Follow up roundup: Amwell to reverse stock split to avoid delisting (updated), Amazon Clinic folded into One Medical, Amedisys divesting to close UHG deal, latest on Steward Health’s antics and $7M spying, Masimo’s shareholder fight (latest)

July 2, 2024 | by

Amwell will reverse stock split to fix their pending delisting on the NYSE. The board of directors approved on 28 June a 1 for 20 reverse split. This will remedy their non-compliance with NYSE regulations requiring an average closing price of above $1.00 over a consecutive 30 trading-day period [TTA 5 Apr]. Shareholders approved the move at their meeting on 18 June. The NYSE notice was given on 2 April and the reverse split will happen at the market open on 11 July, well within the six-month window. Amwell Class A shares closed yesterday at $0.27 so that condensing 20 shares will bring the share price around $5.40. Amwell’s 2024 is forecast with revenue in the range of $259 to $269 million and adjusted EBITDA in the (less) red between ($160) million to ($155) million, with no breakeven in sight until 2026. Their Q1 posted a $73.4 million net loss. Amwell has also released 10% of staff since the palmier days of 2023. Amwell, like Teladoc, continues to struggle in a stand-alone urgent care model that is now obsolete. Release, Healthcare Dive

Update 11 July: Amwell shares opened today at $6.52, and as of midday were trading at $7.51. So short term, the reverse split is working to plump up the shares.

Amazon says goodbye to Amazon Clinic by folding it into One Medical. This should come as no surprise to Readers who noted the  May departure of Clinic’s general manager Nworah Ayogu, MD to VC Thrive Capital with no replacement or search. Amazon’s announcement on 27 June was typically upbeat in renaming the service as One Medical’s Pay-per-visit telehealth. The improvements they claim are:

  • Pay-per-visit telehealth for 30+ common but minor conditions, like pink eye, the flu, or a sinus infection
  • A One Medical monthly or annual membership plan that includes on-demand virtual care and same or next-day appointments at 150+ One Medical primary care offices
  • More affordable–messaging/asynchronous visits are now $29, formerly $35, and video visits at $49, formerly $75. 

The catch–existing Clinic members have to log into One Medical to access their records and the service. Amazon is also propping up One Medical through Prime membership, offering a better deal at $99/year and non-Prime individuals for $199 per year. Amazon does not disclose users, growth, or revenue for either Clinic or One Medical. Healthcare Dive

The long-delayed UnitedHealth-Amedisys home health deal moves closer to closing. Amedisys and UHG’s home health operation under Optum will be divesting some of their locations to VitalCaring Group to avoid Department of Justice anti-trust concerns. The divestiture is contingent on the acquisition closing, now projected in second half of this year. The number of locations was not disclosed though earlier speculation had estimated it at 100. UHG’s offer to acquire Amedisys was made in June 2023 for $3.3 billion in an all-cash deal. It would be additive to its earlier $5.4 billion buy of LHC Group, now part of Optum. With the divestiture, analysts do not see any impediments to a closing, though it had faced opposition in Oregon in March and DOJ opposition since it was announced. This Editor remains sanguine about a successful closing. After UHG won versus DOJ in the Change Healthcare acquisition, “DOJ has a long memory, a Paul Bunyan-sized ax to grind, and doesn’t like losing.” Expect a few more impediments tossed in their direction over the next months. FierceHealthcare , Zack’s Research

The latest episodes in the continuing soap opera of Steward Health involve both Optum and James Bond moves on their critics. Optum had offered back in March to buy their practice groups under Stewardship Health, which stalled with first the Massachusetts Health Policy Commission (HPC), then their bankruptcy. That offer is now off, leaving Steward in the lurch. It was critical to $75 million of Steward’s debtor-in-possession (DIP) financing as recently as 13 June [TTA 14 June]. The deal would have been problematic anyway for Optum as they are under DOJ scrutiny not only for Amedisys but also because Optum controls or has arrangements with 10% of US physicians, 90,000 to date. Healthcare Dive They also settled recently with DOJ for $20 million on Optum Rx’s filling orders from a mail-order pharmacy in Carlsbad, California between 2013 and 2015 for Schedule II drugs: opioids, benzodiazepines, and muscle relaxants. Healthcare Dive

Adding to Steward’s piles of misery are the latest revelations that Steward financed a $7 million spy operation on their critics. This loony aspect to the Steward endgame involved contracting with UK investigators on surveilling a critical former executive, a British financial analyst, and a Maltese politician to find compromising actions between 2018 and 2023. The investigations were allegedly authorized and prioritized by Steward’s top executives while Steward struggled to pay bills for its hospitals and practices. Payments to the investigators were routed through Steward’s Malta operation against their critics in Malta and elsewhere. Steward at the time was embroiled in a dispute around their management of hospitals in Malta, which was eventually investigated and terminated by a Maltese court last year.

One example: the UK firm Audere “collected embarrassing personal information and photographs of a former Steward employee after Steward feared he would leak financial information to its auditor.” Another was the investigation and harassment of a British financial analyst, Fraser Perring, critical of Steward’s actions in its dealings with Medical Properties Trust (MPT). He was followed, his home CCTV was disabled, his home was broken into, family members and his partner were followed. Perring was also being smeared on Twitter through an account set up by Audere. There is much more on this in OCCRP’s report, published (paywalled) in the Boston Globe and Times of Malta. OCCRP’s full report and findings are here. FierceHealthcare

Electronics, audio, and medical device company Masimo continues to fight a hostile activist investor, Politan Capital Management. In December 2023, Masimo notched a significant win via the International Trade Commission versus Apple’s Series 6 and later Watches that forced Apple to disable its pulse oximetry (SpO2) sensors and software that violated Masimo’s smartwatch patents [TTA 28 Dec 2023]. Politan descended on Masimo in April accusing CEO and chairman Joe Kiani and others of mismanagement, including the 2022 acquisition of Sound United’s audio brands. It won two seats on the Masimo board of directors at the last shareholders’ meeting and is demanding two more seats at this year’s meeting on 25 July which would give it effective control.

The latest in the proxy fight is that the chief operating officer, Bilal Muhsin, will depart after 24 years at Masimo if Joe Kiani is forced out. The brief conditional resignation was sent to Masimo’s lead independent director, Craig Reynolds. Mentioned in the resignation was that he would refuse to work with Quentin Koffey, a Masimo director and chief investment officer of Politan Capital. More letters like this may be coming as reportedly Masimo management has urged employees to sign similar letters. Strata-gee, MedTech Dive  

Politan was the investment group that upended Centene Corporation and ousted most of Centene’s board plus 25-year CEO Michael Neidorff in 2022 shortly before his death on 7 April 2022 [TTA 18 Dec 2021]

Update: 300 engineers in Masimo’s healthcare division expressed specific support for Joe Kiani against Politan and Quentin Koffey in an open letter. “We wish to convey our deepest concern if Quentin Koffey and Politan Capital take control and Joe Kiani is removed. We are committed to Masimo because of the vision and innovation he pushes and drives us to deliver. The prospect of losing our founder and CEO threatens to derail the progress we have made and jeopardize the future of Masimo.” They also expressed that they may leave. “We, the undersigned from Masimo Healthcare Engineering, wanted you to be aware that we may not continue with the company if Joe Kiani is replaced by Quentin Koffey and Politan Capital.” This follows on other letters written by international regional managers and presidents in June also stating their support and warning that they may leave if Kiani leaves. The annual shareholder meeting is scheduled for 25 July.   MedTech Dive

However, Masimo is also embattled on other fronts: earlier in June, DOJ and FDA announced their investigation of problems with their Rad-G and Rad-97 SpO2 devices leading to a recall and the SEC is investigating potential accounting irregularities and internal control deficiencies. MedTechDive

Walgreens gives up on VillageMD, will sell to reduce stake below majority, closing underperforming stores, revising profit outlook– and in abandoning Boots sale, managing director James quits

July 2, 2024 | by

Q3 results are in for Walgreens Boots Alliance (WBA) and it was largely a bummer, especially if you work for VillageMD. Their financials have taken a hit from crashing US consumer retail spending and the softening pharmacy business. Adjusted earnings per share (EPS) were $0.63, down 36.6% on a constant currency basis compared to Q3 last year. The full year guidance was lowered from Q2’s outlook of $3.20 to $3.35 EPS to $2.80 to $2.95, again citing US trends. Q3 sales were up 2.6% to $36.4 billion, up 2.5% versus last year. Release

Industry estimates are that fully one-quarter of Walgreens’ 8,700 US stores are being reviewed for performance and closure, based on industry estimates and Tim Wentworth’s remarks on the investor call last week. Healthcare Dive, FierceHealthcare

Mr. Market didn’t like the WBA news at all, dropping the share price from the call last week to today, closing at $11.58, its lowest level in years. Nine years ago, it traded just over $95 per share. Its consistently steady price and healthy dividend save the last couple of years gave it a broker nickname of a ‘widows and orphans’ stock.

The bad news for VillageMD is that it’s for sale. Walgreens plans to lower its ownership below a majority holding and not to grow that line of business, instead focusing on retail pharmacy. Lowering its ownership stake means it has to find a buyer or buyers for at least 14 points of its 63% share. And it’s been a money pit. It not only upped its share from about 30% to 63% in 2021 for $5.3 billion but subsidized the acquisition of Summit Health/CityMD by VillageMD in November 2022 for $8.9 billion ($3.5 billion from WBA). The rough calculation of $10 billion [TTA 28 Mar] spent under CEO Roz Brewer’s watch does make it a bit easier for CEO Tim Wentworth to slash away. 140 locations were closed by March with a total now estimated at 160.  

But where to find a buyer/investor? It won’t be Cigna. Last May, Cigna wrote off $1.8 billion of its 2022 $2.2 billion investment which gave it a ‘in the teens’ share [TTA 2 May]. WBA wrote it down as well; last quarter, a $12.4 billion non-cash impairment charge related to VillageMD goodwill netted a $5.8 billion writedown. It’s no moneymaker though its revenue this quarter grew 7%. An industry analyst estimated VillageMD’s 2023 losses at $800 million last April. Primary care is no longer a hot investment. Even mighty CVS is looking for a private equity investor in Oak Street Health, which implies that CVS doesn’t want to put more than the bare minimum into expanding OSH’s clinics [TTA 29 May].

This Editor’s own interesting take on an option. VillageMD’s new COO/president is a Centene ‘retiree’, Jim Miller. Previously, he had the same positions for two years at Magellan Health. He was there when it was acquired by Centene in 2022 and stayed on till retiring in April. Magellan’s holdings have largely been sold off since activist investor Politan stepped in [TTA 10 Apr]. Could it be that Miller may find investors to buy or spin it off and go private?

Shields Health not for sale and neither is Boots, which didn’t make the latter’s managing director happy. On the investor call, Wentworth also confirmed that specialty pharma operation Shields Health Solutions, bandied about as a sale candidate, will be retained. It grew 24% in Q3 versus year prior. Boots pharmacies in the UK will remain off the WBA selling block in another about-face. Right after last week’s investor call, Boots’ managing director Sebastian James announced his departure, effective in November (!) reportedly for a European eye surgery business. James had been with Boots as MD since 2018 and oversaw 13 consecutive quarters of market share growth including this one, with a 6% rise in UK comparable retail sales. It’s hard not to speculate that either James had lined up a buyer or he tired of the push me-pull you from management. Another factor that doesn’t inspire confidence. Morningstar UK

Wentworth continues to have a rough ride with some speculation as to why WBA continues to dig itself into a hole and when it will turn around.