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Below is a complementary research note written by our Healthcare Team of Tom Tobin, William McMahon, and Justin Venneri. We are pleased to announce our new Sector Pro Product Health Care Pro. Click HERE to learn more. |
Good morning!
If you were able to tune in, thanks for joining us yesterday for our weekly Position Monitor Update call! Keep the great questions coming. If you missed it, the replay is available HERE. A couple of earnings previews (ONEM & TXG) and a few brief highlights (AMN, NEO, and HRC) from the PM call are below.
We watched The Modern Patient Journey: New Ways to Think About Patient Acquisition this past weekend. Much of our time has been spent analyzing volume trends, new models, etc., and the likelihood that ONEM has the right model at the right time (whether it’s flu vaccinations, our trackers, or fundamentals, we think the answer is “Yes”). The presentation is heavy “search” but covered how consumers are looking for care (e.g., an 80% YoY increase in healthcare “near me” searches and a 16% increase in consumers using search to find care online), and how the nuts and bolts of search work. Providers must do more to remain in front of prospective and current patients than ever before in history, and they must "delight" them if given the opportunity. Overall, we appreciated the view through a different lens (i.e., how to position a provider’s service lines or MDs to be found online given consumer search trends) and have a greater respect for how “hyperlocal” healthcare has become. With that backdrop, we look forward to ONEM’s earnings after the close.
EARNINGS PREVIEWS
For ONEM, we expect the company to report strong results later today. As we’ve been highlighting in recent weeks, there are several ongoing tailwinds for this early mover with a “hybrid model.”
We’ve been chirping about #NoFluSeason for two months, and several sources have confirmed that flu vaccinations have been very strong so far in 2020 (including our pharmacy checks), and we’ve also seen this in ONEM’s Claims Index data. Flu vaccinations are positive for ONEM in their own right, but also are likely to come with additional services at the time of the visit, which can boost Net Patient Service Revenue. We have also seen a solid pace of provider growth throughout the quarter as well as a positive app download trend. As such, reported membership is likely to come in well ahead of guidance and consensus.
Based on the provider and app trends, we expect membership could be well ahead of full-year 2020 guidance of 505K-515K, not just ahead of the 486K-496K guidance range for 3Q20 and revenue to come in at close to $90M for 3Q, slightly ahead of the high end of the guidance range (the company has not provided full year 2020 guidance).
ONEM’s membership number is significant because it is the clearest indication of the longer-term opportunity in its core markets. Our analysis shows ONEM has captured a high single-digit market share in their core markets of New York City and San Francisco, but only levels ~ 1% elsewhere in their network. Upside to the membership in 3Q20 offers a credible path to future membership at levels multiples higher than today’s values, and with it, the valuation should be multiples higher as well.
TXG - TXG also reports after the close and we expect upside to revenue, the key factor for shares. COVID-19 resurgence is a negative broadly for access to labs and the ability to run experiments that use TXG equipment and consumables, as well as making sales calls and running seminars. The recent surge in COVID19 could re-emerge as a headwind, but we’d also note that the majority of academic labs are in coastal and urban settings where resurgent case volumes have been modest, at least so far.
NIH grants for single cell sequencing, which we believe tie directly to TXG’s revenue have remained robust, and we’d note that these awards remain in a backlog of spending even as access to labs becomes constricted.
Also, there was a rumor yesterday that TXG was planning an offering around their IPO lock up expiration, which the company responded to with a press release. Single cell sequencing is in the earliest stages of a long-term adoption cycle where TXG is the standard offering. We are much more positive on the news of a COVID-19 vaccine returning scientists to their lab benches, and far less concerned about the shorter term worries over an offering or the IPO lock up.
POSITION MONITOR CALL HIGHLIGHTS
NEO (added to our Long Bench) – We are impressed by NEO’s 1) handle on the economics of testing, 2) ability and willingness to focus on what’s needed in the field today vs. hoped (80-85% of cancer is treated in the community), 3) deals/M&A track record (Clarient, Genoptix, Human Longevity’s oncology division, and Inivata), and 4) focus on new high-growth areas (pharma, informatics, and NGS). The pharma backlog is growing by the day (, and we see claims tracking well, which should be a mix that leads to low double-digit % growth.
AMN – The company put up a huge quarter and strong/better than expected guidance. Demand for temp hires is robust and the net impact (COVID headwinds vs. favorable volume and pricing) is positive. We’re not sure why the stock has traded so poorly over the past two trading days. The underlying fundamentals and trends that drive revenue are strong.
HRC – We think capex will be diverted (to PPE and other necessities/essentials) and conserved due to the financial stress and uncertainty COVID is placing – again – on hospital systems. Demand for HRC’s beds was/has been strong, but we highlighted negative revision trends yesterday (1st chart below). With health care diffusing into the community and competition from Stryker’s new ProCuity, we see the probability of #growthslowing (or stalling/flipping to negative) rising. Also, actual results (11/6) were worse than our algorithms (2nd chart below), which have been directionally correct, projected. It looks like HRC is on the back side of growth accelerating.
PERFORMANCE TABLE FOR POSITION MONITOR NAMES
Note, this was presented yesterday, so the %s do not reflect yesterday’s action:
News Related to Position Monitor & Microquad Names or Trends & Companies We Track:
- Centene acquires health data analytics company Apixio: 3 details
- Biden-Harris announce COVID-19 advisory board.
All data available upon request.
Have a great day out there!
