Healthcare’s been a profit powerhouse in Corporate America, and that’s unlikely to change even if reform comes down the pipeline, according to a recent article from CBS MarketWatch.
MarketWatch examined financial reports of 52 healthcare companies and looked at analysts’ projections for 2009 results, or, in some cases, the final results. On average, healthcare companies saw sales growth of 160% from 2000 to 2009, while profits were up 175%, the report said.
Few reform proposals now in Congress are expected to take a significant bite out of profits, according to the article.
And efforts to tamp down on rising healthcare costs are being put off until another time, the article said.
“Unless the government does something about prices, I don’t think you’re going to see anything hurting anybody,” Les Funtleyder, a healthcare analyst with Miller Tabak & Co., a New York investment bank, told MarketWatch.
But Funtleyder was cautious about a sector that’s deeply entrenched in Orange County.
It’s unlikely that medical device makers would be able to maintain “the breakneck pace of their margin growth” into the 2010s, he said. That momentum should slow, he said.
Medical device makers also are facing the prospect of a $2.5 billion tax on their revenue under current healthcare proposals.
“It looks like med tech will have to bite the bullet and take the margin compression,” Funtleyder said.
Device makers could follow drug makers and find a way to pass tax-related costs to doctors and hospitals, Funtleyder said.
Drug makers made news in late November by raising their prices 9% in anticipation of benefits cuts from health reform, the article noted.
Several companies with OC ties were highlighted in the report.
The biggest overall profit gainer during the past decade was New Jersey-based medical laboratory provider Quest Diagnostics Inc., owner of Quest Diagnostics Nichols Institute in San Juan Capistrano. Quest’s profit grew from $3.4 million in 1999 to a projected $729.5 million for 2009—a 21,000% change.
Among what MarketWatch called the “giant” healthcare companies, Abbott Laboratories, the Chicago-based owner of Santa Ana eye device and contact lens care maker Abbott Medical Optics Inc., posted a 140% profit gain to a projected $5.8 billion from $2.4 billion in 1999.
In addition to profits, healthcare stock prices have boomed in the past decade—prices have risen 260% between 2000 and 2009, second only to the energy sector’s 453% stock price hike during the same period, MarketWatch said.
Spectrum Partners
Spectrum Pharmaceuticals Inc., an Irvine drug maker, is finding more development partners for its bladder cancer drug candidate apaziquone.
Last month, Spectrum said it signed a deal to develop and commercialize apaziquone with South Korea’s Handok Pharmaceuticals Co. that’s valued at more than $19 million. Under the deal, Handok will bear all of the drug’s development and commercial costs.
Apaziquone is being developed for treating cancer that’s not become embedded in the muscle layer of a patient’s bladder.
Spectrum will receive an upfront payment, milestone payments and royalties from the deal.
The Irvine drug maker now is conducting a pair of late-stage clinical trials to test apaziquone’s safety and efficacy, and it is aiming to complete enrollment in the trials by the end of 2009.
In early November, Spectrum signed a deal with Nippon Kayaku Co., a Japanese drug maker, to develop and market the bladder cancer drug in Asia.
Spectrum also has a collaboration deal with Allergan Inc., also based in Irvine, for the drug candidate in North America, Europe and other markets.
Quality Systems Promotes
Quality Systems Inc., an Irvine medical software maker, promoted a pair of executives.
Patrick Cline, who has been with Quality since it bought Clinitec International Inc. in 1996, now is president and chief strategy officer of the company.
He most recently was president of its dominant NextGen Healthcare Information Systems subsidiary, which is based in Philadelphia.
Cline will report directly to Steven Plochocki, who retains the chief executive title. Plochocki previously had the president’s title.
Scott Decker, NextGen’s senior vice president, was named Cline’s successor as NextGen president. Decker is going to oversee NextGen’s day-to-day operations and report to Philip Kaplan, Quality’s chief operating officer.
Decker joined NextGen in 2007. His background includes founding Healthvision Inc., a company considered a pioneer in the health information exchange market.
ICU Contracts
San Clemente-based medical device maker ICU Medical Inc. said it has two new contracts to sell critical care products with MedAssets Supply Chain Systems, a group purchasing organization for hospitals. MedAssets, which is based in Atlanta, serves 1,700 hospitals and 30,000 non-acute healthcare providers.
