charge related to the launch of the psoriasis treatment Skyrizi.

Novo Nordisk Net Profit Beats

Novo Nordisk AS reported results for the third quarter on Friday. Here’s what we watched:
SALES FORECAST: Sales rose 9.1% to 30.28 billion Danish kroner ($4.52 billion) against analysts’ expectations of DKK30.39 billion, on strong growth for its diabetes and obesity treatments.
NET PROFIT FORECAST: Net profit for the three months ended September 30 rose to DKK10.19 billion from DKK9.04 billion a year earlier, beating the DKK9.86 billion forecast by analysts in a FactSet poll.
WHAT WE WATCHED:
GLUCAGON-LIKE PEPTIDE-1: Sales of Novo Nordisk’s Ozempic glucagon-like peptide-1 drug, or GLP-1, totaled DKK6.87 billion in the first 9 months of the year, “and Ozempic thereby reached blockbuster status.” the company said. The drug is designed to respond when blood sugar rises and helps the body release its own insulin. Ozempic has now been launched in 24 countries. In the U.S., the new-to-brand prescription market share for Ozempic is now 37%, bringing Novo Nordisk’s combined GLP-1 new-to-brand prescription market share to 54%.
MARGINS: The gross margin was 83.2% in the third quarter of 2019 compared with 84.1% in the same period last year. The decline of 0.9 percentage point of the gross margin reflects a negative impact from lower realized prices in the U.S. and impairment of intangible assets, partly countered by a positive product mix and a positive currency impact of 0.4 percentage point. The operating margin was virutally unchanged at 42.7% from 42.6% in the quarter. Sybank had expected an EBIT margin of 43.8%.
GUIDANCE: For 2019, sales growth measured in local currencies is now seen at 5% to 6%, from an earlier estimate of 4% to 6%, but reported growth is still forecast to be around three percentage points higher. Operating profit growth is still expected to be 4% to 6% in local currencies, with reported figures still expected to be around five percentage points higher. However, the company said it now sees free cash flow this year at DKK31 billion to DKK35 billion, from DKK30 billion-DKK34 billion previously. Depreciation, amortization and impairment losses are seen DKK1 billion above its previous guidance at DKK5.5 billion, reflecting increased impairment of intangible assets.

Home healthcare firms rally on final CMS rules for 2020

Home healthcare providers LHC Group (LHCG +13.2%), Amedisys (AMED +14.5%) and Encompass Health (EHC +7.1%) are solidly in the green after the U.S. Centers for Medicare & Medicaid Services (CMS) issued final payment and policy changes for calendar year (CY) 2020. Key points:
An alternate case-mix adjustment methodology called the Patient-Driven Groupings Model will be implemented featuring a 30-day unit of payment.
Home infusion drugs will be grouped into three payment categories, each paid in accordance with specified infusion codes. CMS is soliciting comments before full implementation in CY 2021.
Split-percentage payment amounts (currently 60% submitted in the first bill and 40% in the second bill based on a 60-day episode of care; 50/50 thereafter) will be reduced to 20% in 2020 and eliminated in 2021. Also in 2021, there will be no requirement for an upfront payment in response to a Request for Anticipated Payment (RAP), although they will still need to be submitted every 30 days. CMS believes these changes will reduce the administrative burden and mitigate fraud.
CMS is currently modifying current regulations to allow therapist assistants to perform maintenance therapy under the Medicare home health benefit aimed at consistency with skilled nursing facilities.

Google takes on wearables giants with $2.1 billion Fitbit deal

Alphabet Inc Google will buy fitness tracker pioneer Fitbit Inc for $2.1 billion (£1.6 billion), as the search giant looks to take on Apple and Samsung in the fast-growing market for wearable devices.

(Reuters) – Alphabet Inc Google will buy fitness tracker pioneer Fitbit Inc for $2.1 billion (£1.6 billion), as the search giant looks to take on Apple and Samsung in the fast-growing market for wearable devices.
Google said on Friday that it sees an opportunity to introduce “Made by Google” wearable devices into the market and invest more in wearable technology. It had announced a deal to buy Fossil Group Inc’s intellectual property related to smartwatch technology earlier this year. (https://bit.ly/2C1zsIj)
Fitbit’s share of the fitness tracking market has been threatened by deeper-pocket companies such as Apple Inc and Samsung Electronics Co Ltd as well as cheaper offerings from China’s Huawei Technologies Co Ltd and Xiaomi Corp.
“We believe Google is a natural fit. The deep health and fitness data, coupled with the 28 million active users on the Fitbit platform, offer a tremendous value,” Craig Hallum analysts wrote in a note.
Xiaomi dominates the global wearables market, with a 17.3% market share in the second quarter of 2019, followed by Apple. Fitbit owns 10% of the market, data from International Data Corp showed.
Fitbit’s fitness trackers monitor users’ daily steps, calories burned and distance travelled. They also measure floors climbed, sleep duration and quality, and heart rate.
The company in August also launched its latest smartwatch, Versa 2, adding Amazon.com Inc voice assistant Alexa, online payments and music storage to the device’s capabilities.
Fitbit has been offered $7.35 per share in cash, the company said, a premium of about 19% to the stock’s closing price on Thursday. The company’s shares were trading at $7.15.
The company’s shares have gained more than 40% since Reuters reported on Monday that Google had made an offer for the maker of the popular colourful fitness trackers.
Fitbit also said health and wellness data of its users would not be used for Google ads. Google said it would give Fitbit users the choice to review, move or delete their data.
Google, which has been defended its privacy practices after a number of regulatory probes, said it would be transparent about the data it collects for its wearables.
Qatalyst Partners LLP was financial adviser to Fitbit on the deal, which is expected to close in 2020. Fenwick & West LLP was the legal adviser.

Regulators expected to make Google sweat for Fitbit deal approval

U.S. antitrust regulators have little reason to oppose plans by Google’s parent Alphabet to buy Fitbit, but that does not mean, backed a bevy of anti-Google lawmakers, U.S. officials won’t give the proposed purchase extra scrutiny.

Google is already under antitrust investigation by the Justice Department, the House of Representatives Judiciary Committee and dozens of state attorneys general for allegedly using its massive market power to crush smaller competitors.
Fitbit has raised privacy concerns in the past: In 2011, the sexual activity of people using the health and fitness tracker was found to be publicly accessible online.
When Alphabet on Friday offered to acquire the U.S. wearable device maker for $2.1 billion, privacy advocates and lawmakers had cause for concern. [L3N27H342]
While antitrust experts said they did not expect the proposed merger to be stopped by U.S. antitrust enforcers on the basis of existing law around anti-competitive practices, the deal will be closely scrutinized, given bipartisan misgivings about big tech companies.
Fitbit pledged that Google would be transparent about how it used personal data. “We will never sell personal information to anyone. Fitbit health and wellness data will not be used for Google ads,” it said.
“There are so many ways to finesse that statement,” said privacy expert Joseph Turow, who teaches at the University of Pennsylvania. “We have to figure out what that really means.”
Google already has a vast stores of data it uses to market to people, everything from what they read online to what they watch on YouTube, to where they go using Google Maps. The deal would give the advertising giant a treasure trove of information about everything from how well Fitbit’s 27.6 million users sleep at night, to when and how they exercise.
Information from Fitbit fits with the technology industry’s move into what Turow calls “bioprofiling,” which identifies people by their voice, facial features or other biological element.
“I’m sure they would say that these are sensitive data and section it off,” Turow said.
Google for years has said it does not personalize advertising based on health conditions and limits tracking of sensitive health information.
Lawmakers may also have concerns. Representative Pramila Jayapal, a Democrat from Washington, urged tough scrutiny.
“Google and many of the other largest tech companies are building broad, intersecting empires of information about consumers through hundreds of acquisitions that are too often not scrutinized, much less challenged,” she said in a statement.
Google has sought to make money in healthcare in other ways, including applying artificial intelligence software to healthcare data. As the company seeks customers for its AI tools, it has demonstrated how such technology can predict diseases, the need for hospital stays and other issues.
Privacy proponents expressed opposition to the transaction.
“Health is the ultimate gold mine here,” said Jeff Chester, director of the Center for Digital Democracy. “It’s extremely troubling. It’s a big, big move into our deepest and most personal and private parts of ourselves.”
Alphabet has other plays in the industry, including its Verily biotech company and its venture capital fund GV, which has made more than a third of its investments in life sciences.
Both Google and Fitbit have had privacy lapses.
Aside from tracking sexual activity, Fitbit devices came under scrutiny last year when military users who had connected to the fitness map app Strava inadvertently revealed locations of bases in conflict zones.
Google this week was accused by Australia of misleading smartphone users about how it collected and used personal location data.

Amedisys ‘Will Buy Opportunistically’ in Home Health Market

Like so many others in the industry, the Patient-Driven Groupings Model (PDGM) remains top of mind for Baton Rouge, Louisiana-based home health giant Amedisys Inc. (Nasdaq: AMED).
Unsurprisingly, navigating the payment overhaul remains one of the company’s biggest priorities moving forward into 2020. Building out its hospice business and expanding its personal care network with ClearCare Inc. are also key areas of focus, according to Amedisys President and CEO Paul Kusserow.
“Internally, we have been practicing and drilling for PDGM since November 2018, when [the Centers for Medicare & Medicaid Services] (CMS) finalized the 2019 rule with the new payment model,” Kusserow said during a Wednesday third-quarter earnings call. “Since then, we’ve had a cross-functional team of over 40 of our best [staff membres] working daily to prepare our business for these pending changes.”
While PDGM starts Jan. 1, several Amedisys locations will begin operating under the overhaul’s framework even sooner.
“As of November, 60 care centers will be in PDGM test mode, performing most of the functions required,” Kusserow said.
So far, Amedisys is seeing success in its PDGM test run, with results “exceeding expectations,” according to the CEO.
“We’ve dug into and dissected the behavioral assumptions, trained up our centralized coding function, implemented pay-practice changes that will allow us to better optimize our LPN and PTA utilization,” Kusserow said. “We have begun to roll out Medalogix Care so that we will have better analytics around individualized patient-specific care plans, as well as optimizing utilization management.”
Amedisys invested in Nashville, Tennessee-based predictive analytics firm Medalogix last year. The move signaled the company’s plan to eventually release Medalogix products across the business.
While Amedisys is ramping up for PDGM, the company remains active on the legislative front. The company has pushed for bipartisan legislation aimed at refining the overhaul in both the U.S. House of Representative and Senate.
“We continue to make great progress signing up co-sponsors to our House and Senate bills,” Kusserow said. “This legislation would prohibit CMS from making rate adjustments based on behavioral assumptions and allow only for adjustments based on observed evidence of a change in provider behavior.”
As of Amedisys’s Wednesday earnings call, 31 bipartisan lawmakers are co-sponsors for the Senate bill and 130 bipartisan lawmakers are co-sponsors for the House bill.
Apart from PDGM, home care will also play a role in Amedisys’s future.
In July, Amedisys locked in an agreement with ClearCare designed to build a national personal care services network through a partnership model. Broadly, the agreement works by helping interested home care agencies team up with Amedisys through ClearCare’s technology.
In September, the company told Home Health Care News that the personal care network exceeded 700 agencies. With its existing business segment, Amedisys delivered 824,251 personal care hours in Q3 2019, a nearly 2% increase over the 810,427 hours it delivered in Q3 2018.
“Long-term and part of our 2020 focus will be building a nationwide partnership of personal care agencies and the technology infrastructure needed to offer Medicare Advantage plans and others a true continuum of care by combining home health, hospice and personal care services,” Kusserow said.
San Francisco-based ClearCare provides caregiver scheduling, billing and other software solutions to more than 4,000 home care agencies in total, including several of the industry’s largest.

Financial results and hospice plans

Overall, Amedisys’ third-quarter 2019 net service revenue checked in at $494.6 million, an 18.5% increase compared to the $417.3 million the company brought in during Q3 2018.
Home health revenue totaled $311.5 million in the third quarter, a 5.6% increase over the $294.9 million from the same period last year.
As for M&A opportunities, Amedisys is taking a wait and see approach in response to PDGM, though the company will keep an eye out for attractive hospice assets.
Most recently, Amedisys acquired Tulsa, Oklahoma-based RoseRock Healthcare in April and New Jersey-based Compassionate Care Hospice in February.
“We are continuing to build and buy in hospice. We continue to work a full hospice tuck-in pipeline while streamlining our internal acquisition integration and absorption process as we wait for industry disruption in home health early next year,” Kusserow said. “We will buy opportunistically in home health once we see what PDGM looks like and build networks to expand our personal care coverage as well as innovate to allow more people to stay in their homes.”
The hospice M&A landscape has been scalding hot since early 2018.
At least 14 hospice deals transpired during the second quarter of 2019, according to data from M&A advisory firm Mertz Taggart.

CareDx slides 11.9% post Q3 results

CareDx (CDNA -11.9%) reports Q3 revenue growth of 59.6% Y/Y to $33.8M.
Testing services revenue was $28.3M (+6.5% Y/Y); Product revenue was $4.2M (flat Y/Y) & Digital and other revenue was $1.4M (+1114% Y/Y).
Operating margin increased 769 bps to 66% and Adj. EBITDA margin increased 141 bps to 2.3%.
Cash and equivalents were $40.9M as of Sept. 30, 2019.
Provided 8,524 AlloSure Kidney patient results for 6,597 transplant patients.
Also, provided 4,726 AlloMap Heart patient results, increasing 16% Y/Y.
2019 Outlook: Revenue of $124-125M.
Previously: CareDx EPS beats by $0.01, beats on revenue (Oct. 31 2019)