Earlier this month, CVS Health Corp (CVS) announced its acquisition of Signify Health (SGFY) for approximately $8 billion after a successful bidding war for the healthcare network. CVS intends to expand its reach to providing healthcare to consumers in the home with the acquisition. 

Meanwhile, the top transcripts of last week in healthcare highlight Johnson & Johnson (JNJ), Catalent Inc (CTLT), Gilead Sciences Inc (GILD), Alcon Inc. (ALC), and Align Technology Inc (ALGN). Stream’s expert insights suggest that gene therapies will replace traditional drug design within the next few decades and that orthodontists have started to move from Invisalign’s binding printers to in-house printing.

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CVS’ Acquisition of SGFY

SGFY is a leader in Health Risk Assessments, value-based care and provider enablement with a nationwide network of more than 10,000 clinicians. With this acquisition, CVS is expanding its healthcare services strategy with a network of outpatient providers. SGFY has extensive data systems, software and raw content which makes it a high quality asset for CVS Health.

CVS has never wanted to stay in retail long term and have made inroads out of it with its previous Aetna acquisition.

“I’m also very much on top of what’s going on with the different things that are going on in terms of acquisitions. For example, the most recent one with CVS purchasing Signify Health. CVS to me has never really wanted to stay in the retail business long-term. They, at one time, were a customer of Health Advocate, then they moved to Aetna, and then CVS bought Aetna. They have Aetna for its membership, and I think they’ll be going that route as they help out people at home with the acquisition of Signify.”

– Senior Executive, Health Advocate (Prior)

According to a BTIG report, it may be difficult to prevent Aetna from seeing sensitive SGFY data on competing plan members. Some plans may be uncomfortable with CVS Health, and Aetna, managing their in-home-evaluation efforts, since they may compete with Aetna in the market in some regions.

CVS is planning to close up to 900 pharmacies this year to expand into other areas.

“They’re moving to become even bigger in terms of the type of services they will be providing on a direct patient setting with Signify Health being at home. They already have MinuteClinic, but those have not really grown that much…CVS is in the retail pharmacy by closing pharmacies. I think it’s either 700 or 900 pharmacies they’re planning on closing this calendar year because, for business purposes, they want to get into other areas.”

– Senior Executive, Health Advocate (Prior)

SGFY gives CVS the leverage to expand its in-home services and provide direct patient care. 

“I see Signify Health as a way for them to continue to increase their growth and expand their growth by providing in-home services with their own physicians, contracted physicians, and healthcare providers to help people and provide direct patient care. They already have the billing system set up. It’s not that they have to create anything. They’ve got a lot of infrastructure in place. It’s a matter of modifying it for this new company and changing accordingly. Signify Health also has it this matter now, integrating it with the other parts of the CVS organization.”

– Senior Executive, Health Advocate (Prior)

Gone are the days of mom and pops hardware stores, and the good old fashioned CVS drugstore.

“Expert: When your dad needed a hammer, where did he go to buy it?

Analyst: The hardware store.

Expert: Yeah. The local hardware store. Franks’, that corner. Today, he goes to Lowe’s, Home Depot, Amazon or Ace Hardware probably.

I truly believe that’s where healthcare is going. It will be managed by CVS, Walgreens, Amazon, Humana, and maybe one or two other people. We’re seeing this as CVS buys Signify yesterday for $8 billion. They now have 190,000 primary care providers through telehealth. Walgreens signing with VillageMD, they now have 500 primary care. Not only do they own the insurance, they own the pharmacy, now they own the doctors.”

– Senior Executive, Community Health Systems (Prior)

The SGFY acquisition expands CVS provider network to 190,000 through telehealth and outpatient services, and further diversifies them away from pharmacy, which they are reducing by 700-900 stores this year.

Top 10 Expert Call Transcripts – Pharmaceuticals, Biotechnology & Life Sciences

1. REGN (Regeneron Pharmaceuticals Inc) – Former Competitor Believes Dupixent Will Lose Market Share to JAK Inhibitors in Adult Populations
2. MRK (Merck & Co Inc) – Sleep Specialist Thinks QUVIVIQ’s Daytime Benefits May Place It as an Opportunity for Treating Insomnia
3. JNJ (Johnson & Johnson) – Former Competitor Thinks Spravato’s Launch Was Hindered by COVID as Patients Were Administered the Drug and Observed for ~2 Hours
4. REGN (Regeneron Pharmaceuticals Inc) – Dermatologist Is Bullish on Opzelura and Oral JAKs for Atopic Dermatitis
5. GILD (Gilead Sciences Inc) – Former Executive Director Sees GILD’s Future in Gene Therapy and Non-traditional Pharmaceuticals
6. JNJ (Johnson & Johnson) – Former Janssen Regional Sales Director Sees an Unmet Need in Multiple Sclerosis Therapy
7. NVS (Novartis Inc) – Immunologist Believes Non-COVID Vaccines Are Entering a New Wave of Innovation and Discovery
8. CTLT (Catalent Inc) – Former General Manager Sees Strong Growth for the CDMO Industry and for CTLT Despite the Overhang From FDA Issues
9. VTRS (Viatris Inc) – Former Sales Director Believes VTRS’s Management Is Too Risk Averse and Stuck in Inertia
10. ZTS (Zoetis Inc) – Partner Sees Pressure on ZTS and Animal Health Product Manufacturers

A former executive director for biopharmaceutical CTLT believes that gene therapies will replace traditional drug design within the next two to three decades.

“I think gene editing is going to become the future of the platforms. They are not traditional pharmaceutical companies, but they are platforms. That is going to be the huge revenue generator and how many patients that can use their platform for. To get to any type of DNA sequencing, that is going to be the future. In terms of revenue, currently, most of these drugs, when they come into market, they have a seven-year copyright life, they cannot have generally, and the copyright cannot be in the patent. If you consider gene therapy and cell therapy, there is no worry about a patent expiring. These are all biologic manufacturing, patient-to-patient. There’s no drug.

Once we can reduce the cost for some of these expensive manufacturing, I think the revenue stream is going to go up because there is no content update and expiring…I think the revenue is mainly going to be in the CMO side, contract manufacturing for cell therapy, gene therapy, and also the platforms for gene editing and RNA sequencing platforms. I think maybe in 25 years, traditional drug manufacturing may go down, but I don’t see that happening immediately. At some point, I think gene therapy and mRNA-based treatment are going to take over, but it’s not going to happen overnight.”

– Executive Director, GILD (Prior) 

Top 10 Expert Call Transcripts – Health Care Equipment & Services

1. ALC (Alcon Inc.) – Former Competitor Believes ALC Could Catch JNJ as the Leader in Contact Lenses
2. ALC (Alcon Inc.) – Ophthalmologist Believes Accommodating Lenses Should Replace Multifocal IOLs
3. SOON (Sonova Holding Ltd.) – Former Specialist Expects SONVF Will Gain Share and Sees OTC as Neutral/Positive for the Industry
4. MDT (Medtronic PLC) – Former Sales Manager Believes MDT Is Hurt by Bureaucratic Organization and Too Much Restructuring
5. ALGN (Align Technology Inc) – Orthodontist Thinks 3D-Printed Aligners Pose a Risk to ALGN in Less-Complex Cases
6. ALC (Alcon Inc.) – Optometrist Prefers ALC Lenses as the First Choice for Patients
7. HUM (Humana Inc) – Former Director Believes the Competitive Advantage for EAPs Will Be Derived From Provider Treatment
8. ISRG (Intuitive Surgical Inc) – Sr. Bariatric Surgeon Sees ISRG’s Price as a Large Barrier and Will Be Integrating Cheaper Solutions from CMR to Fill the Gaps
9. ALGN (Align Technology Inc) – Dentist Believes the Clear Aligner Market Will Continue to Expand and Expects to Likely Remain Loyal to ALGN
10. CAH (Cardinal Health Inc) – Former Project Lead Believes CAH Has Solid Footing in the Korean Market but Lower-Priced Competitors Are a Challenge

It’s no secret to us that ALGN’s iTero scanners cast a binding effect on orthodontists. One orthodontist has been a loyal customer of ALGN for 15 years at their private practice and believes that 3D-printed clear aligners threaten ALGN in less-complex cases. Invisalign refuses to receive scans from third parties even though it very well has the capability to receive them. (They’ve done it once at the start of COVID-19.) I’ve read many transcripts where orthodontists have called this iTero binding effect annoying and some have moved to in-house only.

One expert wants to be bearish but can’t resist being bullish on Invisalign.

“Invisalign is one of those things where I hate them in some aspects because it is a business and I do feel you get exploited sometimes or they take advantage, but they just do things so well. Any concerns we have as orthodontists they’re always addressing. Their technology keeps getting better. Their products just keep getting more efficient.

As much as I’d love to be bearish on them, I’m still bullish on them as an orthodontist. I think they have a huge market they still haven’t tapped into globally. As much as I love to hate them, it’s a really good product. It’s like the Tesla of electric cars. That’s right now as much as I’d love to get into a more economical way.”

– Founder and Orthodontist, Private Practice

iTero scanners are getting kicked out the house as orthodontists move to in-house printing.

“I pay a maintenance fee to their iTero scanner and they just change that. There are shipping fees for all the refinements that you have to send in for. That can get costly. Now you’re adding to the cost of the lab fee to your cases. That rocked the boat with a lot of orthodontists wanting to switch to different products. Overall I think it’s the cost of doing business. They try to be as transparent as they can be about these costs but they definitely add in a lot more fees as you go.

I think the next big step just looking at the forecast of orthodontics and aligner treatment in particular is really going to be the in-house printing. They’re getting so close to perfecting it. I don’t think it’s there yet. I think that will be the next big jump where you’ll see offices moving in that direction just as they did with Invisalign. I don’t think it’s going to come any time soon, but I think that’s the next guiding post that will change orthodontics and in-house printing and doing your own aligner cases.”

– Founder and Orthodontist, Private Practice

Many orthodontists have claimed that ALGN’s Invisaligns are costly and that they are willing to use substitutes, like 3M, for low-complexity cases. One orthodontist has even claimed that 3M’s product is a 100% substitute for Invisalign. It’s only a matter of time before the product gap between the two closes.

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