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Original Source: FD (FAIR DISCLOSURE) WIRE
. Tom Bell, Accredo Health, Inc., General Counsel and Secretary . David Stevens, Accredo Health, Inc., Chairman and CEO . Joel Kimbrough, Accredo Health, Inc., CFO and Treasurer
ACDO reported net earnings of $20.2m or $0.41 per diluted share. ACDO expects FY05 revenue of $1.85-1.9b and raised diluted EPS guidance from $l.53-1.60 to $1.56-1.61. Q&A focus: impact of decreased Aetna business and increased Medco business, SG&A expense increase, IVIG supply, hemophilia Medicare and Medicaid business, Avonex/Tysabri issues.
A. Key Data From Call 1. 2Q05 GM = 17.8% 2. 3Q05 GM Guidance = 17-18% 3. 2Q05 Net Earnings = $20.2m 4. 2Q05 Diluted EPS = $0.41
5. FY05 Revenue Guidance = $1.85-$1.9b 6. FY05 Diluted EPS Guidance = $1.56-1.61 7. FY06 Revenue Guidance = $2.15-2.225b 8. FY06 Diluted EPS Guidance = $1.78-1.84
S1. Business Overview (D.S.) 1. Revenue Expansion: 1. Pleased with 29% revenue expansion during the Dec. qtr. 1. Especially in the breadth of the growth across many product lines. 2. Twelve of 21 product lines exceeded 29% revenue growth during the qtr. 3. Eight of 21 current product lines should exceed $100m in sales each for Accredo during FY05. 2. Pulmonary Hypertension (PH) Market: 1. Diverse growth was especially evident in pulmonary
hypertension market. 1. Both Remodulin and Tracleer continue to grow much faster than the avg. aggregate growth of all Accredo's products. 2. Believe continuing increase in Tracleer patients is not only expanding the PH market, but is also creating a bolus of patients which will migrate into more clinically challenging
and expensive mono and combination therapy in the future.
3. With recent approval of Ventavis from CoTherix, ACDO will soon
be launching the first inhaled product for this PH patient
population. 4. Because of its administration, believe Ventavis will help further expand ability to treat patients suffering from this very difficult life-threatening disease. 5. During the Dec. quarter United Therapeutics received approval from the FDA for Remodulin IV administration. 1. Provides another important PH treatment option for ACDO's physicians and patients.
6. Combination of all these events is an indicator that very
important pulmonary hypertension franchise should have a
bright future. 3. Medco: 1. During the qtr. Accredo was able to complete the initial transfer of approx. 10,000 patients from Medco some three weeks ahead of 12/31/04 target. 2. This transition was virtually flawless for both Medco and Accredo
1. Patients were quickly integrated into Accredo's clinical model. 3. Medco also appears to have more patients than originally
believed in ACDO's contracted product lives. 1. Should benefit Accredo in future months. 2. The exact number is difficult to estimate because of the normal Jan. change in payer/employer contracts.
4. In specialty pharmacy, Medco appears to have generated new
business that more than makes up for the loss of their FEP
contract. 5. Transfer of FEP patients to other providers and the influx of new patients to Accredo may cause some variation in Accredo's Jan. revenues. 6. Additional patient transfers to Accredo from Medco are also being generated from the conversion of patients from Medco's retail and major medical sales efforts.
7. Initial focus on these objectives has been very productive for
both Medco and Accredo. 4. Avonex: 1. During the qtr. Avonex patient population continued to grow in spite of the success of Biogen Idec's newest multiple sclerosis product, Tysabri. 1. Many new Avonex patients represent market share gains of existing patients from other competitors. 2. Biggest changes observed in the qtr. in multiple sclerosis was that most patients clinically failing Avonex were moving to either Tysabri or, to a lesser extent, a combination therapy of Tysabri and Avonex.
3. Expect ACDO's new naive Avonex referrals to decline in future
months as physicians more often use Tysabri as a first line of therapy. 5. Synagis: 1. In last earnings conference call, commented that ACDO continued to experience increasing sales of the seasonal product Synagis. 2. Have been very successful in demonstrating to payer customers that ACDO has historically kept RSV patients on therapy. 1. Reduces or eliminates emergency room visits and hospitalizations. 3. Clinical and financial successes with Synagis have exceeded expectations. 1. Now expect Synagis revenues during FY05 will grow in the 25-30% range over 2004.
S2. Operating Results and Outlook (J.K.) 1. 2Q05 Overview: 1. Pleased with revenue growth during the qtr. 1. Both QoverQ and sequentially. 2. For the six-month period ended 12/31/04, revenues increased approx. 27% over comparable period last year. 3. Equally important is the diversity of the growth among various
product lines. 4. Incremental revenue derived from of the expanded Medco relationship continues to meet or exceed initial estimates of $100m in FY05. 2. 2Q05 Gross Margin: 1. As expected, GM percentage decreased slightly to 17.8% in 2Q05 compared to a normalized level of 18% in 1Q05. 2. Actual gross market percentage was 18.4% for 1Q. 1. This included the effect of the retrospective payment increase of Remodulin that was recorded in 1Q. 3. Primary impact on GM in 2Q05 resulted from a shift in the product mix in the qtr., not from any noticeable product
margin deterioration. 4. GM percentage shaped by: 1. Addition of strong Synagis revenue in the qtr. 2. Increasing Medco product revenue contribution: 1. Primarily Avonex and growth hormone product lines. 3. Stabilization of IVIG product margins.
5. Believe that GM percentage for 3Q05 will be in the 17-18%
range. 3. 2Q05 Financial Results: 1. G&A …