Well, that was an interesting week. WallstreetBets and $CLOV madness aside, the Biden administration continues to move on both COVID relief/stimulus while regulatory priorities still remain unclear.
Chart of the Week
The Money Wave Grows. The White House released a more detailed breakdown of the $160B it intends to spend on testing, vaccine development, diagnostics and manufacturing. Notably, the White House is requesting $4 billion to build two new vaccine manufacturing facilities in the U.S.
Last night or maybe it was early this morning, the Senate approved an amendment to provide additional money to the Provider Relief Fund. The additional $35 million will be allocated in a budget neutral basis, meaning the Chairman of the Committee will have to reduce an appropriation elsewhere.
Nonetheless, assuming the amendment survives (which it should), the grand total pouring into health care will be about $720B over the course of just one year. For context, the U.S. spends about $3T a year on health-related services.
Rules Action.
The Biden administration withdrew a few more Trump-era rules. These include:
- Conditions for Coverage for End-stage Renal Disease Facilities – Third Party Payments
- Revisions to Medicare Part A enrollment
The first withdrawal is self-explanatory as the debate over third-party payments has been raging in California for years ($DVA). The second rule related to CMS would treat individuals who automatically become eligible for Part A hospital coverage when they turn 65. The plan was to use that automated enrollment as an opportunity to have the beneficiary consider Medicare Advantage. The Biden administration does not appear to want to continue that policy direction currently.
The Centers for Disease Control and Prevention also extended an order that halted residential evictions until March 31, 2020
Vaccine. $JNJ submitted its Emergency Use Authorization for its logistics-friendly vaccine Thursday. The FDA AdComm meeting will be held on Feb. 26. The vaccine data released thus far indicates a 72% effective rate against moderate to severe COVID-19. That level of effectiveness met with some frowns on the street, but it is important to keep in mind that $JNJ’s solution will probably work better in those parts of the world that cannot provide reliable cold chain transport.
$JNJ’s one shot regime is also a positive even with the reduced effectiveness as most providers will tell you some effectiveness is better than none. Tracking people for the second shot is not the easiest thing to do, especially when they have had an adverse reaction to the first dose.
Look for a very quick approval from the FDA with the $JNJ solution moving quickly after that.
SPAC Corner. After the brouhaha with Hindenburg’s report on $CLOV, (my note on that topic here)it seems imperative that we stay on top of the policy implications for SPAC-driven mergers considering the less than robust required reporting for a merger versus an IPO S-1. Beginning this week, we will note the new relevant filings and any business combinations announced. Let us know if we miss any.
Filed S-1s This Week
Hudson Executive Investment Corp. III – Tech-enabled health care
Tuatara Capital Acquisition Corporation – Cannabis
Figure Acquisition Corp. I – Artificial intelligence, advanced analytics
Closed
EQ Health Acquisition ($220M) health care services: alternative-site providers and services, home care and hospice, payor services, behavioral health, dental, physical therapy and veterinary services.
Brookline Capital Acquisition ($57M) Life Sciences – Life Sciences, biotechnology and health care services.
CA Healthcare Acquisition Corp ($115M) - Healthcare industry, specifically healthcare services, healthcare information technology, care management, medical distribution, behavioral health, medical devices, diagnostics, pharma services, health and wellness, and specialty pharmacy.
HealthCor Catalio Acquisition ($180M) – Biomedical technology
Initial Business Combinations in Process
Hudson Executive Investment Corp – Talkspace ($1.4B)
Our Take = Behavioral health via telemedicine will prove to be one of those COVID-19 trends that endures. It solves several problems for the incumbent system: availability of providers, cost and productivity. Behavioral/mental health services largely exist outside the health insurance system which eliminates a lot of regulatory risk.
GX Acquisition Corp – Celularity ($1.7B)
Our Take = We love anything that pushes cell-level therapies and diagnostics forward. The company has several cell therapies in clinical and pre-clinical development that deploy allogeneic placenta derived cells.
Deerfield Healthcare Technology Acquisition – CareMax/IMC Medical
Our Take = Caremax’s TAM is the Medicare Advantage market like $CLOV, $OSH and they appear to be establishing themselves as a risk bearing entity in partnership with health plans and providers. IMC Health is a primary care practice that paired with CareMax’s risk-bearing solutions might make a good combination. We will reiterate, the MA market is getting highly penetrated, especially in urban areas and the competition for patients will be fierce. Both companies are based in Florida.
Big Rock Partners Acquisition Corp – NeuroRX
Our Take = NeuroRX is developing a drug regime for the treatment of bipolar disorder and Acute Suicidal Ideation/Behavior. It is also developing a therapeutic for COVID-19 related Acute Respiratory Distress like just about every other therapeutics company in America.
GigCapital II – Uphealth/Cloudbreak Health
Our Take = Uphealth is a digital platform designed to manage chronic and complex care, medications and behavioral health. Cloudbreak provides a telehealth solution that includes quarantined inpatients. One of Cloudbreak’s most interesting features is its multilingual capabilities which should be accretive for providers in communities with non-English speaking patients. Not sure Uphealth offers enough to get behavior to change or encourage adoption.
Longview Acquisition Corp – Butterfly Network
Our Take = Butterfly makes portable ultrasound devices for the human and animal health markets. Portable means greater efficiency which is going to continue to be important as the health care delivery system works through the backlog of cases created by COVID. The Teleguidance system could prove to be valuable in areas with limited access to advanced technology.
JAWS Acquisition Corp – Cano Health
Our Take = Cano represents what we believe will be the most formidable Direct Contracting model in Medicare. Cano is participating in the implementation stage of the first two Direct Contracting Models. The primary care focus gives maximum insight into patient condition, needs and behaviors that can be influenced to avoid high cost care. One caveat since we still bear the scars of PhyCor: physicians drive patient flow and if you don’t keep them happy, they go elsewhere.
If you are investing in SPACs but not super familiar with health care, hit and we can help.
Upcoming Events.
Feb. 17 @10 a.m. ET (Add to Outlook Calendar) - Direct Contracting in Primary Care | A Threat to MA Plans' Dominance? (Cano, Cityblock, CLOV). We will take a deep dive into the CMS direct contracting models, financial structure, TAMs, real and imagined.
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Emily Evans
Managing Director – Health Policy
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