Takeaway: Please join us for a review of our Health Care Position Monitor with *live* Q&A at 2pm

Call Now |  Position Monitor | Live Q&A Invite | THC Spinco | DVA Catalyst Calendar | Rebate Rule #2 - positionmonitor0729

Live Q&A: Health Care Position Monitor, Recent Research Updates, Q&A

Date/Time: Monday July 29, 2019 at 2:00 PM ET

Location: CLICK HERE for event details (includes video link, materials link and dial-in).

THC - Management announced this past week that their strategic review of Conifer had not ended in a sale to a conventional buyer this.  Rather, the company plans on a tax-free spin-off, Based on the line of analyst questions on the conference call, it was greeted skeptically.  However, there are examples of spin-off structures which can result in recapitalization of the Remainco, the Pfizer spinoff of Zoetis being a good example.  The company also commented on accelerating volume trends, which is a higher quality way to reduce leverage, and key to our long thesis.  

Rittenmeyer added, “We were pleased with Tenet’s performance in the second quarter, with Adjusted EBITDA comfortably within our Outlook range and consistent with consensus estimates. Volume growth strengthened in our hospital business, with increases in both admissions and adjusted admissions. USPI also delivered favorable volume growth and Conifer had another strong quarter.   

ANTM - The negative upside in MLR on 2Q19 was largely attributed to Medicaid re-determinations. We'll look at Medicaid enrollment by state for signs that the combination of falling federal match dollars and efforts to remedy what had been lax enrollment enforcement in recent years is leading to disenrollment.  We still like the long for the Medicare Advantage opportunity and see the re-emergence of rebate pressure as an opportunity to revisit our UNH short.

DVA - This week we interviewed a former dialysis operator who managed a large number of facilities and a home dialysis program.  In our Field Notes, we covered the major takeaways which included our belief that home dialysis uptake is structurally impaired by physician incentives. We also took a look at the OIG request from Rep. Katie Porter (CA-45)that was released earlier this week.  The headwinds of labor cost, Medicare mix, and commercial payment pressure persist. With the sale of DMG and the balance sheet recap behind DVA and a catalyst calendar heating up, we remain bearish.  The earnings call on Thursday should provide some indication of where consensus is now that the DMG sale catalyst is in the rearview.

ZBH - We haven't yet found a US Rosa user to interview to get a sense of the uptake potential, or the competitive dynamic with SYK, who on their earnings call was dismissive of Rosa as a threat to MAKO.  Regardless, ZBH's turnaround story seems to be progressing, albeit slower than our original thesis timeline.  In the coming weeks we'll be updating our doc tracker along with a several other data sets.  

Drug Price Policy - After the withdrawal of the Rebate Rule, we demoted UNH to the Short Bias and kept ANTM as a Best Ideas Long.  Legislation is now emerging which appears even more negative than the withdrawn Rebate Rule. Meanwhile the White House has assumed the role of the wild child to the Senate's "adult in the room," a dynamic that argues for some legislation in September. What that looks like, is still difficult to discern. Join us on Tuesday for a recap of where we are and where we think we are going with federal drug price policy. UNH, ANTM, CVS, CI

CBD Policy - Dr. Amy Abernathy who is running point on the FDA's development of a Cannabis regulatory framework was on Capitol Hill this week. She indicated that the FDA should have a proposal for comment "in the fall." In government-land, seasons are not bound by the equinox so we interpret her comments to mean "this year." Still a ways to go, as Dr. Abernathy herself indicated, but undeniable progress for the industry - GWPH

We will also look at the week ahead and discuss what we anticipate out of ILMN, HCA, DXCM and SGRY.

Have a great weekend.

Thomas Tobin
Managing Director


Emily Evans
Managing Director – Health Policy