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- Tenet Healthcare Corp (THC) - Management announced this past week that their strategic review of Conifer had not ended in a sale to a conventional buyer. 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.
- Anthem Inc (ANTM) - The negative upside in MLR on 2Q19 was largely attributed to Medicaid re-determinations. We 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.
- Davita Inc (DVA) - This week we interviewed a former dialysis operator who managed a large number of facilities and a home dialysis program. We believe 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 last 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.
- Zimmer Biomet Holdings Inc (ZBH) - We haven't yet found a U.S. 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 Legislation is now emerging which appears even more negative than the withdrawn Rebate Rule.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.
- 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.