Healthcare Set to Build on 2002 Trends; Premiums Rising
By VITA REED
The oscillators at Orange County’s healthcare companies should continue at a steady hum in 2003.
Perhaps the most unfinished business lies at Costa Mesa drug maker ICN Pharmaceuticals Inc. New bosses Robert O’Leary and Timothy Tyson face several key decisions, including the fate of Ribapharm Inc., the company’s biotech arm that was partially spun off earlier this year.
Ribapharm, still 80% owned by ICN, could be back in the company fold entirely in 2003.
O’Leary and Tyson also are expected to oversee a plan to divest ICN of operations in Eastern Europe,a region near and dear to company founder and director Milan Panic, a Serbian immigrant. Boosting sales of ICN drugs and development of new ones also are on the agenda.
PacifiCare Health Systems Inc., newly ensconced in its Cypress headquarters, enters 2003 with some momentum in its stock, which has risen some 20% since late October. Chief Executive Howard Phanstiel’s in the midst of a turnaround plan that’s seen the company lop off nearly 800,000 marginally profitable Medicare health maintenance organization members. PacifiCare also is counting on new products to move beyond its core HMO image.
But some on Wall Street still feel that the company’s 2003 outlook remains murky, noting that PacifiCare generates about half of its $12 billion in annual revenue from Medicare. Employers also are said to be growing tired of more-expensive HMO plans and are looking for lower-cost alternatives.
Another item to look out for in 2003 is whether turmoil at Tenet Healthcare Corp., which runs 10 OC hospitals, may play out at the local level. Tenet is the subject of a federal probe into aggressive Medicare charges.
Already, Tenet is talking with PacifiCare about a new contract, and some analysts have said that Tenet, because of the probe, could lose its ability to strong-arm plans into accepting heavy price hikes for hospital services.
Irvine’s Allergan Inc., which spun off its contact lens care and surgical business as Santa Ana’s Advanced Medical Optics Inc. in July, is expected to hone its focus as a specialty drug maker. Among other things, Allergan is looking at yet another use for Botox, its wrinkle-easing neurotoxin.
Allergan plans to seek approval to use Botox for hyperhydrosis, or excessive underarm sweating, in mid-2003, spokeswoman Christine Cassiano said.
“Also, we’re going to launch another ad campaign for Botox,we wrapped up the (initial cosmetic usage) campaign,” she said.
Things could get a little easier for medical device makers next year. In October, President Bush signed legislation backed by Newport Beach Republican Chris Cox requiring the Food and Drug Administration to improve its medical device approval process.
The GOP’s control of Congress next year could be a mixed blessing for healthcare companies. Drug makers could see a Medicare drug plan to their liking, but federal money for healthcare services could be in for cuts amid the budget deficit and possible Iraq war.
Meanwhile, employers again are bracing themselves to dole out more money for health insurance for workers and dependents. Insurance brokers and benefits consultants have predicted hikes of at least 10% in 2003, with smaller employers expected to take premium hits of 25% or more.
Behind the added costs: new prescription drugs and medical devices, ongoing prescription price rises, demands for more money by healthcare workers and continuing pressure on managed healthcare service from Wall Street to produce solid financial results.
PERSON to watch: JOHN WAREHAM
Beckman Coulter Inc.’s chief executive has a challenge on his hands.
Many of the medical diagnostic and testing company’s drug and bio-technology customers are putting off big-ticket spending for research and development.
That means they’re buying fewer Beckman centrifuges, DNA sequencers, robotics, workstations and test systems.
“The best insight we have is that a recovery in spending for (biotech and pharmaceuticals) could be as far out as late 2003,” Wareham said.
For 2003, Wareham said he projects Beckman’s sales to grow by 5.5% to 6.5% from 2002’s expected $2 billion in sales.
To hit projections, Wareham will have to lean on other buyers, including universities, research institutions and medical facilities. Medical users make up about 60% of Beckman’s sales.
Some on Wall Street believe Beckman has factors in its favor. Those include new product lines, favorable underlying industry trends in diagnostic testing and ongoing issues that Chicago-based rival Abbott Laboratories Inc. is having with regulators.
, Vita Reed
Company to watch: Volcano Therapeutics
Laguna Hills-based heart device startup Volcano Therapeutics Inc. plans to spend 2003 getting two products into clinical trials and gearing up for regulatory approval, Chief Executive Scott Huennekens said.
Volcano’s in a bid to win what Huennekens calls a “war” against heart attacks caused by what’s known as vulnerable arterial plaque. A trial for the company’s thermography catheter to detect arterial plaque is under way in Europe and is set to start here in the second quarter.
Last summer, Volcano landed $24 million in second-round funding from Domain Associates in Laguna Niguel and the venture arms of Johnson & Johnson and Medtronic Inc.
“You’ll see that we’ll probably acquire some other technology, potentially, some other companies in the next six months,” Huennekens said. “We’ll be pursuing different objectives that may require some additional financing.”
Volcano, which employs 21 people and plans to hire up to 10 more in 2003, is close to a deal with an unnamed big company, Huennekens said. Under that pact, Volcano would provide blood from the patients in the thermography catheter trial. Both companies would work together to develop diagnostic markers for vulnerable plaque.
, Vita Reed
