Centene Gets S&P Rating Upgrade to BB+ from BB

May 18, 2017: S&P raises Centene’s rating one notch to BB+ from BB with an outlook rating of stable. “The rating upgrade on Centene reflects the company’s continued successful execution of its growth and profitability initiatives since we assigned a positive outlook two years ago (in May 2015)”, said Julie Herman, S&P Global credit rating analyst. Herman continued, “As a result, we believe Centene has increasingly differentiated itself favorably from its closest peers Wellcare and Molina, both of which we rate BB/Stable.”

The stable outlook on Centene reflects our expectation that the company will maintain its strong competitive position in the managed Medicaid market while continuing to diversify its profile, particularly in Medicare and specialty services. Consistent with our base-case economic forecast, we expect the company to show revenue growth of 5%-15% over the next two years, with an EBIT ROR of about 2.5%-3.5%. We expect financial leverage to remain elevated but to continue to drop year over year, reaching below 40% over the next two years. We expect consolidated GAAP capitalization to improve year over year through earnings growth, but remain modestly deficient at ‘BBB’ over the next two years. However, we expect consolidated risk-based capital levels to remain around 350%.

April 25, 2017: Centene reports Q1 EPS of $1.12 adj versus the $1.06 estimate. Revenue also beat coming in at $11.7 billion versus the $11.4 billion estimate. Quarter-end at-risk managed care membership came in at 12.1 million or +5% YoY.

February 7, 2017: Centene reports Q4 EPS of $1.19 versus the $1.12 estimate. Revenue also beat coming in at $11.9 billion versus the $10.9 billion estimate. Quarter-end at-risk managed care membership came in at 11.44 million versus 5.1 million last year representing an increase of 223% YoY, nice!

January 5, 2017: Centene Corporation announced today that its Pennsylvania subsidiary, Pennsylvania Health & Wellness, has been selected by the Pennsylvania Department of Human Services to serve Medicaid recipients enrolled in the HealthChoices program in three zones. Pending regulatory approval and successful completion of readiness review, the three-year agreement is expected to commence June 1, 2017. In April, Centene was originally selected to provide services in three zones for HealthChoices. Today’s award is in response to a re-issue of the HealthChoices award.

The Department completed an evaluation and scoring of the proposal and has selected Centene’s proposal for the Southeast Zone, the Southwest Zone, and the Lehigh Capital Zone of Pennsylvania. The HealthChoices program covers low-income children and families, individuals with disabilities, as well as those newly eligible under the Affordable Care Act expansion throughout the state of Pennsylvania.

In addition to the Health Choices Medicaid award, Centene was previously selected under a separate contract by the departments of Human Services and Aging to serve enrollees in the Community HealthChoices program statewide, pending regulatory approval and successful completion of readiness review. Under this agreement, Pennsylvania Health & Wellness will coordinate physical health and long-term services and supports (LTSS), if needed, to enhance the quality of medical care and access to all appropriate services to more than 420,000 individuals who are dually eligible for Medicare and Medicaid, older Pennsylvanians and individuals with disabilities.

January 3, 2017: Piper Jaffray/Simmons initiates coverage of Centene Corporation with an Overweight rating, and sets a price target of $67.

December 20, 2016: JPMorgan Chase and Co initiates coverage of Centene Corporation with an Overweight rating, and sets a price target of $75. JPMorgan also added Centene to its Analyst Focus List saying that while Republican “repeal/replace” efforts present some risk to both the Medicaid RPF pipeline and current Obamacare-population earnings, they believe the current valuation is more than discounting that risk.

Centene Corporation, a Fortune 500 company, is a diversified, multi-national healthcare enterprise that provides a portfolio of services to government-sponsored healthcare programs, focusing on under-insured and uninsured individuals.

Many receive benefits provided under Medicaid, including the State Children’s Health Insurance Program (CHIP), as well as Aged, Blind or Disabled (ABD), Foster Care and Long Term Care (LTC), in addition to other state-sponsored/hybrid programs and Medicare (Special Needs Plans). The Company operates local health plans and offers a range of health insurance solutions. It also contracts with other healthcare and commercial organizations to provide specialty services including behavioral health management, care management software, correctional healthcare services, dental benefits management, in-home health services, life and health management, managed vision, pharmacy benefits management, specialty pharmacy and telehealth services.

Jazz Pharmaceuticals Announces Positive Results From Phase 3 TONES 3 and TONES 4

March 20, 2017: Jazz Pharmaceuticals announced positive efficacy results from two global multicenter studies in adult patients with excessive sleepiness associated with obstructive sleep apnea (OSA). JZP-110 demonstrated highly statistically significant differences in the co-primary efficacy endpoints in the TONES 3 study at the 300 mg, 150 mg, 75 mg and 37.5 mg dose arms and in the TONES 4 study in the combined JZP-110 treatment arm (300 mg, 150 mg, and 75 mg doses) compared to placebo. Based on the preliminary safety analysis, the most commonly reported adverse events (AEs) in these studies were consistent with those previously described in the Phase 2 clinical studies evaluating JZP-110 in narcolepsy.

The Treatment of OSA and Narcolepsy Excessive Sleepiness (TONES) Phase 3 program is comprised of four studies, two in OSA, one in narcolepsy and one open-label, long-term safety and maintenance of efficacy study. The two Phase 3 OSA studies enrolled 652 total patients.
Efficacy Results of TONES 3 Study The TONES 3 study, or 14-003, is a 5-arm, parallel-group study evaluating four doses of JZP-110 (300 mg, 150 mg, 75 mg and 37.5 mg) and placebo for a 12-week period. The study enrolled 476 patients and was powered to detect differences between placebo and the 300 mg and 150 mg dose arms.

In TONES 3, JZP-110 demonstrated highly statistically significant improvement in the co-primary endpoints of Maintenance of Wakefulness test (MWT) and Epworth Sleepiness scale (ESS) at all doses. In addition, the key secondary endpoint of Patient Global Impression of Change (PGIc) scale demonstrated a highly statistically significant improvement in the 300 mg, 150 mg and 75 mg doses versus placebo. On the co-primary endpoints of MWT and ESS, the study demonstrated that treatment with JZP-110 significantly increased the patients’ ability to stay awake and significantly decreased patients’ subjective levels of sleepiness, respectively, compared to placebo. These effects were maintained throughout the course of the study.
Efficacy Results of TONES 4 Study The TONES 4 study, or 14-004, is a six-week study in which eligible subjects received four weeks of open-label treatment, and at the end of week 4, 126 patients who reported “much” or “very much” improvement on the PGIc scale and who had numerical improvements on the MWT and ESS at week 4 were then randomized 1:1 to receive either the same dose of JZP-110 received in the stable dose phase, or placebo, for two weeks in the randomized withdrawal phase.

In TONES 4, patients randomized to continue on JZP-110 maintained efficacy, while those randomized to placebo experienced a loss of efficacy, as measured by the co-primary and key secondary endpoints.

Preliminary Safety Results of TONES 3 and TONES 4 Studies Based on a preliminary safety analysis, the most commonly reported adverse events were headache, nausea, decreased appetite, dry mouth, anxiety, dizziness, insomnia, nasopharyngitis, and palpitations. There were six patients with serious adverse events (SAEs), two patients on placebo and four on JZP-110. None of these was deemed a treatment-related adverse event as assessed by the investigators. Additional safety information will be available based on the final analyses of the JZP-110 program, including results of the open-label, long-term safety and maintenance of efficacy study.

January 18, 2017: Leerink reiterates their Outperform rating on Jazz Pharmaceuticals and sets a price target of $182 after yesterday evenings FDA updates regarding a generic Xyrem (naracolepsy) application appear to be a net-positive for JAZZ as the FDA concurrently ruled (in a citizens petition [CP]) that it won’t allow generic substitutes to carve-out safety/dosing language that is patent protected. At a minimum, firm expects the approved generic will need to successfully litigate the Xyrem formulation (ends mid-2020E) and DDI patents (expires 2033E) before launching as they believe an at-risk launch against two battletested patent families would be financial catastrophic. Ultimately, todays update provides much needed visibility into how the FDA views the safety risk of omitting divalproex DDI (drug-drug interaction) and dosing language from the Xyrem package insert. Some investors believed generic companies’ ability to “carve out” the DDI information from their labels would allow them to argue they didn’t infringe the DDI patents. Based on last night’s ruling, it would appear this generic noninfringement strategy on the DDI patents is foreclosed. Further, with JAZZs DDI patents withstanding the invalidity challenge in multiple inter partes reviews (IPR) relating to the obviousness of those patents, those patents now appear much stronger and likely to withstand two central arguments they’d anticipate when the patent dispute moves to the district court in May 2017 (lead case). Based on the above considerations, firm believes the generic companies will be more likely to accept JAZZ’s likely settlement offer to launch in late 2025E since the risk of getting blocked until 2033E looks increasingly probable.

January 17, 2017: The U.S. Food and Drug Administration (FDA) has approved Jazz’s Xyrem, the first generic version of Xyrem (sodium oxybate) Oral Solution, to treat cataplexy and excessive daytime sleepiness in patients with narcolepsy, which is a potentially debilitating disease. Cataplexy is a primary symptom of narcolepsy where patients suddenly lose muscle tone, including voluntary muscle control, while awake. Muscle weakness or paralysis associated with cataplexy may cause a person to collapse. Approximately 70 percent of people with narcolepsy have cataplexy. Sodium oxybate is the only medication approved to treat cataplexy in patients with narcolepsy.

The use of Xyrem has been associated with serious side effects including seizures, trouble breathing, changes in alertness, coma, and death. Additionally, the active ingredient in Xyrem (and in the newly approved generic) is sodium oxybate. Sodium oxybate is the sodium salt of gamma-hydroxybutyrate (GHB). GHB has not been approved for any medical use and has the potential for abuse, such as in cases of sexual assault.

Because of the potential risks associated with Xyrem, it is subject to strict safety controls on prescribing and dispensing under a program called a Risk Evaluation and Mitigation Strategy (REMS). FDAs approval of generic sodium oxybate is subject to a REMS with strict safety controls that are comparable to those currently required for Xyrem.

Specifically, under both the Xyrem REMS and the generic sodium oxybate REMS, sodium oxybate can be prescribed only by a certified prescriber, and dispensed only to an enrolled patient by a certified pharmacy. Only a certified pharmacy that ships directly to patients can dispense sodium oxybate. Sodium oxybate will not be available in retail pharmacies.

In approving this generic version of Xyrem, the FDA is maintaining strict safety requirements for sodium oxybate, while providing patients with access to a generic medication option for narcolepsy. Source: http://www.fda.gov/Drugs/DrugSafety/ucm537281.htm

January 9, 2017: At the JP Morgan conference, Jazz said it plans to expand via M&A and partnerships this year; Affirms FY16 $9.90-10.30 versus $10.02 estimate; Revenue $1.5 billion versus $1.49 billion estimates.

December 15, 2016: Cantor Fitzgerald initiates JAZZ with an Overweight rating and a price target of $187.

Jazz Pharmaceuticals plc is an international biopharmaceutical company focused on improving patients’ lives by identifying, developing and commercializing important products that address unmet medical needs. The company has a diverse portfolio of products and product candidates with a focus in the areas of sleep and hematology/oncology.

As part of our unwavering commitment to improving patients’ lives, we are continuing to expand our commercial product portfolio and our research and development pipeline in therapeutic areas that can leverage our unique expertise. We do this through a growth strategy of growing sales of the existing medicines in our portfolio; acquiring commercial products or product candidates that are in late-stage development, and pursuing focused development of our pipeline of differentiated therapies.