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Healthcare Sector Intelligence Weekly

August 17, 2015: Healthcare News and Commentary August 10th – August 14th Provided by the ICR Healthcare Investor Relations Team TABLE OF CONTENTS I. Healthcare Equity Markets Week in Review II. ICR Client Spotlight III. Biotech / Pharma IV. Medtech / Diagnostics V. Healthcare Services / HCIT VI. IPO Backlog VII. Upcoming Broker Conferences VIII. Upcoming Medical Conferences IX. ICR Healthcare Team Contact Information

I. HEALTHCARE EQUITY MARKETS WEEK IN REVIEW

Price Performance as of 8/14/15

Source: ThomsonOne; Biotech measured by the NASDAQ Biotechnology Index; Providers measured by the Dow Jones US Select Healthcare Providers Index, Med Tech measured by the Dow Jones US Select Medical Equipment Index; Managed Care measured by the S&P Composite 1500 Managed Healthcare Index

II. ICR CLIENT SPOTLIGHT Castlight Health, Inc. (CSLT): Announced a new partnership with Jellyvision to provide employees an end-to-end decision support platform for their healthcare choices while helping benefit leaders rein in costs and improve engagement. Through this new partnership, Castlight will offer ALEX on Choosing Your Plan Jellyvision's industry-leading benefits decision support tool-on the EHC platform to all mutual customers. Having ALEX on the Castlight platform will help benefits leaders improve engagement and help users make better choices, not only when choosing care, but also when making healthcare benefits decisions during open enrollment. Everyday Health, Inc. (EVDY): Reported its financial results for the second quarter of 2015. The Company recorded total revenue of $54.8 million, a 32% increase from the prior year period and announced yearly revenue guidance in the range of $236-$244 million. Net income on a non-GAAP basis for the second quarter of 2015 was $9.1 million and adjusted (diluted) earnings per share was $0.27. The Company also announced the acquisition of Tea Leaves Health, a leading provider of a SaaS-based marketing and analytics platform for hospital systems, for a purchase

Prior Week Quarter to Date Year to Date 2014

S&P 500 Index 0.67% 1.38% 1.59% 11.39%

Dow Jones Industrial Average 0.60% -0.81% -1.94% 7.52%

Russell 2000 Index 1.09% -3.96% -4.17% 2.15%

S&P Healthcare Index 0.05% 1.05% 9.88% 23.30%

Biotech -1.23% -1.34% 20.00% 34.10%

Providers -0.05% -2.96% 18.81% 29.45%

Med Tech 0.34% 4.37% 9.85% 22.35%

Managed Care -0.14% -4.51% 25.55% 33.00%

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price of $30 million, plus a potential earnout based on a specified financial target as of the end of 2016. The acquisition of Tea Leaves Health will further extend Everyday Health's presence in the hospital systems market, which represents a high-growth opportunity for the Company. ICU Medical, Inc. (ICUI): Announced its financial results for the second quarter of fiscal year 2015, which beat on the top and bottom line driven by growth in the Company’s direct and OEM channels. The Company recorded product revenue of $83.8 million and updated yearly revenue guidance to a range of $312-$317 million. Net income on a GAAP basis for the second quarter of 2015 was $13.6 million and adjusted (diluted) earnings per share was $0.97. Other highlights from the quarter included adjusted EBITDA of $28.1 million and operating cash flow of $12.5 million. LDR Holding Corporation (LDRH): Announced the pricing of its public offering of 2,000,000 shares of its common stock at a price to the public of $40.00 per share. In addition, the Company has granted the underwriters a 30-day option to purchase up to 300,000 additional shares of its common stock. Piper Jaffray and William Blair are acting as joint book-running managers for the offering. Cowen and Company and RBC Capital Markets are acting as co-lead managers. BMO Capital Markets, JMP Securities, Stephens Inc. and Brean Capital are acting as co-managers. Rock Creek Pharmaceuticals (RCPI): Announced its financial results for the second quarter of fiscal year 2015. The Company recorded a net loss of $0.8 million and invested $0.4 million toward generating preclinical data, testing safety in the human phase I trial and formulating dermatological preparation of the Company’s lead compound. The Company also disclosed its dermatological development program in which dermal formulations of its lead compound are being developed for common chronic skin disorders such as psoriasis, eczema and rare or orphan skin disorders. The Company also announced it will be featured as a presenting company at the 17th Annual Rodman & Renshaw Global Investment Conference, sponsored by H.C. Wainwright & Co., LLC. The conference is being held September 8-10, 2015, at The St. Regis Hotel in New York City.

III. BIOTECH / PHARMA Generic Pharmaceuticals: 2Q Commentary Adds Support to Our Generic Approvals Inflection Theme (Randall Stanicky, RBC Capital Markets, 8/11/15) We continue to see building evidence that an inflection in generic ANDA approvals is here with important sector implications. This is a theme we have been highlighting since Feb and most recently in our more detailed 6/15 report "Approval inflection starting? Our survey results with stock/sector implications". Very simply, following years of growing approval times (>40 mos) and backlog (~4,000 ANDAs) we are starting to see improvement. This coincides with improved staffing levels at OGD, anticipation over GDUFA II negotiations and the Target Action Date (TAD) initiative. A slowdown in approvals has been a well understood sector headwind over the last several years and a ramp in approval activity could have a significant impact across the sector. Conference call commentary was almost universally positive, consistent with our June survey of corporate managements. We've reviewed 2Q commentary which is consistent with the more optimistic feedback we received in June. Several companies called out improvement in the last few months including TEVA who highlighted a pick-up in approval activity with more communication, Mylan (MYL) who also called out better transparency and greater approvals and Perrigo (PRGO) who called out a record three ANDA approvals in the week prior to reporting 2Q, to name three. For the most part, we believe companies have taken a wait-and-see approach relative to building in any meaningful new launch trajectory which suggests that should we see momentum continue to build, it could bring with it revision opportunity. Generic approval inflection positive for the sector but best positioned to benefit are those (i) most exposed with (ii) the largest pipelines and (iii) greatest diversification - we like Endo, Sagent and Akron (ENDP, SGNT and AKRX). Both price and volume are important considerations. Significant revenue concentration brings with it risk of unexpected competition. We prefer stocks levered to both volume (via pipeline) but also less competitive risk exposure (via diversification). ENDP (post Par) is set to have third largest ANDA pipeline, most leverage among mid/large specialty (66% of revenue US generic) and broad diversification (no product >6%). Importantly, we see



potential for Par deal sentiment to improve and drive P&L upside should activity pick up. Both SGNT and AKRX have sizable pipelines for their sizes with most revenue US generic sourced. Teva, Mylan, Mallinckrodt, Endo, Perrigo (TEVA, MYL, MNK, ENDP, PRGO) – Are We Starting to Look More Alike? (Louise Chen, Guggenheim, 8/13/15) Conclusion: Generic drug approvals have slowed. Therefore, we are taking a deeper look at where some important opportunities stand, including Allergan’s (AGN) Restasis, JAZZ's Xyrem, MYL's EpiPen, TEVA's Copaxone 3TW, Glaxo’s (GSK) Advair, ENDP's Voltaren Gel, MNK's Acthar, Abbvie’s (ABBV) Humira, and biosimilars. Our observations include input from our Prevision Policy Analysts. Our takeaway message is that generics often win. Some tailwinds that support greater momentum for generic approvals include: 1) GDUFA I starting to make progress on improving the generic reviews, and negotiations on GDUFA II started in June (user fees expire in '17); 2) the first wave of biosimilars making inroads in U.S., guidance on interchangeability, could come in '15; 3) increased usage of IPR favors generics; and 4) OGD making it a priority to review limited competition, products (topicals, ophthalmics, sprays). We note our takeaways below. The body of our note has details. Timing of generic RESTASIS depends on two things: 1) if Apotex's IPR is accepted; 2) if the FDA will withdraw its guidance that details a pathway for generic Restasis that does not require trials. AGN could settle with generic filers and/or launch Restasis X before Restasis goes generic to improve earnings visibility for this drug. Generic versions of EPIPEN not likely near term, MYL leading generic Advair: 1.) In this emergency-use category, FDA has not treated previous products as equivalent. 2.) Other injectable alternatives are available, which takes pressure off FDA to approve generic equivalents of EpiPen. Even if MYL files generic Advair in '15, we think approval will come in '17+. MYL helped shape the guidance by providing information to the FDA, and that is a great position to be in. We think the FDA would be eager to get a generic Advair to market if they were confident that MYL has met the test. Reclassifying ACTHAR as a biologic could slow generics: Under FDA’s biosimilar law, a group of biologics that have historically been regulated as drugs will be reclassified as biologics effective in '20. At that time, any generics will have to follow the biosimilar pathway, rather than the generic drug pathway. The reclassification could help MNK because generic approvals would be slower, and they may not be interchangeable. Don't expect near-term generic competition for XYREM. There are three obstacles for generics, JAZZ’s IP, REMS, and the FDA. No single decision from the court and regulatory proceedings will determine the outcome of generic approvals. REMS will serve as a de-facto lifecycle extension, by adding another layer of complexity for generics. Finally, settlement with generics could always be a backstop. We expect generic competition for VOLTAREN GEL in the near term: The approval of an AB rated Copaxone, makes the AB rated approval of 3TW more likely. The earliest potential launch of generic HUMIRA could be '17, but many questions still need to be answered here. Gilead, Amgen, Regeneron (GILD, AMGN, REGN): What Did the Payors Say? Color/Excerpts from Q2 EPS Calls (Michael Yee, RBC Capital Markets, 8/13/15) Most payors suggest pressure on PCSK9 launches and HCV utilization are slowing. We reviewed commentary by the major managed care companies to determine management’s views on the management of Hep C drugs and new PCSK9 drugs. As expected, several major payors made specific comments on PCSK9 and a desire to manage/restrict potentially high costs – so we are a bit cautious this could cause headline risk. RBC HC services analyst Frank Morgan believes the more similar the PCSK9s are the greater the likelihood the payors (and plan sponsors, i.e. employers) will push for exclusive deals based on whoever has lowest offered price (similar to playbook used in Hep C). Notably now, the tone is more modest on HCV drugs, where comments suggest utilization and sales may be slowing. Hep C: We reviewed transcripts and concluded that growing impact by Hep C seems unlikely and mostly in-line with decelerating scripts and sales. For example: 1) CVS said they're seeing "a flattening in the utilization trend of



the new Hep C drugs"; and 2) ESRX said that "the hep C contribution is probably marginally less as a percentage". This is consistent with flattening scripts and decelerating sales that we've seen – our APP predicts GILD Hep C sales of $11.6B USA and lower than consensus of $12.4B USA for 2015. While GILD management has stated that they still see strong USA demand (lots of script writing from docs but these aren't getting reimbursed...), we are also seeing DTC ads resurface that point to an attempt to reinvigorate interest/awareness but haven't yet seen a pick-up in scripts. On the upside, we still think OUS Harvoni could be underappreciated, although competition is coming from MRK next year, and we'll continue to follow payor comments. PCSK-9: Payors are speaking aggressively: 1) CVS said they expect to use "formulary exclusion strategy" to help manage PCSK9 costs and will try to attain "lowest possible price"; 2) ESRX pointed to potential for PCSK9s to "wreak financial havoc" and indicated they would try to interpret Praluent (REGN, covered by Adnan Butt) as "pretty narrow" to manage "appropriate use"; 3) Prime Therapeutics maintained that most patients are under-treated with statins and they believe statins are the "best and most affordable therapy", while PCSK9s may only be appropriate for "rare genetic" illnesses; and 4) CVS further petitioned doctors and regulators in an August 10 JAMA opinion letter to consider "responsible stewardship of limited health care budgets", to use a "step therapy [cycling through statins] and prior authorization", and to return to using LDL-C targets for treating high cholesterol (such a move would oppose the updated guidelines from the American College of Cardiology and American Heart Association). Contact us for the paper. As a reminder, the WAC for Praluent is ~ $13.4k/yr. We acknowledge risks for PCSK9 launch although so far pre-authorization forms we've seen aren't too arduous: 1) Payors could force exclusive deals and lower pricing 10%+ below consensus; unlike HepC drugs, Praluent and Repatha have similar efficacy/safety profiles, and we believe will have similar labels, too – thus, PCSK9s could be treated like "commodity", where plan sponsors and payors go with the lowest price. On the other hand, AMGN and REGN/SNY could refrain from a price war given similar drugs; 2) Payors could force step-through of Zetia, particularly as this goes generic within a couple of years; and 3) Force use of 2, or more likely 3, prior statins to determine maximally tolerated. Net-net, long-term we maintain our positive view on PCSK9s, and believe this could become a multibillion-dollar business for AMGN and CV outcomes studies in 2017+ should be positive and have a large efficacy benefit that payors will pay for.

IV. MEDTECH / DIAGNOSTICS ResMed Inc. (RMD): 3Q15 Sleep Center Survey (Mike Matson, Needham, 8/14/15) Investment highlights: We worked with Sleep Review magazine to survey US sleep centers. The survey included 327 responses which were received between 7/22/15 and 8/10/15. Overall, we view the results as modestly positive for RMD. Sleep centers indicated that both last 12 month and next 12 month patient volume growth has improved from our 1Q15 survey. RMD's products generally maintained the highest ratings and it looks likely to hold prescription share. And the use of home sleep testing continues to increase. Given positive sleep market trends and RMD's product cycle, we see potential for upside to revenue and EPS estimates and reiterate our Buy rating. Patient volume growth is continuing to improve: Patient volume grew 8% in the last 12 months (vs. 6% in our prior survey) and respondents expect patient volume to grow 9% in the next 12 months (vs. 8% in our prior survey). We note that this could understate growth since it may not fully reflect the increasing use of home sleep testing outside of the sleep center channel. We now forecast 7-10% growth (up from 6-9% previously) for the US sleep market during 2015, consisting of 7-8% volume growth, 4-5% mix growth, and price declines of 3-4%. RMD's flow generators were rated highest: RMD's AirSense 10 platform was rated higher (6.2 out of 7.0) than both Respironics' PR System One platform (5.9) and Fisher & Paykel's Icon platform (4.7). We expect Respironics to launch a new flow generator platform soon (DreamStation) but were unable to include this since it is not yet available. Its nasal pillow were also rated highest: RMD maintained the highest ratings in nasal pillows while its full-face and nasal masks were rated in line with competing masks. In nasal pillow masks, RMD's AirFit P10 was rated 6.0,



compared to Respironics' Nuance (5.2) and Fisher & Paykel's Pilairo (5.0). And in full face masks, RMD's AirFit F10 was rated 5.9, compared to Respironics' Amara (4.7) and Fisher & Paykel's Simplus (5.9). And in nasal masks, RMD's AirFit N10 was rated 5.6, compared to Respironics' Wisp (5.5) and Fisher & Paykel's Eson (5.6). RMD should hold prescription share in masks and flow generators: The rate of branded prescriptions was steady, with 55% of flow generator prescriptions and 66% of mask prescriptions being branded (vs. 56% and 69%, respectively, in our prior survey). RMD looks likely to maintain its flow generator prescription share and gain 0.2% of mask prescription share. Utilization of adaptive servo-ventilation (ASV) devices to treat complex sleep apnea has declined: Respondents use ASV for 63% of their complex sleep apnea patients (32% with Respironics Auto SV and 31% with RMD's Adapt SV). This is down from 76% in our prior survey (with use of both companies' ASVs declining) possibly due to the SERVE-HF trial results even though the trial evaluated patients with heart failure and central sleep apnea not complex sleep apnea. Diagnostics: Roche Enters the Drug Resistance Race via GeneWeave Acquisition (Vijay Kumar, Evercore ISI, 8/13/15) This morning Roche (not covered) announced that it had acquired GeneWEAVE (GW) Biosciences for a $190 MM upfront payment (and an additional $235 MM in milestone-based payments). GW is developing a technology to identify drug resistance organisms under 4 hours. Please find our key takes and link to our report below. Key conclusions: We see Roche’s acquisition of GeneWEAVE Biosciences as a positive, and potentially could make Roche a technology leader within the fast-growing space of antibiotic drug resistance testing. Traditional microbial identification (ID) and antibiotic susceptibility testing (AST) is a cumbersome process that can take as long as ~48 hours to get an answer: The process is labor intensive, and current players such as BDX (Kiestra / Phoenix), bioMerieux (Vitek mass spec / Biofire), CPHD (GeneXpert), BRKR (Biotyper), T2 (NMR), Abbott (Iridica platform) either play in the ID market or AST portion of the market. Accelerate Diagnostics is a newer player that promises to offer an integrated ID/AST solution in a short time period (~17 hours). Compared to this landscape, the GeneWEAVE’s ‘Smarticle’ technology promises to be a breakthrough and it promises to offer the fastest turnaround time (~4 hours). MRSA and C. Diff are poster children for drug resistance and have received the most attention given the associated mortality (accounts for 90% of drug-resistant mortality). However, from a disease burden perspective, MRSA and C. Diff account for only ~15% of drug resistance infections, with the remaining ~85% caused by a host of organisms that add significantly to healthcare costs. From an economic perspective, the direct costs of drug resistance is estimated to be as high as $20 Bn, and is a significant strain to hospitals. By potentially shortening the length of stay by ~1 to 2 days, rapid drug resistance testing could save $2-3k to hospitals per admission, and presents an attractive opportunity for these newer technologies. JPM Thoughts on Anthem Policy Update Covering Non-Invasive Pre-Natal Testing (NIPT) Use in Average Risk Women (Tycho Peterson, J.P. Morgan, 8/11/15) We wanted to make sure that you saw a policy update effective August 10th from Anthem on the use of non-invasive prenatal testing (NIPT) in average risk women carrying a single gestation. What happened? Specifically, the position statement from Anthem defines NIPT to be medically necessary under the following criteria:



The individual to be tested is carrying a single gestation; AND

The individual is using this as a screening strategy for fetal aneuploidies (trisomy 13, 18, and 21) regardless of risk status and understands the limitations and benefits of this screening paradigm in the context of alternative screening and diagnostic options.

Background: We note that use of NIPT in the average risk setting has been steadily ramping over the last year, with incorporation into guidelines considered to be a key catalyst for reimbursement (and hence wider adoption beyond the high risk setting). Most industry stakeholders, including Illumina (ILMN), have stated that they expect guideline changes to occur sometime in 2016. Our take: Significantly, yesterday’s announcement from Anthem comes in ahead of any guideline changes from the American College of Obstetricians and Gynecologists (ACOG), which continue to recommend conventional screening as the appropriate choice for first-line screening in the general population. Moreover, it could potentially cause other payors to follow Anthem’s lead and not wait for guidelines to be updated before choosing to reimburse NIPT in the average risk setting, opening up the possibility of a steeper/earlier ramp in NIPT revenue vs. current expectations. In terms of overall market size, we note that ILMN has stated in the past that while ASPs in the average risk setting will be lower, volumes will be “dramatically higher.” Specifically, management noted that adoption in the general population could expand volumes by 10x and NIPT revenue by 5-6x (assuming a significantly lower price point), with the global opportunity in the ~$5B range. We note that we currently model ~$100M in Verinata revenue in 2015, growing to ~$250M by 2017. For further details on our thoughts on the NIPT market opportunity.

V. HEALTHCARE SERVICES / HCIT Health Care D.C. Download - Vol. 4.16 (Wells Fargo Healthcare Team, 8/11/15) Congress begins extended recess: On August 6, Congress began a four week recess and is scheduled to return to a packed agenda the week of September 8. With only a handful of days where both the House and Senate are in session in September, Congressional leadership will likely need to quickly come to a budget agreement before the end of September. At this point, we believe a government shutdown is unlikely. However, controversy over issues like Planned Parenthood funding could make anything more than a short-term extension very difficult. In addition to a government funding agreement, Congress will need to deal with the Iran nuclear agreement, the highway trust fund, and the debt ceiling in the coming months. Hospital and post-acute legislation introduced: On July 29, Ways & Means Committee Republicans introduced three hospital-related bills that the Health Subcommittee Chairman, Kevin Brady (R-TX), has said he would like to consider as part of a larger hospital package this fall. The bills increase Disproportionate Share Hospital (DSH) funding in non-Medicaid expansion states; require the Centers for Medicare and Medicaid Services (CMS) to develop codes for surgical procedures that take into account inpatient and outpatient factors; and reform the Indirect Medical Education payment system. Additionally, two senior Ways & Means members introduced a bipartisan bill that would create a single shared value-based purchasing program for all post-acute providers. While we believe all of these bills face an uphill battle to become law in the near term, they likely lay the groundwork for future payment reforms in the acute and post-acute sectors. CMS issues provider pay rules: On July 31, CMS issued final rules for Inpatient Rehabilitation Facilities (IRF), Long-Term Care Hospitals (LTCH), Inpatient Psychiatric Facilities, and Inpatient Hospitals prospective payment system (IPPS). LTCHs seem to face some headwind with implementation of the new site neutral patient criteria, but all of the final rules were very similar to the proposed rules and in line with expectations, in our view. Judiciary committees will review health care consolidation: With the announcement of recent major health insurer deals, the House and Senate Judiciary Committees have announced hearings starting in September on health care competition and consolidation. While the deals will ultimately be up to federal and state regulators, we could see Congress take an active role in the oversight process in the coming months.



New health spending data released: On July 28, the CMS actuaries released new data estimating health care spending will grow at an average rate of 5.8% between 2014 and 2024. This is a noteworthy uptick from the 3.6% growth in 2013. Government actuaries attribute the increase to an aging population, increased health care coverage, and increased drug spending, among other things. Prescription drug spending alone increased 12.6% in 2014, the highest growth since 2002. Santangelo's Weekly Dose: Baptist Health South Florida Leverages Cerner (Glen Santangelo, Credit Suisse, 8/10/15) Baptist Health South Florida Leverages Cerner for Enterprise Wide Health IT System: On 8/4/2015, Cerner announced that Baptist Health South Florida selected its electronic health record and comprehensive population health management technologies across its system of hospitals, physician offices and outpatient locations. The implementation of Cerner's EHR and comprehensive population health management systems will enhance Baptist Health's existing Cerner Soarian Financials system for revenue cycle management solutions. The new IT solutions will provide an integrated, enterprise-wide health IT system to manage care for Baptist Health's more than 1 million patient visits each year. Ken Martindale appointed CEO – Rite Aid Stores: On 8/3/2015, Rite Aid Corporation announced that Ken Martindale, previously Vice President and Chief Operating Officer, has been promoted to the newly created position of CEO of Rite Aid stores, effective immediately. Mr. Martindale joined Rite Aid in 2008 as Senior Executive Vice President of Merchandising, Marketing and Logistics and was named Senior EVP and COO in 2010. Prior to joining Rite Aid, Ken served as Co- President, Chief Merchandising and Marketing Officer for Pathmark Stores, Inc. The company's press release noted that Mr. Martindale will continue report to John Standley, Rite Aid's Chairman and CEO. Allscripts (MDRX) helps first US government health organization earn highest level of EMR adoption: On 7/31/2015 Allscripts announced that The National Institute of Health (NIH) Clinical center, a part of the US Department of Health and Human Services, used Allscripts SunriseTM technology to achieve Stage 7 recognition, the highest level possible on the HIMSS Analytics Electronic Medical Record Adoption Model. The press release highlighted that the NIH Clinical Center is the first US government health organization to receive stage 7 recognition implying that the organization has demonstrated advanced capabilities including a complete EMR, Continuity of Care Document transactions to share data, data warehousing, and advanced analytics.

Trend Tracker: Trend Moderating, Well Controlled on a Per-Member Per-Month (PMPM) Basis (Kevin Fishbeck, Bank of America Merrill Lynch, 8/17/15) Q3 trend of 1.6% vs 2.4% in Q2, PMPM trend controlled: Our monthly Trend Tracker report focuses on tracking utilization through an index based on proprietary hospital volume surveys and industry data. In 1Q15, inpatient and outpatient utilization accelerated, partially offset by slightly weaker pharmacy and physician utilization. In 2Q15, all components of trend decelerated. Based on our Q3 data points, as well as qualitative commentary from companies, we project composite utilization index growth of 1.6% in Q3 versus actual composite utilization index growth of 2.4% in Q2 and 4.2% in Q1. Early in Q3 it appears each trend component has continued to decelerate, although inpatient is down only slightly. PMPM trend appears to be lower year over year: Based on the Gallup-Healthways Well Being Index, the uninsured rate for adults aged 18 and over was 11.4% in Q2. Assuming the uninsured rate is stable in Q3 (as it was sequentially in 2014), we estimate that this corresponds to a 3.3% year over year increase in the insured population. We believe that core trend remains controlled, consistent with strong Q2 results and trend commentary from companies. Reform skews utilization data: At its core, HC Reform is about expanding coverage, but the biggest swing factor for MCO investors is changes in utilization among those individuals already covered. For Q2 hospital admissions increased by 0.9% on average, implying that on a per member per month basis, admissions were actually down 2.4%



year over year. Even adjusted admissions, which averaged 2.9% growth in Q2, were down 0.4% on a per member per month basis. What are we looking for? Utilization inflection points: We look for definitive signs of an inflection point in utilization. The difference between relatively stable trend and modestly rising or falling trend is a distinction worth focusing on. On a PMPM basis, we believe utilization is likely to be under wraps in the near term. MCOs (generally) pricing for more normal utilization: Our 2015 pricing survey points to modestly more competitive pricing, in line with MCO commentary that the market is “competitive, but rational”. With MCOs pricing for a modest uptick in utilization, there could be modest upside if trend remains low.



VI. IPO BACKLOG

Source: Renaissance Capital. Includes IPOs with targeted proceeds of at least $50 million. P = postponed.

File Date Last Update (Days) Company Industry Deal Size (US$mm)

8/14/2015 3 Penumbra Medtech/Diagnostics $115

8/14/2015 3 Edge Therapeutics Biotech/Pharma $115

7/7/2015 7 GenSight Biologics Biotech/Pharma $100

6/24/2015 14 GC AestheticsP Medtech/Diagnostics $75

6/18/2015 41 Nabriva Therapeutics Biotech/Pharma $92

6/16/2015 62 Aeglea BioTherapeutics Biotech/Pharma $86

6/16/2015 35 BioCardiaP Biotech/Pharma $50

6/8/2015 19 Patheon HC Services $700

4/1/2015 103 GelesisP Biotech/Pharma $52

3/31/2015 109 AnteriosP Biotech/Pharma $51

2/27/2015 139 RainDance Technologies Medtech/Diagnostics $60

2/12/2015 161 ValeritasP Medtech/Diagnostics $75

2/11/2015 112 Klox TechnologiesP Biotech/Pharma $67

2/2/2015 196 IASIS Healthcare HC Services $300

9/19/2014 5 Exagen Diagnostics Medtech/Diagnostics $69

8/27/2014 314 NeuroSigmaP Medtech/Diagnostics $50

6/25/2014 347 rEVO BiologicsP Biotech/Pharma $50

2/11/2014 453 21st Century Oncology HoldingsP HC Services $100



VII. UPCOMING BROKER CONFERENCES

September 8 – 10, 2015 Rodman & Renshaw Annual Global Investment Conference New York, NY

September 9, 2015 FBR Healthcare Conference Boston, MA

September 9 – 10, 2015 Wells Fargo 10th Annual Healthcare Conference Boston, MA

September 16 – 17, 2015 6th Annual Credit Suisse Small/Mid Cap Conference New York, NY September 16 – 18, 2015 Morgan Stanley Global Healthcare Conference New York, NY September 9 – 10, 2015 Goldman Sachs 12th Annual European Medtech & Healthcare Services Conference London, England

September 10, 2015 BioCentury News Makers in Biotech New York, NY September 29, 2015 Ladenburg Thalmann Healthcare Conference New York, NY September 30, 2015 Leerink Rare Disease Roundtable New York, NY October 20 – 21, 2015 14th Annual Bio Investor Forum San Francisco, CA

November 4 – 5, 2015 Citi Global Healthcare Conference New York, NY

November 9 – 12, 2015 Credit Suisse Healthcare Conference Scottsdale, AZ

November 16 – 17, 2015 Stifel Healthcare Conference New York, NY November 18 – 19, 2015 Jefferies Global Healthcare Conference London, England December 1 – 2, 2015 Piper Jaffray 27th Annual Healthcare Conference New York, NY December 2 – 3, 2015 Evercore ISI MedTools & Outsourcing Forum Boston, MA December 8 – 9, 2015 26th Annual Oppenheimer Healthcare Conference New York, NY December 9 – 11, 2015 ROTH Healthcare Corporate Access Event Park City, UT January 11 – 16, 2016 J.P. Morgan 34th Annual Healthcare Conference San Francisco, CA February 24 – 26, 2016 BTIG MedTech Conference Snowbird, UT March 13 – 16, 2016 28th Annual ROTH Conference Orange County, CA May 23 – 25, 2015 UBS 2015 Global Healthcare Conference New York, NY



VIII. UPCOMING MEDICAL CONFERENCES

August 28 – September 2, 2015 European Society of Cardiology Congress 2015 (ESC) London, UK September 14 – 18, 2015 European Association for the Study of Diabetes 51st Annual Meeting (EASD) Stokholm, Sweeden September 25 – 29, 2015 European Cancer Congress Vienna, Austria September 27 – 30, 2015 Heart Failure Society of America Annual Meeting National Harbor, MD September 27 – 29, 2015 American Neurological Association 140th Annual Meeting (ANA) Chicago, IL

October 3 – 7, 2015 European Association for Cardio-Thoracic Surgery Amsterdam, The Netherlands October 7 – 11, 2015 The Retina Society Annual Scientific Meeting Paris, France October 7 – 11, 2015 24th Congress of the European Academy of Dermatology and Venereology (EADV) Copenhagen, Denmark

October 12 – 16, 2015 Transcatheter Cardiovascular Therapeutics (TCT) Conference San Francisco, CA October 16 – 21, 2015 American College of Gastroenterology Annual Mtg. Honolulu, HI October 16 – 21, 2015 American Society for Therapeutic Radiology and Oncology 57th Annual Meeting (ASTRO) San Antonio, TX November 5 – 7, 2015 Association for Molecular Pathology Annual Meeting Austin, TX November 6 – 11, 2015 American College of Rheumatology Annual Scientific Meeting San Francisco, CA November 7 – 11, 2015 American Heart Association Scientific Sessions Chicago, IL November 13 – 17, 2015 The Liver Meeting (AASSLD) San Francisco, CA December 8 – 12, 2015 San Antonio Breast Cancer Symposium (SABCS) San Antonio, TX



IX. ICR HEALTHCARE TEAM

John Mills Partner (646) 277-1254 [email protected] Bob Yedid Managing Director (646) 277-1250 [email protected] Stephanie Carrington Senior Vice President (646) 277-1282 [email protected] David Clair Senior Vice President (646) 277-1266 [email protected] Sarah Beaumont Vice President (646) 277-1264 [email protected] Lauren Stival Senior Associate (646) 277-1287 [email protected] Emma Nealon Associate (646) 277-1286 [email protected]








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