Tag - Healthcare

The healthcare market is one of the strongest areas in the American economy. U.S. healthcare system costs have doubled over the past ten years. And I think they will double again in another 10 years.

And we know why it's increasing: the great population boom of the post WW2 era is now resulting in a retirement boom. But it's also a hip replacement boom. And a cardiac surgery boom.

But it's a healthcare boom as much as anything else. Some folks might decry this situation and point to rising health care spending in a debt laden country as proof that the sky is falling or the end of America is coming.

When President Obama's healthcare reform bill passed in late March 2010, name- brand pharmaceutical companies immediately scrambled. The timing could not have been worse. Most branded pharmaceutical companies were already nervous about the lack of branded drugs in the pipeline.

They were all privy to the fact that during 2011 and 2012 several best-selling, brand name drugs were losing their patent protection. They knew several of the industry's cash cows, including Lipitor, Plavix and Seroquel were coming off patents over the next two years.

So, the announcement of an upcoming healthcare reform coupled with a loss of patents led to the inevitable - a sharp increase in the price of brand name drugs.

It doesn’t take a CAT scan to figure out the U.S. health-care system is sick. Companies such as LHC Group Inc. (Nasdaq:LHCG) might be the prescription to help make it better.

Anyone who’s trekked off to the hospital for treatment knows that patients are going to be quickly whisked out the door afterwards. Home-health care demand is rising to a fever pitch, especially since more than 37 million Americans are aged 65 or older, and perhaps 10% need health-related assistance. That’s where LHC Group, a 14-year-old company in Lafayette, La., comes into play.

The home-health industry is highly fragmented, with many of the services coming from small, privately run operations — which account for roughly 90% of the business. Public companies like LHC Group and its competitors can shave costs from follow-up treatment after hospitalization for acute conditions — and better deal with insurance paperwork.

The Bayou Country base of operations should provide a hint to LHC Group’s niche: it focuses on rural-area geriatric care. LHC operates in 13 states, mostly in the South, and has 198 service locations (doubling since 2005). The 4,500 employees visit more than 60,000 patients annually.

LHC Group estimates its in-home care costs at $50 daily, compared to several hundred dollars in a nursing home or thousands during a hospital stay. With an aging population, Medicare enrollment is expected to double around 2030, from 42.5 million in 2005...

Acura Pharmaceuticals (Nasdaq:ACUR)
Palatine, Ill.
http://www.acurapharm.com

52-week low/high: $5.79/$27
Shares Outstanding: 42.72 million
Market Capitalization: $331 million

More than 75 million Americans suffer from pain — more than the number of people with diabetes, heart disease and cancer combined. Prescription medications exist; however, the abuse of such, especially by younger people, complicates physicians’ ability and/or willingness to treat pain. Enter Acura Pharmaceuticals (Nasdaq:ACUR), a company that specializes in prescription drug abuse deterrents. 

The company has seen broad-based institutional interest as of late. According to Nasdaq.com, seven new positions were initiated as of March 31, 2008 in Acura, while eight existing investors increased their positions. On the flip side, only one position was decreased and sold out. Those who initiated new positions as of March 31 were UBS (NYSE:UBS), Merrill Lynch (NYSE:MER), Black Rock (NYSE:BLK), Wells Fargo (NYSE:WFC) and Deutsche Bank (NYSE:DB).

The Palatine, Ill.-based firm specializes in development of opioid pain medicines using what it calls Aversion technology, which is a patented platform designed to develop pharmaceutical products that are intended to relieve moderate to severe pain and deter common methods of prescription drug abuse (injection, nasal snorting and intentional swallowing). Acura’s lead product candidate is acurox — orally administered release tablets with oxycodone to treat severe pain.

In fact, Acura in conjunction with pharmaceutical company King Pharmaceuticals (NYSE:KG) recently reported positive results for a phase III study on the acurox tablets and expects to submit a new drug application to the FDA for acurox tablets by year end.

Acura also has a license agreement with King to develop opioid analgesic products using the aversion technology (opioid is a chemical used in drugs for pain relief). The two are currently jointly developing three immediate-release opioid analgesics using the aversion technology.

The alliance with King, consummated in December 2007, has proven to be a sagacious move, as the company is already realizing revenue accretion. In 2008, Acura recognized $17.1 million in revenues, adding to a strong first quarter.

For the first three months ended March 31, 2008, the latest quarter for which results were available, the company reported net income of $7.4 million, or $0.15 per, compared with a net loss of $9.2 million, or $0.26 per share for the same quarter in 2007.

Drilling down further into the financials, the company has just closed in on profitability. Acura swung to a profit in the fourth quarter of 2007. The company began generating positive cash flows from operations in 2007 and has been steadily increasing its cash position. As of April 30, 2008, the company had cash and cash equivalents of approximately $30 million with no term indebtedness.

Gross margins are higher than the industry at 100%, while the industry sits at 69%. Operating margin was 39.17% compared with -19.84% for the industry.

MiddleBrook Pharmaceuticals Inc. (Nasdaq:MBRK) tanked 50% in pre-market trading on Wednesday after the company announced late Tuesday it had made an agreement with private investment firm Equity Group Investments for $100 million equity investment in the pharmaceutical company. As part of this agreement, Edward Rudnic will step down from his post as MiddleBrook’s president and CEO. In addition, Executive Vice President and CFO Robert Low will be replaced upon the transaction’s closing.

Proceeds of the investment will go toward the Germantown, Md.-based company’s commercial launch of MOXATAG product in early 2009. MOXATAG is a once-daily amoxicillin product. Shares of MiddleBrook Pharmaceuticals were at $1.57, down $1.50 from Tuesday’s close.

Luminex Corporation (Nasdaq:LMNX) are trading heavier than normal with about 912,000 shares, doubling its average volume of about 350,000 after the company announced early Wednesday a public offering of 3.5 million shares of common stock at $19.91 apiece. The Austin, Texas-based medical supplier said the offering is expected to close on June 30.

LCA-Vision Inc. (Nasdaq:LCAV) shares slipped more than 24% in pre-market trading after the provider of laser vision correction announced early Wednesday that it expects total procedure volume for the second quarter to fall 40% from the same period last year. The Cincinnati, OH.-based said the lower volume was due to “macro-economic conditions.”

Cytori Therapeutics Inc. (Nasdaq:CYTX) jumped more than 10% Tuesday after the company announced a patent was issued for its Celution System technology from the U.S. Patent and Trademark Office. The patent protects the San Diego-based biomedical manufacturer’s right to produce and sell technology that processes tissues to obtain a diverse mixture of cells, including red and white blood cells. The company still is seeking U.S. regulatory approval for the device, though it is currently sold in both Europe and Asia-Pacific regions. Cytori shares traded at about $6.74 apiece.

MedCath Corp. (Nasdaq: MDTH) shares are dipping after the health-care provider reported its fourth-quarter earnings plunged to $0.9 million, or $0.04 per share, widely missing analyst estimates of $0.31 per share and down from $10.9 million, or $0.55 per share, a year earlier. The earnings decline was caused by a reduction in ownership of a hospital and a subsequent change in accounting of that unit. As a result of the accounting change, MedCath did not account for the hospital in its quarterly net revenue.

Under the revised accounting rules, the Charlotte, N.C.-based company’s fourth-quarter revenue declined 11% to $158.6 million, below analyst estimates of $169.3 million and compared with $177.4 million a year earlier.

"Our fourth quarter brings to close a very successful fiscal 2007," CEO O. Edwin French said in a statement. "We were able to accomplish many of our strategic and financial objectives during the year, delivering overall solid revenue and EBITDA growth. We believe we have put in place the foundation for a successful fiscal 2008."

In morning trading, MDTH shares are down 16.72%, or $4.43, at $22.07. Over the last 52 weeks, shares have ranged from $21.64 to $34.61.

An aging U.S. population is driving demand for healthcare services. People age 65 or older accounted for 13% of the U.S. population and 37% of hospital spending in 1999. By 2020, the percentage of the population over age 65 is expected to increase to 17%, according to Health Affairs magazine.

Americans are living longer as well; U.S. life expectancy recently hit an all-time high of 77.6 years. The aging population increases demand for hospital services since hospital utilization rates are significantly higher among older Americans - approximately three times higher than the overall population.

The number of Americans aged 55 to 64 is forecast to increase from 29 million in 2004 to 40 million in 2014. One-half of this group has high blood pressure and two in five are obese. As a group they are generally in worse medical condition than Americans born a decade earlier when they were that same age. Because of demographic and other trends, healthcare spending continues to climb, rising 7% in 2005 to nearly $2 trillion following 8% growth in the previous year.

Along with an aging population, the population of working registered nurses (RNs) is aging and the nurse education system is constrained by an aging faculty and a lack of teaching facilities.

There are currently around 2.9 million licensed RNs in the United States, according to the Health Resources and Services Administration. A shortage of RNs began in the United States in 1998 and resulted in 126,000 unfilled hospital positions by 2001. In 2007, the nursing shortage is entering its tenth year. This shortage is forecast to worsen in the coming decade due to demographic trends and an aging RN workforce reaching retirement age. By 2020, experts estimate RN demand will exceed supply by 340,000.

Hospitals and other healthcare facilities are utilizing outsourced nurse staffing to supplement their own recruitment and retention efforts. Rates vary throughout the country, but in general a staffing company may charge a hospital $70 or more an hour for the services of an RN, who will pocket roughly half that amount.

Spending on healthcare staffing services is forecast to rise from $10.5 billion in 2006 to $11.2 billion in 2007 and continue to climb as hospital administrators address rising demand for RNs and limited capacity.

Publicly traded healthcare staffing services companies benefiting from these industry trends include Cross Country Healthcare, Inc. (Nasdaq: CCRN) and AMN Healthcare Services, Inc. (Nasdaq: AHS). 

On a midday Wednesday earnings conference call, executives of healthcare services provider Chindex International, Inc. (Nasdaq: CHDX) emphasized growth prospects in China for the Bethesda, Md.-based company.

“Our improved performance, our well-developed brand recognition and mature management team puts us in an excellent position to reap the benefits of the accelerating growth in the China healthcare market,” CEO Roberta Lipson said on the call. “We’re in a position to capitalize on the opportunities for comprehensive hospital supply chain business solutions.”

Chindex is implementing a two-phase expansion plan into the southern Chinese city of Guangzhou, Lipson said. The first phase, which involves an outpatient clinic, is expected to be completed during the current calendar year. The second phase involving a large hospital is not projected to be completed until 2008. Additionally, the company recently installed surgical robot systems in hospitals in Beijing and Shanghai, Lipson said.

“While it’s impossible to say how the big the market for [surgical robot systems] will be over time, it’s clear that since China has adopted and enthusiastically embraced revolutionary medical technologies in the past, this revolutionary system will continue to gain popularity for some time to come,” Lipson said.

Before the start of trading on Wednesday, Chindex reported annual revenue of $105.9 million for fiscal 2007, compared with $90.84 million in the prior year. The company recorded annual profit of $3 million, up from $0.1 million in fiscal 2006.

“Our overall performance for fiscal 2007 was excellent,” Lipson said.

Health care spending is rising at the fastest rate in U.S. history. According to the National Coalition on Health Care, U.S. health care spending reached $2 trillion in 2005, or $6,700 per person, and is expected to reach $4 trillion in 2015, representing 20% of GDP. Employer health insurance premiums increased 7.7% last year - twice the rate of inflation. Annual premiums for an employer health plan covering a family of four currently average around $11,500. Employment-based health insurance premiums have risen 87% since 2000, compared to cumulative inflation of 18% and wage growth of 20%. Experts agree the current health care system is riddled with inefficiencies, excessive administrative expense, inflated prices and poor management.

Hospital care costs are expected to exceed $1.2 trillion by 2016, versus 2006 costs estimated at $651.8 billion. Growth in hospital spending was 6.6% last year. The fastest-growing health care segment is home health care, which is estimated to have represented 12.5% of total spending, or $53.4 billion in 2006. Demand for home-based care services is rising in response to payer incentives, which favor home-based care over hospitalization, patient preferences and technology advances that allow many chronic conditions to be treated at home. Demand for home health care is expected to grow faster than the overall market because of an aging U.S. population and an increasing prevalence of chronic and co-morbid conditions treatable at home. 

The home health market is fragmented, consisting of some 8,500 providers. Most are local or regional independently-owned agencies, visiting nurse associations or hospital-affiliated agencies. Medicare is the largest home health payer, spending $16.4 billion on home health care services last year. Spending is forecast to increase to $27.3 billion by 2010, according to Medicare actuaries.

Two small-cap companies positioned to benefit from health care trends favoring managed care and home-based services are Matria Healthcare Inc. (Nasdaq: MATR) and Amedisys Inc. (Nasdaq: AMED).

Streamline Health Solutions Inc. (Nasdaq: STRM) announced in a Tuesday morning conference call plans to grow revenues by 20% in fiscal year of 2007, ending Jan. 31. Brian Patsy, the healthcare IT company’s CEO, said the realization of anticipated deals will enable the company to achieve this goal.

“We’re close to signing very large direct sale contracts,” Patsy said on the call. “We have many significant deals in the pipeline that hopefully will be in the second quarter reports.”

On Monday, the Cincinnati-based company reported revenues for the first quarter ended April 30 of $3.78 million, down from $3.85 million a year earlier. On average, analysts surveyed by Thomson Financial were expecting revenues of $5.18 million. Streamline reported a first-quarter loss of $0.44 million, or $0.05 a share, compared with a loss of $0.07 million, or $0.01 a share, in the same period of 2006.

“Revenues were below management’s expectation of record first-quarter revenues, due to protracted negotiations on two large system sales,” Patsy said in a press release.

Streamline Health, founded in 1989, develops workflow and document management software for the healthcare market.

On the call, Patsy said one of the companies that Streamline was dealing with froze capital spending, which protracted the expected deal. The company has since decided to go forward with the deal and Streamline “should close deals in the second quarter,” he said.

Streamline expects three large deals to be finalized in the second quarter.