Author: slightbourne@noblecapitalmarkets.com

Cigna Unloads Medicare Assets for $3.7B, Ups Investments in Core Segments

Posted on by slightbourne@noblecapitalmarkets.com

Health insurer Cigna announced Wednesday it is divesting its Medicare Advantage, Medicare Part D, and other Medicare operations to Health Care Service Corporation (HCSC) in a $3.7 billion cash deal.

Cigna said the sale will streamline its business to focus on growing its health services and benefits platforms. Proceeds will also fund share repurchases, with the transaction expected to be accretive to adjusted earnings per share in 2025.

Refocusing the Portfolio

The sale includes Cigna’s Medicare Advantage plans, Medicare Part D prescription drug plans, Cigna Supplemental Benefits, and the CareAllies health support services unit.

With HCSC taking over these businesses, Cigna can direct more investment and resources toward expanding its Evernorth health services division and Cigna Healthcare commercial health benefits segment.

Evernorth provides pharmacy benefits management, specialty pharmacy, and health technology solutions. Cigna Healthcare offers employer-sponsored group health plans as well as individual plans.

While Cigna sees Medicare as an attractive market, the segment required outsized focus and capital relative to its size within Cigna’s broader portfolio. The sale unlocks value and simplifies operations.

Gaining Scale and Capabilities

For HCSC, the transaction accelerates growth in Medicare, where the company has over 1 million members currently across 7 states. Adding Cigna’s Medicare customers and capabilities will expand HCSC’s geographic reach and enhance its product portfolio.

The businesses being acquired generated around $5.5 billion in 2022 revenues for Cigna. So the deal provides HCSC with meaningful membership and revenue growth in Medicare and immediate scale.

Cigna built a significant presence in Medicare through organic growth and acquisitions like HealthSpring in 2011. HCSC gains these customer relationships and infrastructure with the purchase.

Focusing on What Cigna Does Best

Cigna has been optimizing its portfolio under CEO David Cordani to concentrate on its core competencies. Last year, Cigna sold its international life, accident, and supplemental benefits businesses.

The Medicare sale continues this strategic focus on areas where Cigna has differentiated capabilities and growth opportunities. Evernorth provides unique pharmacy solutions and analytics. Cigna Healthcare leverages the company’s strong employer and health plan expertise.

The transaction value of $3.7 billion represents about 10 times Medicare Advantage customer revenue and 16 times Medicare Part D customer revenue. This appears a solid price for Cigna to unlock capital from non-core assets.

Financial Benefits

Cigna expects the deal will be 5-10% accretive to adjusted EPS in 2025 once completed. The company reaffirmed its 2024 outlook and long-term 10-13% annual EPS growth target.

Proceeds from the divestiture will primarily fund share buybacks, representing an attractive return of capital for investors. Cigna previously had around $7.5 billion remaining on its buyback authorization.

The deal is expected to close in the first quarter of 2025 after securing necessary regulatory clearances. There is no financing condition, providing transaction certainty.

Overall, the sale highlights Cigna’s disciplined portfolio approach to drive shareholder value. Consolidating its focus while monetizing Medicare strengthens Cigna’s growth trajectory in targeted segments. For HCSC, the deal accelerates its diversification into a key government market.

Cardinal Health Bolsters Specialty Offering With $1.2 Billion Acquisition

Posted on by slightbourne@noblecapitalmarkets.com

Cardinal Health announced Wednesday that it will acquire Specialty Networks for $1.2 billion in cash, strengthening the healthcare giant’s services for specialty physician practices. Specialty Networks provides technology-enabled group purchasing, practice management solutions, and data analytics to over 11,500 specialty providers across key areas like urology, rheumatology, and gastroenterology.

The deal enhances Cardinal Health’s capabilities in strategically important specialty areas while expanding its platform serving independent physicians. Here are some key details on the acquisition:

Expanding Service Offerings

Specialty Networks gives Cardinal Health new clinical and economic services to offer specialty physicians and practices. Its analytics platform, PPS Analytics, taps into electronic medical records, imaging systems, and other data sources to generate insights improving patient care and outcomes.

Cardinal gains Specialty Networks’ expertise optimizing specialty practice operations and finance. And through group purchasing relationships Specialty Networks facilitates, Cardinal Health can provide access to discounted products and services.

The combined specialty offerings will aim to boost efficiency, revenues, and coordination of care for specialty providers. This strengthens Cardinal’s value proposition as a distribution and services partner.

Supporting Independent Physicians

A key aspect is Specialty Networks’ focus on independent and community-based specialty practices. With over 1,200 physician practice customers, it expands Cardinal’s reach and understanding of this critical healthcare segment.

The medical landscape is increasingly consolidated, making it more vital for Cardinal Health to support independent practices’ success. Specialty Networks’ experience and technology assets aid in this aim.

Cardinal Health can also leverage Specialty Networks’ physician expertise and relationships to accelerate development of its Navista Network. This network assists independent community oncologists with practice solutions and clinical trials access.

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Enhanced Analytics and Insights

Specialty Networks’ rich specialty patient data and analytics capabilities will enhance Cardinal’s offerings. Its PPS Analytics platform mines electronic records and images using artificial intelligence to generate diagnostic and treatment insights.

Cardinal gains access to millions of longitudinal specialty patient data points. This strengthens its real-world evidence and insights for biopharma partners on the safety, efficacy and use of therapies.

The specialty data and analytics also aid population health management and value-based care initiatives. And they support Cardinal’s direct provider services like improved medication adherence programs.

Driving Growth in Key Areas

Specialty Networks expands Cardinal’s presence and cross-selling opportunities in strategic specialty therapeutic areas:

  • Urology – large patient population with ongoing and acute care needs
  • Rheumatology – fast growing with new advanced treatments
  • Gastroenterology – increasing prevalence of GI diseases

These are growth priorities where Specialty Networks strengthens Cardinal’s advantages. The deal accelerates Cardinal’s specialty growth plans through enhanced resources and newly integrated offerings.

Strong Cultural and Strategic Fit

Cardinal Health and Specialty Networks share a mission to bring value to physician practices while improving patient outcomes. Keeping Specialty Networks’ management team intact ensures continuity of its culture and physician focus.

The companies also have experience collaborating, as Specialty Networks is already a Cardinal Health specialty GPO partner. This makes integration of the businesses more seamless.

The acquisition is expected to be accretive to Cardinal’s non-GAAP earnings per share within 12 months post closing. Specialty Networks gives Cardinal Health a stronger specialty platform and differentiated assets to better serve practices and patients. Combining specialized expertise and technologies, the deal creates benefits for physicians and Cardinal Health alike.

Exro-SEA $300M Electric Merger: Creating an EV Propulsion Leader

Posted on by slightbourne@noblecapitalmarkets.com

Electric vehicle technology firm Exro Technologies is acquiring e-mobility drivetrain maker SEA Electric in an all-stock $300 million deal. The strategic merger combines two complementary electric propulsion platforms, setting the stage to disrupt the surging commercial EV space.

For investors, the transaction provides Exro with enhanced scale, revenue, and a clear path to profitability. With SEA’s major OEM customers like Volvo and Toyota, over 1,000 EV system orders are forecast for 2024 generating above $200 million sales.

The consolidated entity targets delivery of complete, next-gen propulsion solutions demanded by fleet operators and manufacturers transitioning to electric. Significant synergies, cross-selling opportunities, and cost savings are expected from the integration of the companies’ technologies.

Massive Addressable Market

Exro’s battery control electronics and SEA’s full electric drive systems together optimize EV power, efficiency, and costs. This unique, end-to-end capability unlocks a share of the enormous global commercial EV market.

Market research firm IDTechEx sees the medium and heavy commercial EV market reaching over $140 billion annually by 2031. With increasingly stringent emissions regulations worldwide, electrifying trucks, buses, construction equipment and beyond offers massive potential.

Exro and SEA aim to be at the forefront of this shift providing the integrated propulsion technologies enabling OEMs to electrify their offerings at scale.

Key Customer Wins

A huge value driver is SEA Electric’s multi-year supply agreements with heavy-duty truck leaders Mack and Hino for thousands of initial EV systems. This provides the merged Exro with committed volumes and Tier 1 auto relationships to leverage.

SEA’s proven proprietary technology underwent extensive validation by the major OEMs. Having signed binding long-term deals, SEA Electric immediately thrusts Exro into a commanding competitive position and cash flow generation.

Clear Path to Profitability

Beyond the technology and growth synergies, the transaction offers investors a profitability catalyst for Exro. Management estimates achieving positive cash flow within 12 months post-close given the ramping order book.

This would mark a key inflection point in Exro’s maturation toward becoming a fully self-sustaining EV enterprise. Profitability could further enhance access to capital to fuel expansion efforts.

The merger is subject to shareholder greenlighting, but the strategic fit and near-term income opportunity make a compelling case. With Polestar and others vying in electric commercial vehicles, Exro seizes pole position through its SEA Electric deal.

Take a look at some Century Lithium Corp., a Canadian based advanced stage lithium Company, focused on the growing electric vehicle and battery storage market.

Fed Holds Rates Steady, Cools Expectations for Imminent Cuts

Posted on by slightbourne@noblecapitalmarkets.com

The Federal Reserve left interest rates unchanged on Wednesday following its January policy meeting, keeping the federal funds rate target range at 5.25-5.50%, the highest level since 2007. The decision came as expected, but Fed Chair Jerome Powell pushed back on market bets of rate cuts potentially starting as soon as March.

In the post-meeting statement, the Fed removed language about needing additional policy tightening, signaling a likely prolonged pause in rate hikes as it assesses the impact of its aggressive actions over the past year. However, officials emphasized they do not foresee cuts on the horizon until inflation shows “greater progress” moving back to the 2% goal sustainably.

Powell Caution on Rate Cuts

During his press conference, Powell aimed to temper expectations that rate cuts could begin in just a couple months. He stated March is “probably not the most likely case” for the start of easing, rather the “base case” is the Fed holds rates steady for an extended period to confirm inflation is solidly on a downward trajectory.

Markets have been pricing in rate cuts in 2024 based on recent data showing inflation cooling from 40-year highs last year. But the Fed wants to avoid undoing its progress prematurely. Powell said the central bank would need more consistent evidence on inflation, not just a few months of decent data.

Still Room for Soft Landing

The tone indicates the Fed believes there is room for a soft landing where inflation declines closer to target without triggering a recession. Powell cited solid economic growth, a strong job market near 50-year low unemployment, and six straight months of easing price pressures.

While risks remain, the Fed views risks to its dual mandate as balancing out rather than tilted to the downside. As long as the labor market and consumer spending hold up, a hard landing with severe growth contraction may be avoided.

Markets Catching Up to Fed’s Thinking

Markets initially expected interest rate cuts to start in early 2024 after the Fed’s blistering pace of hikes over the past year. But officials have been consistent that they need to keep policy restrictive for some time to ensure inflation’s retreat is lasting.

After the latest guidance reiterating this view, traders adjusted expectations for the timing of cuts. Futures now show around a coin flip chance of a small 25 basis point rate cut at the March FOMC meeting, compared to up to a 70% chance priced in earlier.

Overall the Fed is making clear that investors are too optimistic on the imminence of policy easing. The bar to cutting rates remains high while the economy expands moderately and inflation readings continue improving.

Normalizing Policy Ahead

Looking beyond immediate rate moves, the Fed is focused on plotting a course back to more normal policy over time. This likely entails holding rates around the current elevated range for much of 2024 to solidify inflation’s descent.

Then later this year or early 2025, the beginnings of rate cuts could materialize if justified by the data. The dot plot forecast shows Fed officials pencil in taking rates down to 4.5-4.75% by year’s end.

But Powell was adamant that lowering rates is not yet on the table. The Fed will need a lengthy period of inflation at or very close to its 2% goal before definitively shifting to an easing cycle.

In the meantime, officials are content to pause after their historic tightening campaign while still keeping rates restrictive enough to maintain control over prices. As Powell made clear, investors anxiously awaiting rate cuts will likely need to keep waiting a bit longer.

Neuralink’s First Human Implant Could Spark Tech Stock Volatility

Posted on by slightbourne@noblecapitalmarkets.com

Elon Musk’s brain-computer interface company Neuralink announced this week it has conducted the first-ever implant of its device in a human subject. While details remain scant, the news serves as a milestone for a technology some believe could transform human capability. For tech investors, Neuralink’s progress stokes excitement but also uncertainty around the winners and losers in an era of enhanced humans.

Neuralink aims to develop a brain implant allowing paralyzed patients to control devices with their thoughts and able-bodied people to digitally communicate at speeds faster than speech. The first implant surgery comes after years of animal testing and brings the possibilities closer to reality.

According to Musk, the anonymous volunteer patient is “recovering well” and initial results show “promising neuron spike detection” from the 1024 electrode threads inserted by a surgical robot. The goal is for the implants to interpret brain signals, replacing the need for physical movement to operate computers or smartphones.

While the current trial is focused on quadriplegic patients, the ultimate vision is a technology so seamless it augments natural brain function. With the ability to download information directly into the brain, Neuralink promises a future where humans can achieve computer-like efficiency.

Leaps Forward, Ethical Debates

To technologists, successfully reading and transmitting neural signals brings humanity to the brink of a productivity revolution. Brain enhancement could elevate human potential and economic output, feeding into further innovation and growth.

However, developers must tread carefully given sobering lessons from the smartphone era’s negative effects on mental health. Addictive potential and unintended consequences abound when tampering with humanity’s most complex organ.

Investing Implications

For stocks, Neuralink’s progress exemplifies the promise and peril of emerging technologies. Huge opportunity exists as brain-computer interfaces enable new industries and services. But ethical debates or setbacks could also derail optimism.

The saga of Meta’s metaverse ambitions is instructive. Despite billions invested, underwhelming VR technology and idealistic vision have sunk the stock. Neuralink requires immense scientific progress to become reality. Any stumbles or loss of faith in the vision could rapidly deflate hype.

Yet some secular growth trends appear inevitable. Neuralink-inspired advances will boost artificial intelligence capabilities, a priority for giants like Alphabet and Amazon. Cloud infrastructure and high-performance computing demands will accelerate. Medical device makers and chip developers enabling products like Neuralink will see new markets open.

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But more speculative ideas or overvalued stocks could crumble on the slightest speedbump. Investors must differentiate between progress and promotional hype. In biotech, this means focusing on companies with robust, diversified drug pipelines rather than single-product moonshot bets.

Betting on Musk himself is dubious given the seesawing markets have experienced around Tesla and Twitter. While his cult of personality propels cash into his ventures, realistic timeframes and execution risks are higher than perceived.

Ultimately, Neuralink is emblematic of both the transformative potential and inherent volatility of disruptive technology. Its first human application sparks excitement, but a measured approach accounts for hurdles ahead. Investors can embrace futuristic optimism while grounding in reality.

Gilead Deepens Arcus Ties With $320M Investment to Accelerate Cancer Immunotherapy Pipeline

Posted on by slightbourne@noblecapitalmarkets.com

Gilead Sciences and biotech partner Arcus Biosciences announced Tuesday an amended collaboration to accelerate development of their cancer immunotherapy programs, along with a $320 million equity investment by Gilead.

The deal builds on the companies’ 2020 partnership and boosts Gilead’s ownership in Arcus to 33% through an additional stake purchase at $21 per share. Gilead also gains a third seat on Arcus’ board, having their Chief Commercial Officer Johanna Mercier join as a director.

Strategic Focus on TIGIT

A key change is prioritizing late-stage studies for the anti-TIGIT antibody domvanalimab, the lead candidate from the collaboration. Arcus CEO Terry Rosen stated the partners want to “leverage their strengths and focus on efficiently advancing novel combinations.”

Domvanalimab is progressing in Phase 3 for non-small cell lung cancer and gastric/GEJ cancer. By accelerating these pivotal studies, expected to fully enroll by year-end, the drug could reach approval sooner if successful.

However, they are discontinuing the ARC-10 Phase 3 lung cancer trial to devote resources to the other domvanalimab studies targeting greater unmet need.

This streamlining highlights the companies’ faith in TIGIT’s potential but the necessity to optimize their most promising assets. TIGIT is an emerging immunotherapy target and domvanalimab a next-gen asset, so focusing late-stage research is prudent.

Quemliclustat Now Solo Arcus Program

Meanwhile, the planned Phase 3 study of Arcus’ CD73 inhibitor quemliclustat in pancreatic cancer will become an Arcus-only program, no longer jointly developed.

Again the theme is concentrating human capital and financial resources where they can make the biggest difference. For smaller Arcus, independence for some programs provides flexibility.

Arcus can also now fully control projects beyond domvanalimab and their PD-1 drug zimberelimab, which Gilead has options to license. This benefits Arcus’ broader pipeline and product vision.

Extends Arcus Cash Runway

Importantly, the $320 million cash infusion lengthens Arcus’ funding horizon until 2027 by their estimates. This enables advancing Phase 3 quemliclustat and AB154 studies plus potential commercial launch activities without financing concerns.

Any biotech developing novel drugs without revenue benefits immensely from having ample cash reserves. This partly protects Arcus from market volatility and general biotech funding challenges.

Gilead Building a Powerhouse

For Gilead, the enhanced Arcus alliance adds another pillar to their ambitions cancer franchise. The pharma giant has been aggressively wheeling and dealing to expand in oncology, now a key growth area.

Recent moves include the $21 billion Immunomedics acquisition and purchases of companies like Tango Therapeutics, Dragonfly Therapeutics, and Epizyme. The Arcus pact leverages access to next-generation immunotherapy science and pipeline.

Gilead is constructing a vertically integrated oncology player combining in-house and external innovation. Scale and synergies across R&D, manufacturing, and commercialization can accelerate targeted therapies to patients.

With collaborators like Arcus doing the early lifting, Gilead can then optimize late-stage studies and apply their regulatory expertise to reach approvals more quickly.

Overall the amended Arcus agreement highlights Gilead’s commitment to cancer and immunology while bolstering their presence in cutting-edge research like TIGIT inhibition. With the investment and restructuring, Gilead strengthens ties to Arcus’ science while keeping the biotech funded and focused. For both, it’s a win-win accelerating cancer drugs to market.

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JOLTS Report Shows Ongoing Labor Market Tightness

Posted on by slightbourne@noblecapitalmarkets.com

The latest Job Openings and Labor Turnover Survey (JOLTS) report released Tuesday by the Bureau of Labor Statistics showed job openings rose to 9.02 million in December, up from a revised 8.92 million in November. This was higher than economist forecasts of 8.75 million openings.

The December JOLTS report indicates ongoing tightness in the US labor market, as job openings remain stubbornly high even as the Federal Reserve has aggressively raised interest rates over the past year to cool demand and curb inflationary pressures.

On the surface, the rise in openings appears a negative sign for monetary policy aimed at loosening the jobs market. However, the increase was small, and openings remain well below the March 2023 peak of 11.9 million. The quits rate, which measures voluntary departures and is an indicator of workers’ confidence in ability to find new jobs, also edged down to 2.1% in December, though it remains elevated historically.

This suggests the Fed’s policy actions may be having a gradual effect, but the labor market remains tight overall. Layoffs also stayed low in December, with just 1.6 million separations due to layoffs or discharges during the month. The labor force participation rate ticked up to 62.3% in December, so labor supply is expanding somewhat, though participation remains below pre-pandemic levels.

For the Fed, the report provides ammunition on both sides of the debate as to whether a pause in rate hikes is warranted or further increases are needed to achieve a soft landing. Markets see a mixed bag, with the US dollar index largely unchanged on the day and Treasury yields seeing only slight moves following the release.

Impact on Economic Outlook

The bigger picture is that while job openings are declining, they remain unusually high, indicative of continued broad demand for workers across sectors like healthcare, manufacturing, and hospitality. Businesses appear eager to hire even amidst an economic slowdown and uncertainty about the outlook.

This need for workers will support consumer spending, the primary engine of US GDP growth, as long as hiring remains robust and layoffs low. But it also means upward pressure on wages as employers compete for talent, which could fuel inflation. Herein lies the conundrum for monetary policy.

The strength of the labor market is a double-edged sword – positive for growth in the near term, but concerning for the Fed’s inflation fight if it necessitates further large wage increases.

Chair Powell has been adamant the Fed’s priority is reducing inflation, even at the risk of economic pain. With the jobs market still hot in late 2023, further rate hikes seem likely at upcoming policy meetings absent a substantial cooling in inflation or rise in unemployment.

Payroll growth could slow in 2024 from levels above 400,000 per month in 2023, but demand remains too high relative to labor supply. The Fed wants meaningful softening in job openings and wage growth, which has yet to fully materialize. Unemployment would likely need to rise to the high 3% range or beyond to reduce wage pressures.

The JOLTS report provides important context on the state of the labor market amid crosscurrents in other economic data. Manufacturing has slowed and housing has declined, but consumers keep spending and job switching remains high. The Fed is unlikely to declare victory or shift to rate cuts with this conflicting mix of weak and resilient activity.

The path for monetary policy and markets will depend on which direction the trends in openings, wages, inflation and jobs growth tilt in coming months. For now, the JOLTS report gives the sense of an economy and labor market that are cooling gradually under the weight of higher rates rather than slowing precipitously.

WillScot Bolsters Modular Space Solutions With $3.8B McGrath Buyout

Posted on by slightbourne@noblecapitalmarkets.com

WillScot Mobile Mini Holdings Corp. announced Monday that it will acquire modular rental provider McGrath RentCorp in a $3.8 billion deal. The acquisition aims to solidify WillScot’s position as a leading provider of modular space and portable storage solutions across North America.

Under the terms of the agreement, McGrath shareholders will receive $123 per share, comprised of 60% cash and 40% WillScot stock. This reflects a 10.1% premium over McGrath’s share price as of January 26th. Once completed, McGrath shareholders will own approximately 12.6% of the combined company.

The deal comes as WillScot looks to expand its footprint and diversify its customer segments through McGrath’s complementary business. McGrath serves over 10,000 business customers with modular building leasing and sales solutions across the U.S.

According to WillScot CEO Brad Soultz, “The transaction will further accelerate our growth, with combined 2023 pro forma revenue of $3.2 billion and adjusted EBITDA of $1.4 billion, we will be on path to achieve a $700 million free cash flow run-rate twelve months after we close.”

WillScot expects to realize $50 million in run-rate cost synergies within two years following the close of the acquisition in Q2 2024. The company has a track record of successfully integrating past deals and meeting synergy targets.

The combined company will be able to cross-sell value-added products and services and roll out operations best practices across the broader customer base. It will also have increased scale and expanded infrastructure to accelerate organic growth strategies already in place.

Along with revenue and cost synergies, the deal provides WillScot with greater geographic diversification and depth in adjacent sectors like electronic test equipment rental through McGrath’s TRS-RenTelco business.

On the financial front, the combined company is projected to generate approximately $3.2 billion in revenue and $1.4 billion in adjusted EBITDA in 2023. It expects to produce around $700 million in free cash flow within twelve months after the merger is finalized.

To fund the cash component of the acquisition, WillScot has secured committed bridge financing of $1.75 billion, along with expanded capacity from its existing credit facilities. The company is committed to rapid deleveraging and plans to achieve a 3.0-3.5x net leverage ratio within a year post-close.

McGrath’s board has unanimously approved the transaction. With shareholder approval and regulator sign-off, the buyout is anticipated to close during Q2 2024. Until then, McGrath will operate as an independent, publicly traded company.

The acquisition is the latest in WillScot’s strategy to capitalize on demand growth for modular space and storage solutions. The company has acquired over 15 businesses since going public in 2017, including the transformative $1.2 billion merger with Mobile Mini in 2020.

For McGrath shareholders, the deal provides a significant premium and ongoing upside through ownership stake in WillScot. It also enables McGrath’s rental solutions to reach a wider audience through WillScot’s expansive branch network and customer base.

Science 37 to be Acquired by eMed in Deal to Expand Virtual Clinical Trials

Posted on by slightbourne@noblecapitalmarkets.com

Clinical research company Science 37 announced Monday that it has entered into a definitive agreement to be acquired by telehealth provider eMed in a deal valued at approximately $38 million. Under the agreement, eMed will commence a tender offer to purchase all outstanding shares of Science 37 stock for $5.75 per share in cash, representing a 21.3% premium over Science 37’s share price last week.

The deal will allow eMed to leverage Science 37’s remote clinical trial capabilities and proprietary Metasite technology platform to expand patient access and accelerate enrollment for clinical studies. Science 37’s decentralized clinical trial model enables patients to participate from home via telehealth, rather than having to travel to physical trial sites.

This acquisition comes at a pivotal time, as the biotech industry embraces virtual and hybrid trial designs in the wake of the COVID-19 pandemic. Science 37 was an early pioneer in decentralized trials, giving the company a first-mover advantage. According to Science 37 CEO David Coman, “eMed provides the greatest value to our stockholders, customers, patients, and employees. Stockholders will receive a premium, trial sponsors will gain greater access to patients, faster enrollment, and confidence in the Company’s capital position.”

For eMed, the deal significantly expands its digital healthcare footprint, adding Science 37’s network of telehealth investigators, coordinators, and software platform to its existing suite of at-home diagnostics and virtual care services. eMed was an early mover as well, having developed the first at-home COVID-19 test kit in 2020. Since then, the company has expanded into at-home testing and treatment for flu, UTIs, and other conditions.

The combined resources of both companies will provide end-to-end support for decentralized clinical trials, from patient recruitment to at-home sample collection to telemedicine visits. This could be a game-changer in improving patient diversity in trials and enabling studies focused on rare diseases or targeted therapies.

According to Science 37’s latest financial update, the company expects approximately $58-59 million in revenue for 2023 and over $50 million in cash reserves as of December 31, 2023. The company projected 2023 revenue of $50-60 million.

Science 37’s board of directors unanimously approved the acquisition deal with eMed. Major Science 37 shareholders, including Redmile Group, LLC, have also agreed to tender their shares in support of the acquisition.

The deal is expected to close in Q1 2024, pending tender of a majority of outstanding Science 37 shares and satisfaction of other customary closing conditions. Once completed, Science 37 will become a privately held subsidiary of eMed.

This Science 37 acquisition comes on the heels of eMed’s parent company, Evernow Inc., raising $100 million in Series B funding last March. The current deal highlights continued investor appetite for telehealth and digital health companies that are expanding access to care.

In fact, Noble Capital Markets will be hosting a Virtual Healthcare Conference from on April 17-18, 2024, featuring presentations from emerging growth companies in the healthcare sector. The conference will provide a platform for companies to showcase their innovations in digital health, telemedicine, medical devices and more.

The Science 37 and eMed deal also demonstrates the growing intersection between telehealth and clinical research. Other companies like Medable and Excelya are exploring how hybrid and decentralized trials can boost patient recruitment and retention. By meeting patients where they are, virtual trials enable more representative, diverse study populations.

While some industry experts say a hybrid approach will become the standard, decentralized trials are still a relatively new model. This acquisition provides eMed with a first-mover advantage, but expect other digital health companies to underscore their clinical trial offerings moving forward. In the meantime, all eyes will be on eMed and Science 37 as they pioneer the next generation of virtual clinical research.

Cooling Inflation Fuels Hope of Fed Rate Cuts Despite Economic Strength

Posted on by slightbourne@noblecapitalmarkets.com

The latest inflation reading is providing critical evidence that the Federal Reserve’s interest rate hikes through 2023 have begun to achieve their intended effect of cooling down excessively high inflation. However, the timing of future Fed rate cuts remains up in the air despite growing optimism among investors.

On Friday, the Commerce Department reported that the Fed’s preferred inflation gauge, the core personal consumption expenditures (PCE) index, rose 2.9% in December from a year earlier. This marked the first time since March 2021 that core PCE dipped below 3%, a major milestone in the fight against inflation.

Even more encouraging is that on a 3-month annualized basis, core PCE hit 1.5%, dropping below the Fed’s 2% target for the first time since 2020. The deceleration of price increases across categories like housing, goods, and services indicates that tighter monetary policy has started rebalancing demand and supply.

As inflation falls from 40-year highs, pressure on the Fed to maintain its restrictive stance also eases. Markets now see the central bank initiating rate cuts at some point in 2024 to stave off excess weakness in the economy.

However, policymakers have been pushing back on expectations of cuts as early as March, emphasizing the need for more consistent data before declaring victory over inflation. Several have suggested rate reductions may not occur until the second half of 2024.

This caution stems from the still-hot economy, with Q4 2023 GDP growth hitting a better-than-expected 3.3% annualized. If consumer spending, business activity, and the job market stay resilient, the Fed may keep rates elevated through the spring or summer.

Still, traders are currently pricing in around a 50/50 chance of a small 0.25% rate cut by the May Fed meeting. Just a month ago, markets were far more confident in a March cut.

While the inflation data provides breathing room for the Fed to relax its hawkish stance, the timing of actual rate cuts depends on the path of the economy. An imminent recession could force quicker action to shore up growth.

Meanwhile, stock markets cheered the evidence of peaking inflation, sending the S&P 500 up 1.9% on Friday. Lower inflation paves the way for the Fed to stop raising rates, eliminating a major headwind for markets and risk assets like equities.

However, some analysts caution that celebratory stock rallies may be premature. Inflation remains well above the Fed’s comfort zone despite the recent progress. Corporate earnings growth is also expected to slow in 2024, especially if the economy cools faster than expected.

Markets are betting that Fed rate cuts can spur a “soft landing” where growth moderates but avoids recession. Yet predicting the economy’s path is highly challenging, especially when it has proven more resilient than anticipated so far.

If upcoming data on jobs, consumer spending, manufacturing, and GDP point to persistent economic strength, markets may have to readjust their optimistic outlook for both growth and Fed policy. A pause in further Fed tightening could be the best-case scenario for 2024.

While lower inflation indicates the Fed’s policies are working, determining the appropriate pace of reversing course will require delicate judgment. Moving too fast risks re-igniting inflation later on.

The détente between inflation and the Fed sets the stage for a pivotal 2024. With core PCE finally moving decisively in the right direction, Fed Chair Jerome Powell has some latitude to nurse the economy toward a soft landing. But stability hinges on inflation continuing to cool amid resilient growth and spending.

For investors, caution and flexibility will be key in navigating potentially increased market volatility around Fed policy. While lower inflation is unambiguously good news, its impact on growth, corporate profits, and asset prices may remain murky until more economic tea leaves emerge through the year.

HEALWELL Makes Big Move into AI-Powered EHR Market Through Intrahealth Acquisition

Posted on by slightbourne@noblecapitalmarkets.com

Healthcare technology firm HEALWELL AI is starting 2024 off strong with the strategic acquisition of Intrahealth Systems, a global provider of electronic health record (EHR) software. This $24 million deal provides HEALWELL with a platform to showcase and scale up its impressive AI capabilities within the massive EHR solutions market.

For investors focused on healthcare tech and AI, this is an exciting play on some of the most promising trends reshaping the industry. As digital health and telemedicine expand rapidly, there is surging demand for next-gen EHR systems equipped with cutting-edge analytics and AI.

HEALWELL is aiming to be at the forefront of this movement by uniting its physician-designed AI with Intrahealth’s established EHR solutions and multi-national customer base.

With over 15,000 clinicians and millions of patients served across Canada, Australia, and New Zealand, Intrahealth boasts an impressive footprint and high-margin recurring revenue exceeding $12 million annually.

HEALWELL plans to turbocharge Intrahealth’s offerings by embedding its own AI-powered clinical decision support software. This technology has already demonstrated major promise in preventative care by enabling earlier disease detection and personalized interventions.

Integrating these AI capabilities into a widely adopted EHR platform like Intrahealth opens up tremendous possibilities to amplify outcomes and lower costs for healthcare providers globally. This direction aligns perfectly with growing adoption of value-based care models that prioritize proactive, tech-enabled, and patient-centric treatment.

For HEALWELL specifically, the benefits of acquiring Intrahealth extend well beyond the technology integration upside. This established player provides HEALWELL with a stable source of profitable SaaS revenue to complement its R&D pipeline. And Intrahealth’s international reach significantly expands HEALWELL’s total addressable market.

The deal also furthers HEALWELL’s broader acquisition-driven strategy focused on consolidating AI, data science, and digital health assets. Intrahealth delivers an ideal platform to demonstrate the power of HEALWELL’s innovations to a large audience of potential customers and partners.

With healthcare spending continuing to spiral globally, there is tremendous appetite for tools that can optimize care and reduce waste. This thematic tailwind, combined with Intrahealth’s impressive financials and HEALWELL’s tech prowess, makes the acquisition look like a savvy move.

Investors can gain valuable insights into the healthcare technology landscape at the upcoming Noble Capital Markets’ Emerging Growth Virtual Healthcare Equity Conference from April 17-18, 2024. This premier small-mid cap event will feature presentations from over 50 public emerging growth companies in the space.

The opportunity in AI-enhanced software platforms like EHR looks especially strong when considering the sheer size of the healthcare IT market. According to Grand View Research, this sector is projected to reach $230 billion by 2028, expanding at nearly 12% annually.

Within this landscape, EHR systems are a central focus, with MarketsandMarkets forecasting this specific niche to be worth $48 billion globally by 2027. First movers with differentiated offerings stand to grab significant market share as adoption of next-gen EHR accelerates.

By snapping up Intrahealth, HEALWELL is positioning itself as a frontrunner in this race to redefine the EHR status quo. Investors interested healthcare technology and AI should keep a close eye on how successfully HEALWELL leverages this strategic acquisition. The company’s progress integrating its robust AI into Intrahealth’s solutions will be an important proof point.

Overall, the Intrahealth deal provides HEALWELL with both an immediate boost in revenue and profitability, plus a long-term growth driver if the combined EHR/AI offering gains traction. This is exactly the sort of calculated, opportunistic move investors should want to see in an emerging healthcare technology leader like HEALWELL.

GC Oncology’s $380M IPO Kickstarts 2024 Biotech Market

Posted on by slightbourne@noblecapitalmarkets.com

The New Year has kicked off with a bang in biotech, as CG Oncology has completed the first initial public offering in the space for 2024. The cancer-focused biotech raised a whopping $380 million in its IPO on the Nasdaq, sailing past its initial target range of $181 million.

CG Oncology priced its shares at $19 apiece, above the $16-18 range it had set ahead of the IPO. The impressive deal is being viewed by many analysts and investors as a positive indicator that the biotech IPO market is rebounding in 2024 after a relatively slow 2023.

The robust demand for CG Oncology stock reflects renewed optimism and openness to investing in early-stage biotech companies, especially those with innovative science and strong leadership teams.

CG Oncology is developing a novel oncolytic virus therapy known as cretostimogene grenadenorepvec for the treatment of non-muscle invasive bladder cancer. Oncolytic viruses represent an exciting new approach in cancer treatment, wherein specially engineered viruses are able to infect and destroy cancer cells directly while also stimulating anti-tumor immune responses.

Cretostimogene grenadenorepvec is an adenovirus that has been engineered to replicate selectively in bladder cancer cells and stimulate the immune system by expressing granulocyte-macrophage colony-stimulating factor (GM-CSF). Early stage clinical data have shown promising signs of efficacy.

The company plans to use the IPO proceeds to fund a Phase 3 clinical trial of its lead candidate as well as earlier stage pipeline programs. Success in the Phase 3 study could support regulatory approval and commercialization.

CG Oncology was founded in 2018 by a veteran team of biotech entrepreneurs and scientists. The company pursued a pre-IPO crossover financing round in 2022, enabling it to build momentum heading into its public debut.

The IPO success places CG Oncology in a strong position to advance its pipeline. With the influx of capital, the company will be able to aggressively pursue its clinical development plans without relying heavily on external partners.

Moreover, the validation and visibility provided by being a public company can potentially help CG Oncology forge productive collaborations and access additional funding in the future.

Looking ahead, the positive investor response to CG Oncology seems likely to pave the way for more biotech IPOs in 2024. A robust IPO market provides fuel for innovation and discoveries that can transform patient lives.

The biotech sector sputtered in 2022, with only around 20 IPOs completed versus more than 50 in 2021. However, sentiment appears to be shifting, perhaps signaling sunnier days ahead.

In addition to favorable market conditions, biotech companies pursuing IPOs seem to be taking valuable lessons from 2022 by tightening focus on fundamentals like drug efficacy and visibility on clinical milestones.

Other than CG Oncology, a host of biotechs have already filed with SEC intentions to go public in 2024, spanning exciting areas like gene therapy, neurology, and synthetic biology.

With fresh capital and investor enthusiasm, the next generation of biotech companies can pursue ambitious goals to develop innovative medicines. More early-stage companies may also gain the funding needed to initiate or advance clinical trials.

CG Oncology’s big IPO pop reflects the right combination of cutting-edge science, unmet medical need, and strong leadership. This formula will likely be replicated by other emerging biotech stars in the making.

In all, the successful CG Oncology IPO kicks off 2024 as a promising year for biotech funding, innovation, and progress against once intractable diseases. Investors and industry observers will be tracking the IPO market closely through the year for signs of sustained momentum. If the appetite for compelling biotech stories persists, it could drive a much-needed renaissance helping to unlock new medical frontiers.

Mark your calendars! Don’t miss Noble Capital Markets’ Emerging Growth Virtual Healthcare Equity Conference April 17-18. This exclusive virtual event connects investors with 50 leading public biotech, healthcare services, and medical device companies.
Presenting company slots are available.

Meta and Microsoft Achieve $1 Trillion Milestones as AI Investments Pay Off

Posted on by slightbourne@noblecapitalmarkets.com

Two of the biggest tech giants, Meta and Microsoft, recently hit major market cap milestones as part of the ongoing record rally in tech stocks.

Meta’s market cap surpassed the $1 trillion during intraday trading on January 24th, marking the first time the company reclaimed this valuation since 2021. Meta previously hit the $1 trillion mark in September 2021 at the height of its stock’s popularity.

Driving Meta’s soaring stock price is a nearly 200% surge over the past year, as CEO Mark Zuckerberg enacted cost-cutting that included laying off over 20,000 employees. After its stock plummeted to a six-year low in 2022, Zuckerberg has described 2023 as a “year of efficiency.”

Shareholders are bullish on Meta’s focus on expanding its position in artificial intelligence. Last week, Zuckerberg revealed the company is ramping up AI investments, procuring hundreds of thousands of high-powered AI chips from Nvidia. This signals Meta is spending billions to compete in the red-hot AI space.

On the same day Meta topped $1 trillion, Microsoft also briefly surpassed the $3 trillion mark during trading on January 24th. This comes around two weeks after Microsoft temporarily overtook Apple as the world’s most valuable company in mid-January. While Apple has since regained the top valuation spot, Microsoft remains hot on its heels.

Fueling Microsoft’s continued share price gains is optimism around the company’s AI initiatives. Microsoft stock is up over 7% year-to-date amid strong demand for AI capabilities, especially in generative AI.

Analysts predict Microsoft will post a solid earnings beat for its upcoming quarterly report, citing its leadership in enterprise-level AI as a key advantage. Microsoft seems poised to capitalize on the explosion of interest in AI technologies like ChatGPT.

AI Arms Race

The back-to-back market cap milestones from Meta and Microsoft highlight the massive investments pouring into artificial intelligence right now.

With breakout successes like ChatGPT demonstrating new possibilities for generative AI, tech giants are racing to stake their claims. The companies leading development of advanced AI stand to reap substantial rewards.

Both Meta and Microsoft are positioning themselves at the forefront of this AI arms race. In addition to its major chip purchases, Meta recently unveiled its own chatbot project, BlenderBot. Microsoft is integrating generative AI into Bing search and other offerings.

The tech world’s strike into AI looks poised to pay off based on the positive investor sentiment boosting Meta and Microsoft’s valuations. However, the AI hype cycle could eventually lead to a correction for these high-flying stocks.

For now, shareholders seem willing to bet on the transformative potential of artificial intelligence. And the tech giants pouring money into AI research appear ready to capitalize on this enthusiasm.

Big Tech Boosts Markets

Meta and Microsoft reaching new market cap heights also highlights the outsized impact of Big Tech on the broader stock market. The performance of tech stocks is a key factor driving indexes like the S&P 500 to record levels.

Despite some pockets of weakness, optimism around AI and other emerging technologies continues fueling upward momentum. The Nasdaq index, heavily weighted toward tech, rose over 12% in 2023 even as the overall market declined.

This dynamic shows no signs of changing in 2024. Tech stocks led markets higher to begin the year, with the Nasdaq up close to 10% in January as of this writing. Stocks like Meta and Microsoft hitting new milestones reflects their leadership in this rally.

However, extended runs by Big Tech raise risks of overheating and heighten their influence on market swings. With Apple, Microsoft, Amazon, Alphabet and other tech giants comprising over 20% of the S&P 500, their performance significantly impacts overall returns.

Nonetheless, bullish sentiment toward AI and other disruptive tech breakthroughs appears likely to keep lifting valuations. As giants like Meta and Microsoft position themselves to capitalize on these trends, their gravity on markets looks set to rise.