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Healthcare Weekly: Why Acquire CANO? (+ ALGN, TMO, IDXX, ZTS)

Alyees Qureshi | October 13, 2022

Trending tickers this week in Stream by AlphaSense’s top expert call transcripts are ALGN, TMO, and ZTS. We also have new developments with yet another potential acquisition by CVS Health (CVS). Let’s take a deeper dive below!

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Why is CANO a Potential Target for Acquisition?

CVS is in exclusive talks to buy Florida-based company Cano Health (CANO). CANO operates primary care facilities and supports medical practices that cater to seniors in select states. However, no deal has been announced yet.

CVS has been expanding rapidly into healthcare after its acquisition of Signify Health (SGFY) last month. But why is CANO potentially next?

According to the former Health Center Manager at CANO, the healthcare provider offers beautiful medical centers and a Spanish speaking staff to provide care in indigent locations. Read this Stream expert call transcript below:

Analyst: “I’m curious, why would Cano be a good acquisition target? Let’s say you are CVS or some other healthcare player. Why would you go with Cano?”

Expert: “I would say the potential of growth, the potential of the market in certain areas. If you come to San Antonio, you don’t know what the majority of the heritage is here. The majority, I would say, is Hispanic. They are really focusing on whatever the indigent people location that they’re in.

That’s where they’re setting their clinics in. They’re not going to the high-dollar buildings. No, they’re coming to the area, the neighborhoods where it’s needed, where people do not have the care. The areas that we’re at are the poor areas of town. We’re bringing in this beautiful facility with these new beautiful models and we have certain guidelines that we have to master to be able to keep our patients educated and healthy.

Our goal is for these patients not to be admitted to the hospital, to be able to catch whatever illness they have prior to having to go to the hospital. My goal was every patient had my card and had my cell number. If they had a problem, they couldn’t get through the line for whatever reason, they would call me.”

Health Center Manager, CANO (Prior)

Top 5 Expert Call Transcripts – Health Care Equipment & Services

  1. HUM (Humana) – Former Software Engineer Believes HUM Is Not Very Tech Sophisticated  Although It Has Improved in the Past Couple Years
  2. ALGN (Align Technology) – Competitor Believes the Direct-to-Consumer Model Is the Biggest Competition Right Now for Invisalign
  3. LH (Laboratory Corp) – Former VP of Network Growth Is Bullish on the Genomics Capabilities to Expand Marginal Revenues for LH
  4. CAH (Cardinal Health) – Former DC Manager Sees Growth in Home Health Segment but Thinks CAH Is Likely to Lag the Market
  5. UNH (UnitedHealth Group) – Former Sr. Strategic Account Executive Believes UNH Needs to Focus More on Patient Advocacy and Less on Stock Price

The former Partner and Vice President of Sales at Global Dental Science believes that the direct-to-consumer (DTC) models have flooded the market and are the biggest competition right now for Invisalign. Based on recent expert call transcripts, I’ve become bearish on DTC brands as some orthodontists claim that DTCs have excellent marketing but their products don’t usually end well for consumers.

As far as what is the market in the last 24 months, I still believe that the direct-to-consumer model is the biggest competition right now for an Invisalign. The overall direct-to-consumer model. I might be wrong, but there are so many companies that have entered that space and they’re willing to take a small chunk of the business that they peck at whether it’s the SmileDirectClub or the Angelalign.

The list is as long as my arm of the clear aligner companies. The Smileie, I don’t know, ALIGNERCO. They’ve all got their discount coupons. I don’t know as a patient how you would keep it straight and maybe that’s the benefit of Align and their stronghold in the market in the dental office. Maybe the direct-to-consumer model becomes too confusing to the patients and they’re willing to succumb to their dentist being the authority.

Partner and Vice President Sales, Global Dental Science (Prior)

Many orthodontic offices have moved to in-house printing for major cost savings which also competes with the direct-to-consumers models. I’m very bullish on in-house printing after reading Stream’s expert call transcripts as many orthodontists have started dabbling in printing during the COVID pandemic. One contributing factor is the Binding Effect of iTero Scanners that has pushed many orthodontists away from ALGN.

There’s also a decreasing need to buy clear aligners and manufacture them on your own. A lot of orthodontic offices are moving to scan a patient, design your, whether it’s 30 weeks or 52 weeks or whatever, in-house, and then print the clear aligners right there in your own facility and deliver those to the patient. That’s where I see the office is going. That’s such a dramatic savings.

They can buy a disc of plastic for $1. They can buy a printer for $6,000. They can have a scanner that they get for $10,000 and the design software and boom, they’re off to the races. They can pay all those off in 30 days, 45 days as long as you got enough patients and market your own set of clear aligners in your practice. It does compete with the direct-to-consumer model.

Partner and Vice President Sales, Global Dental Science (Prior)

Top 5 Expert Call Transcripts – Pharmaceuticals, Biotechnology & Life Sciences

  1. TMO (Thermo Fisher Scientific) – Former Director Expects TMO Will Outgrow Peers in China but Sees Risk From Contraction in Pharma Investment
  2. ZTS (Zoetis Inc) – Veterinarian Would Like to Move to ZTS From IDXX
  3. CRL (Charles River Laboratories International) – Former Director Believes FDA Modernization Act Could Be Both A Threat and Opportunity to CRL
  4. CRL (Charles River Laboratories International) – Former Client Manager Thinks the Decision to Pay More for CRL is Based on Quality
  5. TMO (Thermo Fisher Scientific) – Former Sr. Product Manager Thinks The One Lambda Business Within TMO Could Become More Challenging as It Moves From a ~2 Competitor Market to a ~5

IDEXX Laboratories Inc (IDXX) has been hurting from a lack of innovation and losing share to ZTS. Last month, we saw a former IDXX director with bearish sentiments on IDXX and its need for new leadership. This week we have a veterinarian wanting to switch from IDXX to ZTS diagnostic equipment. It’s safe to say that Stream’s expert call transcripts provide you with different operator perspectives.

My experience with IDEXX has never been that great. They have a lot of time to focus on, I think, maybe a bigger clinic or multiple practices. Also, they will put us on the back burner most of the time. Unfortunately, I had to sign a contract two months ago with IDEXX…

The things that I don’t like about IDEXX is it takes a lot of blood sample to run for the chemistry or the hematology, and their supplies are expensive…

If I have a choice, I usually don’t want to use IDEXX. That is where I like Zoetis bloodwork machines. One thing is the sample size is really, really less that it is required to run to get the testing done for patients with Zoetis machines like [Avian]. I can take half a microliter and get a lot of information from that, which is absolutely not possible with IDEXX bloodwork machine. That is the major thing that I like about Zoetis.

I like Zoetis because of their in-house heartworm tests, and giardia tests, and all the VETSCAN. After they developed this ABAXIS, it takes pretty little sample. The IDEXX thing takes around 10 minutes. With Zoetis, I get quick results with their in-house testing as well.

Owner and Veterinarian, Private Practice (10 years)

IDXX demands target revenues for each practice using its bloodwork machines, whereas ZTS does not. This expert believes that IDXX’s practice is unethical.

When signing a contract with IDEXX, it is really, really difficult to get out of them. You probably have to involve a lawyer and all of that stuff…

Now, it is not just about their bloodwork machine, but they will usually sign up a contract price with 60 years and then they will send the target for the practice depending on how much revenue they are making. That is really, I will say, unethical because… It is not up to the company to tell us how much bloodwork we should run, how much revenue we should generate from bloodwork machines and all. That’s a real ethical thing about Zoetis, which they are doing. In that way, it drives more revenue if they don’t push on the bloodwork machines, which is happening all the time.

[ZTS] also don’t push through the contracts or anything like that. If you pay the bloodwork machine, that’s yours and you can use it as long as you want to. There is no goal-setting for revenues, all these too are very ethical thing to do because we would be doing a lot of bloodwork anyway.”

Owner and Veterinarian, Private Practice (10 years)

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