Cegedim SA and Simcere Pharmaceutical Group Presented at 2013 J.P. Morgan Healthcare Meeting

SAN FRANCISCO, January 8, 2013 – Several emerging international healthcare firms presented their information to investors and potential partners at the 31st Annual J.P. Morgan Healthcare Conference held at the Westin St. Francis Hotel near Union Square in San Francisco.

Most of the smaller firms presented their talks at the conference’s smaller rooms.  This is where I found the Cegedim SA presentaiton.

Emerging European Firm

Jan Eryk Umiastowski, Chief Investment Officer gave a talk about his firm Cegedim SA, a private company that is located in France. He said that the company is a market research firm for pharmaceutical market development companies.  The company competes with companies like IMS Health.

He said that Cegedim collects prescribing information from pharmacies and doctors of what pharmaceuticals are being used by patients.  He said that they capture data that includes drug product name, quantity and so on to create databases.

Jan said that the company provides an IT application for claims transaction management.

He showed a bright green, credit card-like, card. He said that the patient goes to the pharmacy and presents the special green charge card, swipes the card and the IT application completes the transaction overnight.  Cegedim receives its revenues from pharmaceutical firms, doctors, doctors office groups, and others.

Jan said that the business model is subscription-based and there is a high switching cost to its business clients.  Jan said that the Cegedim works with Walgreens and is Number One in the countries that they operate in.  Their IT application runs on Windows 8. Their main clients are pharmaceutical companies in North America, Europe, and emerging countries.  In the future, the firm is looking for a 20% margin.  2012/Q3 was the first time that they were receiving pharmaceutical company business.

Emerging Chinese Firm

I learned that another group of emerging international firms was part of the Asia and China Forums. These meetings were located in the Victor’s room on the 32nd floor. The China meeting hosted fifteen or so presentations from China-based healthcare companies such as Simcere Pharmaceutical Group.

A woman executive gave the presentation about Simcere Pharmaceutical Group (NYSE: SCR).  The firm is located in Nanjing, China.  This young pharmaceutical firm started life as a pharmaceutical distributor.  The firm later became a fully integrated pharmaceutical company and currently has about 4,000 employees. The company recently changed its CEO and its business strategy.  Its disease focus is in oncology, strokes, cardiovascular disease, infectious diseases and pain.

According to the executive, the firm is doing cost cutting of its SG&A, and plans to grow its R&D operations.  She said that the company has partnerships with Merck and Bristol Myers Squibb.  Its pharmaceutical portfolio includes Endostar and others including branded generics.

She highlighted the financial performance and said that 2012/Q3 revenues were RMB 526 million and the first nine months revenues were RMB 1,543 million.  R&D investment has grown RMB 2009 to 2012Q1-Q3 as listed in this table:

Table: R&D Investment

Year 2009 2010 2011 2012/Q1-Q3
R&D SpendingRMB, millions 133 126 199 168

The executive said that market uptake of pharmaceuticals in China is gradual.  The company has eleven drug candidates in the pipeline.

Simcere Pharmaceuticals has several partnerships including:

  1. Merck J-V, Signed in 2011, 630 sales reps sell six products.
  2. Bristol Myers Squibb, Dev. metatinib, IND 09/2012
  3. Apexigen, antibody deal, BD0801 IND, 10/2012

Simcere Pharmaceuticals is looking for manufacturing partnerships to expand its manufacturing base. The company’s listing status in the US is part of its strategy to play in the US-based style of business to attract more US partners

J.P. Morgan Healthcare Conference, Kaiser Permanente Aims for “Total Health”

SAN FRANCISCO, Westin St Francis Hotel, January 7, 2013. The Alexandra’s room at the 32nd floor was filled with attendees. Many people were standing around the seating area and out into the hall to hear speakers from Kaiser Permanente (KP) give their talk.

President and COO, Bernard Tyson opened the KP presentation with basic details about the big health care company.  He said that the not-for-profit HMO is in nine states and has 37 hospitals.  Its facilities occupy some six million square feet.  He said that the firm generated about $50 billion in revenues in 2012.  The firm has 17,300 doctors.  Their mission is to provide the highest quality care to the most patients possible.  Bernard said “This is the same mission created by Henry J. Kaiser when KP was founded.”  KP is active in prepaid care, is technology enabled and stands for “Total Health.”  He said that the future of it care focus has three parts: Quality, Accessibility, and Affordability.  Referring to J.D. Power member quality studies, Bernard said “Quality is rated as #1 with 5 stars.  Seven out of eight regions are rated at 5-stars.  Northern Calif. is rated at 5-stars.”

Tyson went on to say that they have made improvements in care delivery.   KP uses the EPIC information technology system that helps KP deliver healthcare.  He said that quality is an increasing trend and that variation in practices is going down, which is a good thing. With its race-based data system, KP doctors can to look at all ethnicities, which helps to build good data.

Tyson said going forward KP would mainly focus on:

1. Staffed beds (in-hospitals)

2. Face to face meetings (in doctor’s offices)

3. In-home care (in patient’s home)

4. Technology/ virtual care.  (email and mobile apps)

Bernard said that in 2012 KP had 20 million e-visits to doctors and expects the see this activity grow to 25.3 million in the next few years.  He said that in 2012, KP had about 40 million face-to-face visits to doctors.  He is excited about the future.

He introduced Kathy Lancaster, Executive VP and CFO.  Kathy provided some color on the financial details.  She said that quality drives affordability, so investments help the KP regions to achieve NCQA (National Committee for Quality Assurance) goals that ultimately drive better financials. She mentioned that KP received the J.D. Power quality award (2012 national member health plan quality survey).  She said that the investment in quality dramatically drives down affordability costs. The “over-65” (population) group is growing at 3X the rate of the “under-65” group.

She spoke of EBITA data and said that cash is at 3.3X of debt. Managing cash internal to its business is the reason for KP to come to the capital markets.  KP supports about nine million members. Twenty percent of KP’s capital investment goes into IT.  KP developed a $38 billion capital plan.  She said that KP rebuilt 15 of its hospitals in California for seismic repair, etc.  She said that KP is getting ready for Obama Care and its new patients.

Kathy wrapped up her remarks by saying that “Total Health” is staying healthy, returning to health, and healthy aging.  The “80/20 rule” says that patients with most illness cost 80% of the overall healthcare expense.  The “over-65” group is the fastest growing group.

Emerging Personalized Medicine Not All Smooth Sailing

There was a podcast in the weekly Burrill Report about Personalized Medicine’s many challenges that caught my attention.  Bioethicist Leonard Fleck, a professor at the Center for Ethics and Humanities in the Life Sciences at Michigan State University, Personalized Medicine, discussed those challenges with Daniel Levine in a recent interview about his article titled “Smoothing Personalized Medicine’s Ragged Edge.”

One of these challenges is about ethical issues such as where to draw the line on who receives treatment based on how responsive a patient will be to qualify to receive a certain therapy.  This is a concern, especially given the costs of cancer drugs that can range from $50,000 to $130,000 for each course of treatment.  The difference is that somebody might survive an additional two years with one of those drugs versus somebody who might only survive an additional two months with access to one of those drugs.

There is a lot of gray area.  It is not so clearly defined as one would hope. “What we want to know morally and politically speaking is whether individuals with such radical different responses to such a drug have equal just claim to have access to that drug”, said Fleck.  These decisions are not going to be decided by Medicare, Medicaid, or any other large or visible government program.

He said that, instead, we are going to see emergence of “accountable care organizations.”  These organizations will include a very large number of patients and physicians at hospitals and other health care providers who need to stay within their budget.  Therefore, they will need to make decisions about what kinds of healthcare interventions “yield too little good at too high a price.”  The likelihood is that those decisions, because they are scattered all over the U.S., are not really going to be politically visible.

According to Fleck, the UK’s National Institute for Clinical Excellence is a model for us because it is largely politically isolated from partisan politics.  “We can’t have an institution that is going to be poisoned by whatever the current political rhetoric requires of political decisions,” he concluded.

J.P. Morgan’s Healthcare Conference 2011

SAN FRANCSICO – The J.P. Morgan 29th Annual Healthcare Conference was held at the Westin St. Francis this week (Jan. 10-13, 2011).  This four-day healthcare industry investor event hosted about 350 company presentations, an increase from 338  last year. Compared to last year’s 7,250 attendees, this year’s event brought in about 8,700 registered attendees.  This increase suggests that investors are more optimistic about healthcare companies in 2011.

I heard from some attendees that suggested that perhaps more than 30,000 healthcare and investment industry professionals gathered throughout San Francisco this week as a direct result of the J.P. Morgan event.

This year’s event continued its traditional approach of hosting  presentations of a broad mix of small-cap to large-cap healthcare companies from across multiple sectors.  In addition, the conference this year included presentations from 22 not- for-profit organizations and 17 healthcare companies from China.

The conference included an interesting luncheon talk on Monday from Nancy-Ann DeParle.  She is Counselor to the President and Director of the White House Office of Heath Reform.  Her talk provided an information update on the Affordable Care Act that was enacted in 2010.  She spoke to an audience of about 1,500-2,000.

While her talk covered familiar themes about healthcare policy that was made in 2010, such as how we can lower costs, how to lower waste, how to change the delivery system, the high cost of US healthcare and so on, she tended to zero in on the small business and individual healthcare insurance market and the impact on entrepreneurial companies.  She said that she sees a failed healthcare insurance market for small businesses and individuals.  She said that the reality of  “job lock” stifles innovation.  That is, people cannot move to new jobs or to startup new innovative companies without the fear of healthcare insurance loss.

She spoke about the ‘Patients Bill of Rights’ that include consumer protections; the CMS Innovation Center which would be helpful to entrepreneurs; and the small business tax credits among other comments.

DeParle pointed out that there is a lot of misinformation going around the new healthcare law.  She said that the Affordable Care Act does not set prices, it does not disturb the doctor-patient relationship and there is no government take-over of healthcare.  She brought attention to the new information website: HealthCare.gov.  DeParle said that the opportunity for healthcare businesses is that is that there will be millions of new customers for health insurance, drug, medical device and other healthcare companies.

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