By Sarah Toy
Health-care earnings begin in earnest this week. Government insurance giant Centene Corp. reported on Tuesday morning, and Anthem Inc., Biogen Inc., Boston Scientific Corp. and Swiss drugmaker Novartis AG are all reporting on Wednesday.
The past week has been a difficult one for health companies. Health-care stocks are lagging the broader market by their largest margin since 2006, sparked by murmurs of a single-payer health system and proposals to tighten regulations around drug pricing. Shares of UnitedHealth Group Inc. tumbled last week despite the company reporting first-quarter earnings and revenue that beat expectations — a sign of investors’ growing anxiety over the health-care regulatory climate.
With that in mind, here’s what to watch out for during the next couple of days as health-care companies announce earnings.
Centene /zigman2/quotes/208900023/composite CNC -0.37% shares initially shot up 6.1% in premarket trade Tuesday after the insurer reported first-quarter profit and revenue that beat Wall Street expectations, while raising its full-year outlook.
However, it seems that Centene’s strong first quarter wasn’t enough to quell investor jitters, as the stock gave back all of its gains after the opening bell, falling 1.5%.
The company’s net income rose to $522 million, or $1.24 a share, from $340 million, or 96 cents a share, a year ago. Adjusted earnings per share (EPS) was $1.39, above the FactSet consensus of $1.35. Total revenue rose 40% to $18.44 billion, beating the FactSet consensus of $17.46 billion, with Medicaid revenue jumping 54% to $12.61 billion and revenue from Medicare rising 19% to $1.38 billion. Commercial revenue rose 19% to $3.65 billion. The company, whose stock has fallen more than 16% so far this year, is the largest provider of plans through both the Medicaid program and the ACA marketplaces
Centene raised its full-year EPS guidance to between $4.24 and $4.44 per share from $4.11 to$4.31. It also raised its revenue outlook to between $72.8 billion and $73.6 billion from $70.3 billion to $71.1 billion.
The health insurer agreed last month to buy competitor WellCare Health Plans Inc. /zigman2/quotes/207459018/composite WCG +1.35% for $15.3 billion, creating a managed-care giant in the business of government health programs and boosting Centene’s Medicare market share. The deal, which dropped as health-policy threats came from both the left and the right, was seen by some as a bet on the future of the Affordable Care Act (ACA) , also known as Obamacare. Whether the bet pays off will depend on what changes, if any, are made to the ACA.
“At this time, we believe there is no appetite in Washington to revisit comprehensive health-care reform,” Chief Executive Michael Neidorff said during Tuesday’s earnings call with analysts.
Coming up on Wednesday
On Wednesday, health insurer Anthem /zigman2/quotes/203808743/composite ANTM +0.26% will report first-quarter earnings before the opening bell. Earnings are expected to come in at $5.89 per share, up from $5.41 in the year-earlier quarter, according to analysts polled by FactSet. Revenue is expected to be $24.426 billion, higher than $22.342 billion a year ago.
Shares of Anthem are down 8.4% so far this year, reflecting the recent sell-off in health insurance stocks.
In 2017, Anthem announced it would launch its own pharmacy-benefit manager, which the insurer said should generate around $4 billion in savings each year. The PBM, called IngenioRx, was initially slated to launch in 2020, but then Anthem said in January the rollout would be pushed up to March, resulting in a boost in projected earnings for the year. Management will likely give an update on the rollout on Wednesday during its earnings call with analysts, so investors should keep their ears open.
Biogen /zigman2/quotes/201531540/composite BIIB +0.02% is also set to report first-quarter earnings on Wednesday before the market opens. The drugmaker, whose shares are down 24% in the year to date, was dealt a severe blow this past quarter when it was forced to discontinue Phase 3 trials of aducanumab, an investigational Alzheimer’s drug whose mechanism of action was based on the so-called amyloid hypothesis. Shares plunged 28% at the time, and Biogen said it would take a closer look at the data.
Investors will want answers from management on Wednesday about what went wrong with aducanumab, which analysts once thought would be the company’s next big blockbuster drug. They will also want to hear an update on the drugmaker’s collaboration with Eisai Co. Ltd. /zigman2/quotes/202565502/delayed ESALY -0.02% on another amyloid-based treatment for Alzheimer’s.
Biogen is expected to report earnings of $6.83 per share, up from $6.05 a year ago, according to analysts surveyed by FactSet. Revenue is expected to come to $3.385 billion, up from $3.131 billion in the year-earlier quarter.
Medical device maker Boston Scientific Corp. /zigman2/quotes/203726728/composite BSX +0.28% will announce earnings on Wednesday morning, as well. FactSet analysts expect the company to report earnings of 36 cents per share, higher than 33 cents in the year-earlier quarter. Revenue should be $2.535 billion, up from $2.379 billion a year ago.
The Food and Drug Administration ordered Boston Scientific and Coloplast Corp. /zigman2/quotes/208102519/delayed CLPBY -1.31% last week to remove their transvaginal mesh products, used to treat pelvic organ prolapse, from the market. Shares of Boston Scientific fell more than 7% at the time, though shares are only down 1.8% for the year. Investors will want to hear from management how the removal of the vaginal mesh products, a part of Boston Scientific’s urology and pelvic health business and the subject of years of litigation against the company, will affect the bottom line.
Finally, Swiss drugmaker Novartis AG /zigman2/quotes/203243705/composite NVS +0.49% will also report earnings on Wednesday ahead of the market open. Analysts polled by FactSet expect earnings of $1.10 per share, down from $1.13 a year ago. Revenue is expected to be $11.356 billion, down from $12.694 billion in the year-earlier quarter.
In March, the Food and Drug Administration approved the company's new multiple sclerosis drug, Mayzent. Novartis priced the treatment at $88,000 annually, something that probably won’t invite objections from investors but could draw scrutiny from payers and lawmakers. Management will likely give an update on the drug launch during the company's Wednesday earnings call with analysts.
Management will also likely address its Friday disclosure of an investigation looking into the death of a second baby involved in a clinical trial of experimental multiple sclerosis treatment Zolgensma. A six-month-old patient with type 1 spinal muscular atrophy had recently died in Europe after undergoing the treatment, but an investigator and independent monitor deemed that death unrelated to the therapy. Zolgensma, whose FDA submission was based on data from a trial of 15 babies, is expected to be approved by the FDA within weeks.
Shares of the drugmaker, which spun off eye-care business Alcon Inc. /zigman2/quotes/206405150/composite ALC -0.03% earlier this month, are down 0.8% so far this year.