CVS's stock drops as the healthcare-benefits business continues to hurt profits

 For the second straight quarter, revenue missed expectations and the full-year profit outlook was cut

Shares of CVS Health Corp. dropped in early trading Wednesday, after the drugstore chain once again missed quarterly revenue expectations and lowered its full-year profit outlook, citing continued challenges in its healthcare-benefits business.

The company also saw weakness in its pharmacy and consumer-wellness segment during the second quarter, as both total revenue and same-store sales in its retail-pharmacy business missed expectations.

Chief Executive Karen Lynch said CVS was "taking action" to address its challenges, including making leadership changes in its healthcare-benefits business.

The stock (CVS) dropped 1.1% in premarket trading, following another disappointing earnings report. On May 1, the stock had plunged 16.8% after first-quarter results were reported.

Net income fell to $1.77 billion, or $1.41 a share, from $1.90 billion, or $1.48 a share, in the same period a year ago.

Excluding nonrecurring items, adjusted earnings per share fell to $1.83 from $2.21 but topped the FactSet consensus of $1.73.

CVS said the decline in earnings was due primarily to weak operating results in the healthcare-benefits segment, "which reflected continued utilization pressure and the unfavorable impact of the company's Medicare Advantage star ratings for the 2024 payment year within the Medicare product line."

Total revenue grew 2.6% to $91.23 billion but was below the FactSet consensus of $91.41 billion. That marked the second straight quarterly revenue miss, after beating for at least 19 straight quarters, based on available FactSet data.

Among CVS's business segments, healthcare benefits revenue rose 21.4% to $32.48 billion, above the FactSet consensus of $32.33 billion.

But adjusted operating income dropped 39.1% to $983 million and the medical-benefit ratio, in which a lower percentage means higher profitability, increased to 89.6% from 86.2%.

Medical membership as of June 30 was up 200,000, or less than 1%, from the end of March to 27.0 million members, with increases in both the Medicare and Medicaid product lines.

"Based on the current performance and outlook for the healthcare benefits segment, the company has decided to make leadership changes effective immediately," CVS said.

Brian Kane, executive vice president and president of Aetna, is leaving after less than a year at the company, and CEO Lynch will assume direct leadership of the segment.

Lynch and Chief Financial Officer Tom Cowhey will oversee the day-to-day management of the business. CVS Chief Strategy Officer Katerina Guerraz will be chief operating officer of the business.

For the health-services business, revenue fell 8.8% to $42.17 billion, hurt by the previously announced loss of a large client and continued pharmacy-client price improvements, but that beat expectations of $41.33 billion.

Pharmacy and consumer-wellness revenue rose 3.7% to $29.84 billion but missed the FactSet consensus of $30.28 billion.

Prescriptions filled increased 3.6%, but adjusted operating income dropped 12% due to continued pharmacy-reimbursement pressure and less front-store volume, including lower contributions from COVID-19 over-the-counter test kits.

Total same-store sales, typically sales of stores open at least a year, rose 6.4% but missed the FactSet consensus of 7.9% growth.

Pharmacy same-store sales were up 9.1%, but missed expectations of a 10% rise, and front store same-store sales fell 4% compared with expectations of a 0.7% decline.

For 2024, the company cut its guidance for adjusted EPS to $6.40 to $6.65 from at least $7. In CVS's first-quarter report, the guidance had been cut to at least $7 from at least $8.30.

The stock has tumbled 26.1% year to date through Tuesday, while the S&P 500 has gained 9.9%.

https://www.morningstar.com/news/marketwatch/20240807186/cvss-stock-drops-as-the-healthcare-benefits-business-continues-to-hurt-profits

Agios to Receive $1.1 Billion in Milestone Payments Following FDA Approval of Vorasidenib

 Agios Expects to Receive $905 Million Payment from Royalty Pharma and $200 Million Payment from Servier in Q3 2024; Payments Increase Agios’ Pro-Forma Cash Position as of June 30, 2024, to $1.7 Billion –

– Strong Cash Position to Enable Agios to Prepare for Potential PYRUKYND® (Mitapivat) Launches in Thalassemia in 2025 and Sickle Cell Disease in 2026 and Drive Pipeline Progress –

https://www.biospace.com/agios-to-receive-1-1-billion-in-milestone-payments-following-fda-approval-of-vorasidenib

Harris’ First Amendment threats as Cali AG reveal her ruthless politics

 Kamala Harris has made the Supreme Court a prime target of her presidential campaign. For her, the court’s Dobbs abortion ruling is a menacing threat — “a national movement afoot to attack hard won and hard fought freedoms.”

Yet her record as California attorney general suggests she’d be the one willing to roll back important freedoms — including the First Amendment-based expectation that we can express our opinions without being intimidated into silence if our views are unpopular.

She made that clear a decade ago when she targeted Americans for Prosperity, the free market-oriented nonprofit supported by libertarians Charles and David Koch. 

Vice President Kamala Harris speaking at a campaign rally in Philadelphia on Aug. 6, 2024.Photo by BRENDAN SMIALOWSKI/AFP via Getty Images

Her interpretation of the law was so extreme that, incredibly, the Kochs were joined in their legal defense by two liberal bastions: the American Civil Liberties Union and the NAACP. 

Harris, in other words, was too far left for the left.

Her actions as state AG should spark concern about how a President Harris — especially her administration’s Internal Revenue Service — would protect those holding views that clash with her own.

Here’s the background of the case, which Harris’ AG successor ultimately lost before the US Supreme Court.

In 2012, AG Harris moved to reinterpret a California statute requiring nonprofit charities to report the names of donors contributing more than $5,000. 

There was no obvious law enforcement reason to do so; such “Schedule B” reports, including all those names, were already required by the IRS, and Harris’ predecessors had deemed that sufficient. If criminal offenses were suspected, Harris as attorney general could have subpoenaed the necessary records. 

But California progressives at the time were obsessed with the influence of “dark money” — at least when it came to conservatives pushing back against the state’s high taxes and expansive government.

They wanted names.

Americans for Prosperity was concerned that revealing donor names to a hostile state agency might result in their becoming public.

They had good reason to worry: Between 2012 and 2021, as Harris and her successors doggedly continued their efforts during subsequent-court action, the state “inadvertently” posted more than 1,700 Schedule B forms on a public website.

Conservatives had already seen the personal risks that came with public disclosure of donor names in California. The state’s requirement for public reporting of contributions to political campaigns or referendum drives had made that clear.

In 2008, a public shaming campaign spotlighted the identities of those who had financially supported Proposition 8, a ballot referendum that, when it passed, briefly banned gay marriage in California. 

Disclosure of his $1,000 donation was used to force the 2014 resignation of Mozilla CEO Brendan Eich, unceremoniously ousted from the company he helped to launch in the key role as chief technical officer. Even small business owners who had supported the referendum for religious reasons faced blowback. The owner of a Sacramento dairy told NPR that he “soon started getting very nasty e-mails and letters and phone calls by the hundreds” after being outed as a Prop 8 donor. 

Leaks of the names of charitable donors would expand those risks. The fear of one’s name and address becoming public would, as the ACLU would put it, “infringe on associational privacy” and threaten First Amendment rights.

In opposing the Koch-ACLU-NAACP lawsuit in federal court, Harris had to brush off a chilling federal judicial precedent, one involving the threat of racial violence.

In 1958, the Supreme Court acted to protect the NAACP from disclosing its membership lists in the landmark NAACP v. Alabama.

In a unanimous decision, the justices ruled that publishing the organization’s membership list would “likely interfere with the free association of its members” — not to mention, in Jim Crow Alabama, expose its members to the threat of lynching.

Six decades later, in 2021, Chief Justice John Roberts cited that precedent to rule against Harris’ argument. Her “promise of confidentiality was illusory,” Roberts wrote in his 6-3 majority opinion.

Here’s a chilling thought: a Harris administration as lax as her California office was in protecting the names of millions of donors to right-of-center causes.

Such records are currently held by the IRS — which of course has already failed to protect the personal tax records of wealthy Americans like Citadel’s Ken Griffin, who have found themselves demonized by the left-wing ProPublica in stories based on illegally leaked tax returns.

Kamala Harris’ campaign for the presidency brings new attention to her record as a law enforcement official in California, where she exercised executive power. 

Her key role in seeking to disclose the names of conservative donors reveals her hypocrisy about the right to privacy, at least in matters other than abortion — and her ruthless willingness to wield government authority against her opponents.

Howard Husock is an American Enterprise Institute senior fellow and the author of “The Poor Side of Town — And Why We Need It.”

https://nypost.com/2024/08/06/opinion/harris-first-amendment-threats-as-cali-ag-drew-liberal-ire/

Walz's economic track record

 Minnesota Gov. Tim Walz's economic track record is under the microscope after Vice President Harris' decision Tuesday to select Walz as her running mate on the Democratic Party's 2024 ticket.

Walz, 60, is in his second term as Minnesota's governor after he represented the state's 1st Congressional District for 12 years. Prior to entering politics, Walz worked in construction, manufacturing and as a mortgage processor and became a teacher while also serving in the Army National Guard until 2005.

With nearly two decades in high-level elected office, Walz has a lengthy record on economic issues that is largely in line with mainstream Democrats, including those of Minnesota's unique Democrat-Farmer-Labor Party, which the governor belongs to.

Here's a look at Walz's track record on several key areas of economic policy now that he has been named Vice President Harris' running mate:

Minnesota Gov. Tim Walz is in his second term as governor after serving in the U.S. House 12 years. (Nicole Neri/Bloomberg via Getty Images / Getty Images)

Taxes and spending

While in Congress, Walz supported the Obama administration's stimulus package known as the American Recovery and Reinvestment Act.

He also voted against the Troubled Assets Relief Program (TARP) under which the federal government bailed out financial institutions by purchasing toxic assets, as well as a program that provided federal loans to bail out automakers. 

As governor, Walz's latest budget proposal for 2024-25 would total $65.2 billion, the largest state budget in the state's history, including $8 billion in tax cuts, according to the Minnesota Reformer. The plan would spend most of the state's $17.6 billion surplus through spending and rebate checks to Minnesotans.

The proposal has faced criticism from Republicans in the state. Minnesota House Minority Leader Lisa Demuth noted the spending increase comes when the state has a "record surplus" of $17.6 billion and is calling for permanent tax cuts.

The nonpartisan Tax Foundation's State Business Tax Climate Index for 2024, which was published in October 2023, ranked Minnesota as having the 44th best tax climate for businesses in the country.

An analysis published by the left-leaning Institute on Taxation and Economic Policy in January found that Minnesota's tax code was the most progressive of all 50 states, with only the District of Columbia having a more progressive tax code.

Walz said last year that "Bidenomics" may not resonate with voters given the impact of inflation. (Jim Vondruska/Getty Images / Getty Images)

Walz's latest budget proposal for the 2024-25 budget cycle calls for an increased capital gains tax and reducing the state's tax on Social Security benefits for lower income beneficiaries, while keeping it in place for higher income households. 

The Minnesota Post reported that when he campaigned for re-election in 2022, Walz was supportive of a bipartisan deal reached by the state legislature to eliminate the tax on Social Security benefits entirely amid concerns the taxes could encourage beneficiaries to leave the state. 

However, the deal fell apart amid a dispute over how to spend the state's cash surplus, and Walz has since said he believes the tax on Social Security benefits should remain in effect for those with higher retirement income because the "impact of that Social Security tax is almost unnoticeable to the folks making that much."

Inflation and "Bidenomics"

Last year, Walz said at the Heartland Forward summit that inflation made it so that President Biden's campaign may struggle to "sell just straight 'Bidenomics' that's working" because voters "may not buy that." 

Instead, Walz said the president should focus on contrasting his agenda with that of former President Trump's campaign.

Green energy

In 2023, Walz signed a bill requiring that electric utilities in the state have carbon-free energy generation or procurement sources for 80% of retail sales for public utilities by 2030. 

From there, the requirement would increase to 100% by 2040, with a requirement that 55% of all total retail electric sales be generated or procured from eligible energy sources by 2035.

A report by the Minnesota-based Center for the American Experiment criticized the proposal, saying it would cost $313 billion through 2050 and create capacity shortfalls in the electric grid that would result in blackouts because of output fluctuations from wind and solar energy sites.

Minnesota Gov. Tim Walz signed a green energy mandate into law last year. (Glen Stubbe/Star Tribune via Getty Images / Getty Images)

Labor and consumers

Last year, Walz signed into law legislation that banned nearly all post-termination noncompete agreements for employees and independent contractors. The move made Minnesota the fourth state to enact a law restricting noncompete agreements and preceded a federal regulatory push by the Biden-Harris administration to ban noncompete agreements.

Walz signed a junk fees bill in May that requires the full price of a given product to be disclosed at the beginning of the transaction and in any subsequent advertising. It also prohibits charges that aren't aligned with an additional product or service.

He also signed a bill in June requiring the supply chain of more than 360 drugs to be subject to reporting.

Gov. Tim Walz joined New York Gov. Kathy Hochul and Maryland Gov. Wes Moore at the White House prior to President Biden's decision to withdraw from the race. (Anna Moneymaker/Getty Images / Getty Images)

COVID response

The COVID-19 pandemic began during Walz's first term as governor, and he adopted relatively heavy-handed restrictions, including lockdowns and mask mandates that were favored by many Democratic leaders around the country. Walz eventually lifted an indoor masking mandate in 2021.

Walz also established a hotline to report residents who violated COVID-19 mandates, as FOX 9 Minneapolis reported at the time. Republican state Senate Majority Leader Paul Gazelka asked Walz to "please take [the] Hotline down" in a post after it was established, saying it was "unnecessary."

"We can all show a bit of kindness to our neighbors as we manage our times and needs differently in our stay at home efforts," Gazelka added.

Minnesota Republicans criticized Walz's administration for lax oversight of pandemic programs that cost millions of taxpayer dollars. Federal prosecutors charged 70 people for their role in a $250 million scheme to defraud federal food programs that funded meals for children during the pandemic. 

Known as the Feeding Our Future scandal, it was one of the country's largest pandemic aid fraud schemes. Minnesota's Office of the Legislative Auditor, a nonpartisan watchdog, said in a June report that Walz's Department of Education "failed to act on warning signs" and was ineffective in using its authority to respond to the fraud scheme.

Walz faced criticism over his handling of the pandemic and the 2020 riots. (Stephen Maturen/Getty Images / Getty Images)

George Floyd Riots

Walz faced criticism for his handling of the violent riots that erupted in Minneapolis after the 2020 killing of George Floyd.

Floyd was killed in police custody May 25, 2020, and violent protests began in Minneapolis and the neighboring city of St. Paul the following day. After two days of unrest that saw the torching of a police station and damage to numerous small businesses, Walz activated the Minnesota National Guard to quell the unrest on May 28.

In financial terms, the Minneapolis-St. Paul riots of 2020 were the second-most destructive in U.S. history at an estimated cost of approximately $500 million, trailing only the 1992 Los Angeles riots. About 60% of the financial losses related to the riots were uninsured, the Star Tribune reported, citing the Lake Street Council.

https://www.foxbusiness.com/politics/kamala-harris-vp-pick-what-know-about-tim-walzs-economic-track-record

FDA Approves Servier First Targeted Therapy for Gliomas

 The US Food and Drug Administration (FDA) has approved vorasidenib (Voranigo, Servier) for the treatment of certain isocitrate dehydrogenase (IDH)–mutant diffuse gliomas, marking the first approval of a targeted therapy for these types of brain tumors.

Specifically, the oral targeted inhibitor of IDH1 and IDH2 was approved for use after surgery in adults and children aged 12 years or older who have grade 2 astrocytoma or oligodendroglioma with a susceptible IDH1 or IDH2 mutation. According to the FDA, surgery includes biopsy, subtotal resection, or gross total resection. 

Mutations in IDH1 are present in around 80% of grade 2 gliomas, whereas IDH2 mutations are more infrequent, occurring in about 4%. 

Prior to the approval, which was based on progression-free survival (PFS) and safety findings from the pivotal phase 3 INDIGO trial, patients with this type of glioma had limited treatment options, said a Servier spokesperson.

The approval of vorasidenib marks "one of the biggest advances in low-grade glioma in more than two decades" and "will empower patients to take active control of their disease with a once-daily pill," according to the spokesperson.

In the INDIGO trial, 331 patients were randomly assigned to receive 40 mg of vorasidenib once daily (n = 168) or placebo (n = 163). At a median follow-up of 14.2 months, the median PFS was more than twice as long among those who received vorasidenib vs placebo: 27.7 months vs 11.1 months, respectively (hazard ratio [HR] for disease progression or death, 0.39). The time to next intervention was also significantly longer with vorasidenib vs placebo (median not reached vs 17.8 months, respectively; HR, 0.26).

The 61% reduction in the risk for tumor progression or death observed in the trial represents "a significant sign of efficacy that has the potential to change the landscape in this disease," first author, Ingo K. Mellinghoff, MD, of Memorial Sloan Kettering Cancer Center, New York City, told Medscape Medical News last year, when presenting the findings at the 2023 American Society of Clinical Oncology conference. These findings were simultaneously published in The New England Journal of Medicine.

Glenn Lesser, MD, a discussant at the 2023 meeting, commented on the "striking" findings. The results are "statistically highly significant, and more importantly, they're clinically very, very significant," said Lesser, from Wake Forest Baptist Health in Winston-Salem, North Carolina.

Vorasidenib can also potentially delay the use of toxic chemotherapies and radiation for many years in patients with these tumors, Lesser added.

Adverse events of grade 3 or higher occurred in 22.8% of those who received vorasidenib and in 13.5% of those in the placebo group. Increased alanine aminotransferase levels of grade 3 or higher occurred in 9.6 vs 0% of patients in the groups, respectively.

The most common adverse reactions with vorasidenib, affecting at least 15% of treated patients, include fatigue, headache, COVID-19, musculoskeletal pain, diarrhea, nausea, and seizure. The most common grade 3 or 4 laboratory abnormalities were increased alanine aminotransferase, aspartate aminotransferase, gamma-glutamyl transpeptidase as well as decreased neutrophils. 

The recommended dose of vorasidenib for adults is 40 mg given orally once daily until disease progression or unacceptable toxicity. In children aged 12 or older, the recommended dose is 40 mg given orally once daily for those weighing ≥ 40 kg, and 20 mg given orally once daily for those weighing < 40 kg.

https://www.medscape.com/viewarticle/fda-approves-first-targeted-therapy-gliomas-idh-mutations-2024a1000ego