Health Care Providers & Services
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PGNY
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A rather interesting IPO: Progyny, a fertility and family building solutions provider, jumps 22% on its first day of trading. (26 Oct 2019) Progyny (PGNY $13-$16-$16) is a New York-based health benefits provider which serves large, self-insured employers in the US. Sounds pretty plain vanilla. Except that Progyny's entire business model revolves around helping couples have babies. Their slogan says it all: "Progyny envisions a world where anyone who wants to have a child can do so." The employees of companies that use Progyny have access to high-level, targeted treatment for infertility. Launched in 2008 as a fertility education platform (CEO David Schlanger is the former head of online health platform WebMD), the company began offering health benefits packages to employers in 2018. For the trailing twelve months (TTM), Progyny recorded a net income of $1.4M on revenues of $160M. Perhaps due to the shaky IPO year thus far, the underwriters priced ten million PGNY shares at $13 for the offering—under the expected range of $14-$16. By Friday's close, however, the shares were trading at $15.94, a 22.6% spike from the offering price. JP Morgan, Goldman Sachs, and Bank of America led the underwriting on the Nasdaq. According to Allied Market Research, the global fertility services market is projected to rise from its current $17 billion to $31 billion by 2024. And, with the tight job market thanks to a 50-year-low unemployment rate, more and more big companies are offering specialized benefits to lure in and retain workers. Progyny also boasts a much higher success rate than the national average. That being said, we wouldn't jump in just yet to buy the $1.3 billion small-cap. Let's see if it can sustain its growth trajectory and continue to operate in the black in rougher economic times.
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CNC
WCG |
Two health care providers for government-sponsored programs to merge. (27 Mar 2019) Health care plan sponsor Centene (CNC $50-$52-$138) announced it will acquire competitor WellCare Health Plans Inc (WCG $188-$255-$325) in a $15.3 billion deal. The companies are major players in the government-sponsored managed care world, with both providing services to Medicare and Medicaid recipients. The goal is to turn two regional players into one with a national footprint, with 22 million combined members and expected revenues nearing $100 billion in 2019. As for being a sound investment, is now really the time to take a chance on a major Obamacare (corporate) recipient? After all, a federal judge just ruled that Obama's marquee legislation violated the US Constitution by forcing individuals to buy health insurance. While the Roberts-led US Supreme Court didn't come to the same conclusion several years ago, the law is certainly still up in the air. Back to the deal—the acquirer (Centene) dropped about 10% on news of the merger, while the company to be acquired (WellCare Health Plans) spiked double digits. This merger is expected to close in early 2020, but we wouldn't touch either firm now—or the new entity next year, as there are too many moving parts that won't be settled for some time. We currently do not own any health care providers within any of the Penn platforms.
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UNH
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UnitedHealth posts a quarterly beat and raises full-year guidance. (17 Jul 2018) Last fall we reported that the nation's largest health insurer, $242 billion UnitedHealth Group (UNH $184-$257-$259), handily beat expectations for the quarter and raised its guidance. Today, UNH handily beat expectations for the quarter and raised its guidance—again. Revenue rose 12% during Q2, to $56.09 billion, and net earnings rose 28%, to $3.14 per share. The most impressive metric in the report revolves around the number of new members UnitedHealth signed up in the quarter: 2.2 million Americans. The medical care ratio for UNH (the percentage of premiums paid back out for medical services) improved from 82.2% last year to 81.9% this past quarter. On the heels of these strong numbers, the company once again raised its full-year 2018 guidance. What is the company's fair value? We would place it somewhere between $275 and $300 per share.
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ATHN
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Athenahealth gets unsolicited takeover bid from Paul Singer's Elliott Management
(08 May 2018) Nearly one year ago we reported that Paul Singer, the billionaire founder of Elliott Management, had purchased a 9.2% stake in Jonathan Bush's (the nephew of former President George H.W. Bush) healthcare IT company Athenahealth (ATHN $103-$150-$159). After Singer's position was reported, shares of ATHN shot up 25%—to $130. Shareholders can now thank Mr. Singer once more, as his unsolicited bid to buy the firm for $160 per share was the catalyst for another 23% jump in the price of the stock. That offer values the company at roughly $7 billion. Bush, the outspoken CEO of the firm, has been relatively mum on news of the deal, but we do know that he has been one of the leading proponents for the digitalization of health care in an effort to improve the level of care given to patients. |
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CI
ESRX |
Cigna to acquire Express Scripts—and its debt—for $67 billion, stock drops 10%
(08 Mar 2018) Shortly after Thursday's opening bell, Cigna (CI $144-$176-$227) was busy dropping 10% while Express Scripts (ESRX $56-$81-$85) was jumping 12%. The reason? Cigna announced its intentions to buy the $46 billion pharmacy benefit manager (PBM) for a total transaction value of $67 billion (CI will take over ESRX's debt load and pay a hefty premium for the assets). We've never exactly had a warm and fuzzy feeling about the health insurer's CEO, David Cordani. To be quite frank, he strikes us a fast-talking, well-dressed snake oil salesman. For its part, Express Scripts probably felt pressured to do something big, considering its biggest customer—Anthem (ANTM)—did not renew their contract, instead opting to start its own PBM. Just to muddy the waters further, we reported in February of 2017 that Anthem's deal to buy Cigna was halted, with a bloody battle between the two ensuing. The bottom line? This is an industry in flux, and there is too much uncertainty over Cigna's future. Add to that our perception of the CEO, and we wouldn't touch the stock, despite the general bullishness among analysts. |
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ABC
WBA CVS CAH |
AmerisourceBergen surges after rumors of a potential Walgreens buyout
(13 Feb 2018) Drug distribution firm AmerisourceBergen (ABC $72-$102-$106) was surging to the tune of 16% in pre-market trading on rumors that Walgreens (WBA) may be interested in buying the 75% or so of the company that it doesn't already own. The move would make sense, and it would also follow the pattern of Walgreens' recent acquisition spree. Several years ago the company bought Swiss pharmaceuticals retailing firm Alliance Boots (thus becoming Walgreens Boots Alliance), and last year it closed the deal to acquire around 2,000 Rite-Aid stores. WBA is locked in mortal combat with competitor CVS Health (CVS), with both holding roughly a $70 billion market cap. AmerisourceBergen rival Cardinal Health (CAH) already has a tie-up with CVS; is a full acquisition by CVS now on the horizon? |
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JPM
AMZN BRK.A |
Three massive companies join forces to search for health care solutions
(30 Jan 2018) When Americans hear the US government talk about tackling a problem, they generally cringe. After all, what words immediately come to mind when you hear the term "government solutions?" Bloated. Complicated. Expensive. Outdated. Inefficient. When it comes to government trying to "fix" health care, the solutions can be downright deadly. That is why we are thrilled to hear that three massive companies—JP Morgan, Amazon, and Berkshire Hathaway—are joining forces to find a free market solution to the health care challenges we face. It will be an experiment designed to increase efficiency, reduce costs, improve services, and apply technological solutions to an outdated system. One top executive from each of the three companies—which combined employ over one million workers—will co-lead the projected. We are honestly excited to see what real-world solutions come out of the project. Interestingly, for-profit health care companies were getting hammered on the news. |
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CVS
AET |
Aggressive CVS appears ready to buy health insurer Aetna for around $200 per share
(27 Oct 2017) Talk about taking command of your environment through vertical integration. CVS Health (CVS $69-$73-$88), which is still digesting its purchase of benefits manager Caremark, now appears ready to go after $59 billion health insurer Aetna (AET $105-$179-$185), and may be willing to pay up to $200 per share to get the firm. After the news, Aetna's share price immediately spiked over 11%, to near $179 per share. It is going to take some creative finance to fund the deal—CVS has a market cap of just $75 billion. Gutsy leadership. |
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AAPL
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Apple considered buying medical clinic as another inroad to the health care business
(17 Oct 2017) Anyone who has listened regularly to Apple (AAPL $104-$160-$165) CEO Tim Cook knows just how seriously he takes the company's push into health care technology. But buying a medical clinic? That is apparently precisely what the company was considering as it negotiated the purchase of Crossover Health, a startup which works with employers to build and run on-site clinics. Music to Apple's ears, Crossover has touted the use of technology for everything from scheduling appointments to assisting in preventative "wellness solutions." While neither side is commenting, and it appears those talks are dead, Apple has also reportedly approached One Medical, a nationwide primary care group. Two things are certain: massive numbers of Baby Boomers will keep health care front and center, and Apple will play a leadership role in bringing innovative technology to the sector. |
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UNH
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UnitedHealth surges on profit beat, raised guidance
(16 Oct 2017) The largest US health insurer, UnitedHealth (UNH $136-$205-$204) rose 6% in mid-day trading—through its 52-week high—on upbeat guidance and an easy bottom-line beat. The $186 billion insurance behemoth saw its profits jump by 26.3% year-over-year, and its top-line revenue grow by 8.7%. The shining star for the company has been its Optum business, which manages drug benefits and offers data analytics services to other firms. Another reason the company did so well? It withdrew from individual insurance markets (the Obamacare exchanges) last year. In addition to the earnings beat, UNH raised its full-year guidance from between $9.75 and $9.90 per share to an even $10 per share. |
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AET
AAPL |
(14 Aug 2017) Aetna in secret talks with Apple to discuss bringing the Apple Watch to all of its members
Health care benefits giant Aetna (AET $105-$155-$162), which helps insure 23 million Americans, has been in secret talks with Apple (AAPL $103-$160-$162) to discuss ways to get the Apple Watch on the arms of its members. The company already offers the health-tracking device to its 50,000 employees as part of a wellness program, and it would now like to offer all members the same perk. While the watch has been somewhat of a disappointment to analysts thus far, between the new health apps under development by the firm and deals with companies like Aetna, the sky is the limit. Especially after the watch goes through a few more design changes to make it more fashionable. |
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WBMD
KKR |
(24 Jul 2017) WebMD to be purchased, taken private by private-equity firm KKR
Have you ever stopped to think just how many people have become billionaires (or at least something close) thanks directly to the Internet? Look at WebMD (WBMD $48-$66-$66). The business plan was to create an online compendium of health-related topics to help individuals understand their medical conditions. As one could imagine, the site attracted a huge number of health care providers willing to pay to get their product or service in front of millions of targeted customers. The stock was flying high on Monday, spiking 20%, after news that private-equity firm KKR (KKR $14-$20-$20) would buy the firm for $2.8 billion and take it private. KKR has quietly been accumulating online health sites to include Medscape.com, DentalPlans.com, and now WebMD, among others. |
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CERN
AMZN BOX |
(20 Jul 2017) What industry is the next target for Amazon? How about health information services.
Look out, Cerner (CERN $47-$65-$69), Amazon (AMZN $710-$1,028-$1,035) appears to be getting into the health care information business. The $491 billion company hasn't met a business (seemingly) that it doesn't want to dominate, and now comes news that Bezos's team has yanked a big health care techie from Box (BOX $11-$20-$21). Missy Krasner has been the VP and managing director of the cloud-based platform company since 2013, helping them build up their cloud storage product for health care providers. This has to be a blow to Box and yet another win for Amazon. Seriously, how can one company be effective in so many different industries? Then again, Jeff Bezos is no Jeffrey Immelt (slam intended for Immelt). |
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ATHN
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(18 May 2017) Athenahealth up 22% after activist takes stake. You may know Jonathan Bush, nephew of former President George H.W. Bush, from one of his many, and colorful, interviews on CNBC. The $5 billion health care technology company Mr. Bush founded in 1997, Athenahealth (ATHN $90-$130-$142) got a nice shot in the arm today on news that Elliott Management purchased a 9.2% stake in the firm. Whether that is good news for the company (what are Elliott's aims?), only time will tell. But it was good news for investors, as the stock shot up by nearly one-quarter.
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HUM
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(15 Feb 2017) Humana is pulling out of Obamacare. Citing an unsustainable condition, the fourth largest insurance provider, Humana (HUM $150-$212-$218) is pulling the plug on Obamacare. In a Tuesday press release, the company announced that it would pull all of its options out of the "Affordable" (what a joke) Care Act individual marketplaces on January 1, 2018. They probably could have saved their breath—it is highly doubtful that Obamacare will still exist by next January.
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ANTM
CI |
(14 Feb 2017) Cigna sues Anthem after bizarre merger fight. When US District Judge Amy Berman terminated the proposed $54 billion merger between acquirer Anthem (ANTM $115-$164-$164) and smaller insurer Cigna (CI $115-$146-$151), she cited intense friction between the two CEOs as a factor. That's an understatement—Cigna's was actively, it seemed, working to scuttle the deal. Now, Cigna is suing Anthem for $13 billion in damages from the failed merger. This amount is in addition to the $1.85 billion breakup fee it says it is due. The kicker? Cigna filed to dissolve the merger! For its part, Anthem was apparently working on a secretive integration plan which it kept shielded from Cigna execs.
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HUM
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(14 Feb 2017) Well, that's one way to create value for shareholders. After a federal judge cursed the deal, citing antitrust concerns, Humana (HUM $150-$207-$218) and Aetna (AET $97-$122-$137) officially called off their planned merger. Aetna, the 5th largest insurer in the US, will pay Humana, the 4th largest, a $1 BILLION break fee, or $630 after taxes. Looks like Humana and the US government are the two big winners.
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ANTM
CI |
(09 Feb 2017) Anthem's acquisition of Cigna is dead. With a lot of help from the players involved, a federal judge put the nail in the coffin of Anthem's (ANTM $115-$159-$162) planned $48 billion takeover of smaller rival Cigna (CI $115-$148-$151) on anticompetitive grounds. The judge said the courtroom drama was more like a divorce hearing than a merger proposal, with the two often bashing one another in both private and public. The judge did the American consumer a favor by not allowing these two knuckleheads to merge. Sadly, after reading the details, I wouldn't trust either company to competently manage a company or individual healthcare plan.
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