New CMS skilled-nursing pay model likely dampened October hiring

Skilled-nursing facilities shed an estimated 1,300 jobs in October, likely the effect of a new CMS payment model that’s prompted some providers to lay off workers.

Hiring in the sector had already been weak in recent months—preliminary numbers showed skilled nursing added just 1,100 jobs in September. But the U.S. Bureau of Labor Statistics’ latest preliminary employment figures, released Friday, shows that the CMS’ new patient-driven payment model is likely having a negative effect on hiring in the skilled nursing sector.

The overall unemployment rate grew from 3.5% to 3.6% in October, and total nonfarm payroll employment grew by 128,000 jobs, compared with an estimated 136,000 gain in September.

The new payment model, which took effect Oct. 1, is designed to eliminate the incentive to deliver potentially unnecessary services by basing payment on data-driven characteristics. Before, payment was based on the volume of therapy services provided.

But the side effect of that has been skilled nursing providers laying off and cutting the pay of thousands of therapists nationwide. Associations representing therapists are warning the CMS that Medicare beneficiaries may be harmed as a result of the staffing changes.

October was a weak month overall for healthcare hiring. The industry added just 14,600 jobs last month, 61% fewer than in September, when the industry added 37,600 jobs. September’s total was revised down from its preliminary estimate.

The ambulatory sector made 7,800 new hires last month, down significantly from a preliminary estimate of 28,700 in September.

Within ambulatory, dentists’ offices shed 3,600 jobs in October, after adding 900 in September. Physicians’ offices shed 700 jobs last month, after a strong 5,200 jobs added in the prior month. Home health added 4,200 jobs in October, down 26% from September. Outpatient care centers added 3,400 jobs, and medical and diagnostic laboratories added 3,000.

Hospitals made just 2,100 new hires in October, down significantly from the government’s estimate of 8,100 in September.

Community care facilities for the elderly had a strong showing last month, having added 4,600 jobs. That’s up significantly from September, when the government estimated they shed 300 jobs.

Outside of healthcare, food services and drinking places also had a solid October, having added 48,000 jobs. Professional and businesses services employment grew by 22,000 jobs last month. Social assistance added 20,000 jobs, while financial activities added 16,000. Manufacturing employment declined by 36,000 jobs last month.

https://www.modernhealthcare.com/healthcare-economics/new-cms-skilled-nursing-pay-model-likely-dampened-october-hiring

Facebook held Fitbit acquisition talks

The Information sources say Facebook (FB +0.4%) held talks about acquiring Fitbit (NYSE:FIT), but was only willing to offer about what Google (GOOG +0.6%)(GOOGL +0.7%) was willing to pay.

The interest alone shows Facebook’s growing push into hardware.

Earlier today, Fitbit announced Google will acquire the company for $7.35 per share for a fully diluted equity value of $2.1B.

FIT shares are up 15.6% to $7.14. Peer Garmin (NASDAQ:GRMN) is up 2% to $95.64.

https://seekingalpha.com/news/3513203-facebook-held-fitbit-acquisition-talks-report

Upcoming events – key tests approach for Kadmon and Surface

Kadmon awaits key graft-versus-host disease data, and Surface Oncology’s change of tack comes under the spotlight.

Welcome to your weekly roundup of approaching clinical readouts. The end of this year will be hugely important for Kadmon, which is to make a decision on whether to file its lead asset, the Rock2 inhibitor KD025, in chronic graft-versus-host disease (GVHD).

The call will hinge on the first readout from its 126-patient phase II Rockstar trial, evaluating KD025 in chronic patients who have had at least two prior forms of treatment. Kadmon is expected only to disclose whether the trial met the hurdle for filing, with more detailed data due next year.

Patients in the uncontrolled two-cohort study are receiving a 200mg dose of KD025 once or twice daily, and the primary endpoint is six-month overall response rate (ORR); clinical significance would be reached with an ORR of ≥30% in either study arm.

However, to compete with Johnson & Johnson/Abbvie’s Imbruvica, which has shown an ORR of 67% in chronic GVHD, KD025 would need to get closer to the 58% ORR it showed in phase II.

GVHD, which can occur in patients who have undergone transplants, comes in two forms: acute, when the attack begins soon after transplant, and chronic, starting 100 days after transplant. The standard of care for both types is steroids.

Incyte’s Jak inhibitor Jakafi recently got the go-ahead in steroid-refractory acute disease. Imbruvica is indicated for chronic GVHD, also after steroids, while Jakafi is in a phase III trial, Reach 3, in steroid-refractory chronic GVHD, with data due next year.

KD025 has a chance to make an impact if its clean safety profile in phase II can be replicated in Rockstar: Imbruvica and Jakafi are both linked with infections, which has not been seen with the Kadmon project, Cantor Fitzgerald analysts noted. They added that KD025’s lower ORR versus Imbruvica could be down to the latter having been studied in a more severe patient population.

Still, the GVHD market could soon get more crowded, with Incyte also testing its next-generation Jak, itacitinib, in acute and chronic disease (Upcoming events – Roche braves liver cancer and Incyte looks for a new Jak, October 11, 2019).

SELECTED GRAFT-VERSUS-HOST DISEASE TREATMENTS*
Project	Company	Mechanism of action	2024e sales ($m)	Status
KD025	Kadmon	Rock2 inhibitor	473	Phase II
Jakafi	Incyte	Jak1 & 2 inhibitor	216	Marketed
Temcell HS	Mesoblast	Mesenchymal stem cell therapy	209	Marketed
ATIR101	Kiadis Pharma	T-lymphocyte cell therapy	189	Filed
Alzumab	Equillium	CD6 antibody	59	Phase II
Itacitinib	Incyte	Jak1 inhibitor	35	Phase III
ALPN-101	Alpine Immune Sciences	CD28 antagonist	44	Phase I
Thymoglobulin	Sanofi	T-cell inhibitor	29	Marketed
Temcell HS	JCR Pharmaceuticals	Mesenchymal stem cell therapy	27	Marketed
*Sales by indication. Source EvaluatePharma.

Surface tension

Surface Oncology floated in 2018 largely on a wave of enthusiasm about CD47 antagonism, but subsequent events have taken the shine off this approach, and its stock now stands 90% off its $15 IPO price. Fortunately, the company has a Novartis-partnered clinical asset, SRF373/NZV930, to which it has been able to switch attention.

SRF373 is an antibody against CD73, and its phase I study is expected to yield results by the end of 2019. While the trial’s main aim is to demonstrate tolerability, the 344 patients enrolled have several types of advanced cancers, and investors will fix on overall remission rates as an early sign of efficacy.

Making sense of the data and parsing the contribution of SRF373 could be easier than in other combo studies. As well as testing SRF373 in combination with Novartis’s anti-PD-1 MAb spartalizumab and/or its A2a antagonist NIR178, the Surface project is given to a separate cohort as monotherapy.

The thinking behind SRF373 is that in cancer cells CD73 acts as an enzyme to stimulate production of adenosine, which in turn has an immunosuppressive action. SRF373 hits membrane-bound and soluble CD73.

Though only a handful of competing projects are in the clinic, Surface investors have some baseline expectations. Astrazeneca’s oleclumab has been tested alone or in combination with Imfinzi, and the combo yielded partial responses in 5% of colorectal and 10% of pancreatic cancer subjects. And Bristol-Myers Squibb’s BMS-986179 plus Opdivo gave a 12% ORR across various tumour types.

Over $500m in potential milestones is due from Novartis, so the phase I readout is Surface’s most important near-term catalyst. CD47 meanwhile, has quietly been shelved on the grounds of toxicities and an “evolving competitive landscape”.

SELECTED ANTI-CD73 MABS
Project	Company	Status	Results?
Oleclumab	Astrazeneca	Several ph2 monotherapy & Imfinzi combo studies	Data at Asco 2018
CPI-006	Corvus	Monotherapy & Keytruda combo; ph1 started Apr 2018	Data at SITC 2019
BMS-986179	Bristol-Myers Squibb	Monotherapy & Opdivo combo; ph1 started Jun 2018	Data at AACR 2018
SRF373	Surface Oncology/Novartis	Monotherapy & spartalizumab/NIR178 combos, & triplet; ph1 started Jun 2018	First data H2 2019
TJD5	I-Mab/Tracon	Monotherapy & Tecentriq combo; ph1 started Aug 2019	Data possible 2020
IPH5301	Innate Pharma	Preclinical	Preclinical data AACR 2019
Source: EvaluatePharma & company statements.

https://www.evaluate.com/vantage/articles/events/upcoming-events/upcoming-events-key-tests-approach-kadmon-and-surface

Breaking down Beigene’s latest deal with the west

A multifaceted tie-up effectively gives Beigene a net $1.5bn fund-raising and several Amgen drugs to sell locally.

It’s easy to hail yesterday’s deal between Amgen and Beigene as another example of the great strides companies are taking to internationalise via complex licensing arrangements. But the truth might be rather more prosaic.

Though the tie-up involves certain distinct elements it can best be summarised as a simple way for Amgen to access the Chinese market by buying into Beigene, a player that already has a strong local presence. And, though the headline $2.7bn number sounds impressive, Amgen is not handing over any cash for Beigene’s assets.

In return for Amgen’s $2.7bn Beigene has had to issue new shares, meaning that the money is not an unencumbered up-front fee. That said, the premium of 26% to Beigene’s close yesterday will rightly be taken as a strong endorsement of the Chinese group, which had recently come under pressure from a short seller called J Capital.

For Beigene this is not a clean fund-raising exercise, since the company has committed to provide up to $1.25bn to the development of 20 Amgen oncology projects. Amgen states that thanks to Beigene it will make a bigger impact on China than it could have done on its own.

Innovent read-across

But no Beigene projects will change hands, so the deal is arguably less groundbreaking than the 2015 tie-up between Innovent and Lilly, which could be seen as an asset swap that marked a way for the two companies to access each other’s expertise in their own territories.

Of course, Beigene already has a US listing on Nasdaq, and under a separate deal with Celgene it sells the Celgene drugs Abraxane, Vidaza and Revlimid.

To these three it will soon be able to add Amgen’s Xgeva, Kyprolis and Blincyto. These, plus the 20 projects from Amgen’s oncology pipeline, will be sold by Beigene in China under a profit share; Beigene will also get an unexpected bonus, in the form of a single-digit royalty on Amgen’s sale of the 20 R&D assets – except the high-profile Kras inhibitor AMG 510 – in the west.

Beyond AMG 510 the 20 pipeline assets have not been disclosed, but a look at Amgen’s most recent pipeline reveals the likeliest candidates (below). Many of these are antibodies and bispecifics, some targeting the same antigen, but using subtly different approaches.

It seems that the Amgen deal could turn Beigene further away from its small-molecule comfort zone, and give it an economic interest in the global cancer market. However, its most important immediate aspect will be to resuscitate Beigene’s valuation.

AMGEN’S CLINICAL-STAGE ONCOLOGY PIPELINE (ALL PHASE I)
Project	Mechanism	Note
Small molecules
AMG 510	Kras G12C inhibitor
AMG 397	MCL-1 inhibitor	Oral
AMG 176	MCL-1 inhibitor	IV
Antibodies
AMG 596	Anti-EGFRvIII MAb
AMG 427	Anti-Flt3 MAb
AMG 404	Anti-PD-1 MAb	Intended for combo use
AMG 160	Anti-PSMA MAb
Bispecific antibodies
AMG 757	Anti-DLL3 bispecific
AMG 420	Anti-BCMA bispecific	Partnered with Boehringer Ingelheim
AMG 701	Anti-BCMA bispecific	Extended half life
AMG 673	Anti-CD33 bispecific
AMG 330	Anti-CD33 bispecific	Partnered with Ligand
AMG 562	Anti-CD19 bispecific
AMG 424	Anti-CD38 bispecific	Partnered with Xencor
AMG 212	Anti-PSMA bispecific
Others
AMG 506/MP0310	4-1BB agonist DARPin	Partnered with Molecular Partners
AMG 119	Anti-DLL3 Car-T
Note: apart from AMG 510 it has not been disclosed which 20 projects will be included in the Beigene deal. Source: Amgen presentation & EvaluatePharma.

https://www.evaluate.com/vantage/articles/news/deals/breaking-down-beigenes-latest-deal-west

Rexahn up 52% on encouraging RX-5902 data

Thinly traded nano cap Rexahn Pharmaceuticals (REXN +52.4%) is up on an 24x surge in volume, albeit on turnover of only 899K shares, in apparent response to encouraging preclinical data on pipeline candidate RX-5902. The results were just published in the journal Molecular Cancer Therapeutics.

A panel of 18 triple-negative breast cancer (TNBC) cell lines exposed to RX-5902 showed potent antiproliferative effects. In a subset of cell lines, it induced apoptosis (cell death), G2-M cell cycle arrest and aneuploidy (abnormal number of chromosomes).

In an animal model (nude mice), RX-5902 showed dose-proportional pharmacokinetics with a decrease in β-catenin.

Phase 2-stage RX-5902 (supinoxin) is an orally available small molecule inhibitor of a protein overexpressed in cancer cells called phosphorylated-p68 (P-68) which modulates an intracellular signaling pathway called β-catenin/Wnt that plays a key role in cancer cell growth and proliferation. P-68 up-regulates cancer-related genes so inhibiting its action decreases cancer cell growth and proliferation.

On another note, in late September, the company announced its intent to explore strategic alternatives.

At the end of June, it had $16.3M in quick assets while operations consumed $6.2M in H1.

https://seekingalpha.com/news/3513157-rexahn-52-percent-encouraging-rxminus-5902-data

Progenics stiff-arms activist investor opposed to Lantheus merger

Progenics Pharmaceuticals (PGNX +4.9%) is sending a letter to shareholders urging them to revoke any consents they may have submitted to activist investor Velan Capital LP and to defer sending Velan any consents until they have the opportunity to read the preliminary S-4 detailing the rationale for its acquisition by Lantheus Holdings (LNTH -1.2%) announced a month ago.

Velan opposes the deal calling it “value-destructive” considering its “massive discount.”

It notified shareholders that the deadline for its consent solicitation is Friday, November 8, but the company says the real deadline is actually November 17 which will allow stockholders enough time to read the S-4 since it plans to file the document before then (but apparently after November 8).

https://seekingalpha.com/news/3513173-progenics-stiff-arms-activist-investor-opposed-lantheus-merger-shares-5-percent

Why HMS Holdings Shares Are Crashing

Shares of HMS Holdings (NASDAQ:HMSY) were crashing 19.2% lower as of 11:31 a.m. EDT on Friday. The big decline came after the healthcare management services company reported its third-quarter results before the market opened this morning.

HMS announced Q3 revenue of $146.8 million, down 4.8% year over year and well below the consensus Wall Street revenue estimate of $165.8 million. The company posted Q3 adjusted earnings per share (EPS) of $0.30, down slightly from its adjusted EPS of $0.31 in the prior-year period but better than the average analysts’ estimate of $0.28.

What probably bothered investors the most, though, was that HMS lowered its full-year 2019 outlook. The company now expects total revenue will be between $630 million and $640 million. Its previous guidance projected full-year revenue between $650 million and $660 million.

HMS upped its guidance range for net income to between $89 and $94 million, up from a range of $85 million to $90 million. However, it lowered its outlook for adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to between $182 million and $187 million from its earlier projection of between $185 million and $190 million.

HMS Holdings CEO Bill Lucia acknowledged that the company had “posted mixed results in the third quarter.” He said that “our business can experience quarterly ebbs and flows, as evidenced by our favorable revenue and earnings in the first two quarters this year.”

But investors sometimes focus much more on the negatives than the positives with quarterly results. That appears to be what’s happening with HMS.

It’s certainly concerning that the company’s coordination-of-benefits business, which is its biggest revenue generator, is shrinking rather than expanding. However, HMS remains on track to deliver overall revenue and earnings growth this year.

Investors will probably want to take a wait-and-see stance with HMS after its Q3 performance. Bill Lucia is exactly right that there is some seasonal volatility with the business, which impacts lots of healthcare stocks. HMS’ results in the next couple of quarters should either provide reassurance that the company is on the right track overall — or present genuine reasons for concern.

https://www.fool.com/investing/2019/11/01/why-hms-holdings-shares-are-crashing-today.aspx