Brightspring Health Services Inc Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Brian Tanquilut - Jefferies - Analyst : Congrats on a solid quarter. Maybe, Jon, my first question, just to the point that Jim made about margins, expecting that to improve in the fourth quarter. Just curious how we should be thinking about that between (inaudible) between mix and other initiatives that would drive that margin expansion? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 01, 2024 / 12:30PM, BTSG.OQ - Q3 2024 Brightspring Health Services Inc Earnings Call

Question: Brian Tanquilut - Jefferies - Analyst : Awesome. And then maybe, Jon, just as a follow-up, there's a lot of -- there are a lot of questions from the investor community on biosimilars and pricing adjustments that are -- that seem to be happening in that space. So just curious what you're seeing or how should we be thinking about your exposure to some of these taking dynamics in the biosim world.

Question: AJ Rice - UBS Equities - Analyst : I know last quarter, you talked about being in negotiations with a long-term care operator. It sounds like in your comments about start-up costs for onboarding a client, that must have come to fruition. Can you give us any color on what that might mean? And I think also last quarter, you had talked about being in discussion with some managed care -- a large managed care plan about your home health business. I'm wondering if there was any update on what you're seeing in contracting at home health as well. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 01, 2024 / 12:30PM, BTSG.OQ - Q3 2024 Brightspring Health Services Inc Earnings Call

Question: AJ Rice - UBS Equities - Analyst : Okay. And glad to hear you got the Haven deal completed. I think the original discussion was that, that might contribute another $15 million of EBITDA. Is there any update on how that might flow through? Is that a 2025 potential contribution? And any thoughts on how quickly you might expand that business and what revenue it contributes?

Question: David Larsen - BTIG - Analyst : Congratulations on a good quarter. Can you talk a little bit about the impact of the Inflation Reduction Act if there's any? I mean we've seen IQVIA pull back yesterday. We've seen icon on the CROs come under some pressure. There's kind of a view amongst some investors that it's sort of a headwind on the overall market. My view is maybe it's causing pharma to invest more heavily into specialty. Just what impact is brand inflation in the IRA having on your overall business? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 01, 2024 / 12:30PM, BTSG.OQ - Q3 2024 Brightspring Health Services Inc Earnings Call

Question: David Larsen - BTIG - Analyst : Great. And then just any color around MA volumes? The plans have been under pressure because of high volumes. It seems to me like that could be a tailwind to you. Just any color there on how -- the pressure of the plans that have been under, how that's translating to your business.

Question: Joanna Gajuk - BofA Global Research - Analyst : So I guess I have two questions related to prior topics, if I may. So the first one on the IRA. So I understand you were commenting on the changes to the drug prices. But on the flip side, there are some other changes to Part D, essentially lowering the cost for patients. And some payers have said that they saw higher utilization of specialty just because of that. So have you seen that as well? And also in this context, the changes to the patient costs are actually going to be even bigger in '25. So do you expect even bigger increase in utilization next year under those changes? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 01, 2024 / 12:30PM, BTSG.OQ - Q3 2024 Brightspring Health Services Inc Earnings Call

Question: Joanna Gajuk - BofA Global Research - Analyst : Great. And if I may follow up on the discussion around STELARA. So thank you for details in terms of your exposure, but your infusion peer set and I guess you refer to is that there are some changes that the maker of STELARA plans to introduce ahead of other changes happening, so essentially reducing the spread materially on that drug. So how does this change, if that was to happen because it sounds like maybe not final. But if that was to happen, how does this change your view of the impact of future similar launches? Could we see other drug makers kind of follow suit? And does this change how you think about biosimilar benefit to your business going forward?

Question: Ann Hynes - Mizuho Securities USA - Analyst : I know you're not giving 2025 guidance, but heading into next year, can you maybe highlight some key headwinds and tailwinds you might be facing?

Question: Whit Mayo - Leerink Partners - Analyst : Just curious about the sequential growth implied within the guide for the fourth quarter, certainly points to the stronger seasonality that we see within the business. But how are you sort of thinking about the directional trends within each of the individual segments?

Question: Whit Mayo - Leerink Partners - Analyst : That's super helpful. Maybe I missed this, but just and maybe it's not in your best interest to say this, but like where do you think the capital deployment priorities will be over the next year? You've been active in hospice, maybe a little bit largely in home health. Are there any areas or businesses you think maybe more noncore going forward? So just kind of thinking about the portfolio and how you're maybe allocating capital or taking capital out as you look out over the next year.

Question: Linda Bolduc - Morgan Stanley - Analyst : This is Linda Bolduc on for Erin Wright. So going quickly back to the IRA, I believe I heard a mention of the company having one drug on the IRA drug list. Is this STELARA or is it another drug? And if so, what is that drug's exposure?

Question: Linda Bolduc - Morgan Stanley - Analyst : That's helpful. And also within the Pharmacy segment, we've seen continued quarter-over-quarter impressive growth compared to last year and especially when we compare that to a long-term growth target of high single digits. So just to parse out this growth a bit further, how much of that impressive growth is related to BrightSpring capturing meaningful share from industry peers and the (inaudible) expanding with these new specialty drugs?

Question: Jamie Perse - Goldman Sachs - Analyst : Jon, I was hoping you could spend a minute just on your early primary care efforts, what you're looking for there to gauge the level of management focus and capital you'll deploy here? And how should we be measuring your success in that space in 2025 and 2026? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 01, 2024 / 12:30PM, BTSG.OQ - Q3 2024 Brightspring Health Services Inc Earnings Call

Question: Pito Chickering - Deutsche Bank - Analyst : Well, the discrete models, it looks like the Provider side of business was a big part of the third quarter EBITDA beat. So how much of that margin improvement sort of seen this quarter, which was spectacular, came from pricing versus community and rehab patients declining year-over-year? So positive mix coming from home health or just overall SG&A leverage on the 10% revenue growth?

Question: Matthew Gillmor - KeyBanc Capital Markets Inc. - Analyst : So the $10 million of nonrecurring items you called it out, I was curious if you could delineate between the start-up losses and the payer settlement? And then related to that, was that something that was contemplated in guidance? Or we should we view that as sort of incremental to what you reported on EBITDA?