Download Magellan Rx Management

A Unique Vision of Care
Jefferies 2014 Global Healthcare Conference
June 3, 2014
Cautionary Statement
The following schedules and statements made in this presentation constitute forward-looking statements
contemplated under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based
on management’s current expectations and are subject to known and unknown uncertainties and risks which could
cause actual results to differ materially from those reflected, contemplated or implied by such forward-looking
statements including, but not limited to, the following:
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Termination or non-renewal of contracts by customers
Renegotiation of rates paid to and/or by the Company by customers and/or providers
Higher utilization of behavioral health treatment services by members
Delays, higher costs or inability to implement the Company’s initiatives
The impact of new or amended laws or regulations
Acts of war, terrorism or other catastrophic events
The impact of increased competition on ability to maintain or obtain contracts
The impact of increased competition on rates paid to or by the Company
The impact of share repurchase programs
Governmental inquiries and/or litigation
Interest rate increases
Economic uncertainties
Many of these factors are beyond the control of the Company. Any and all forward-looking statements made in this
presentation are qualified in their entirety by the complete discussion of risks set forth under the caption “Risk Factors”
in Magellan’s Annual Report on Form 10-K for the year ended December 31, 2013 and on subsequent Forms 10-Q.
Magellan undertakes no obligation to update any forward-looking or cautionary statements.
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Agenda
– Magellan Overview
– Key Strategic Initiatives
• Magellan Complete Care
• Magellan Rx Management
– Financial Highlights
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Magellan: History and Transformation
Magellan Today
Healthcare Company with a focus
on special population management
Multi-line
Specialty Healthcare
Management
(2006 – 2012)
Market Leader
in Behavioral
Health
Management
(up to 2006)
Building on a strong foundation to transform for the future
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Magellan Today - Building for the Future
Managed
Healthcare
Specialty Solutions
Pharmacy
Management
Complete Care
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Full Suite
of Integrated
Specialty
Healthcare
Products
for Targeted
Populations
Agenda
– Magellan Overview
– Key Strategic Initiatives
• Magellan Complete Care
• Magellan Rx Management
– Financial Highlights
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Magellan Complete Care Strategy
Focused on integrated
physical and behavioral
health management of
special populations on a
state-specific basis
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Pursuing on a state-by-state
basis through:
• Partnership
• Joint Venture
• Acquisition
• Internally Developed
Target Revenue – Magellan Complete Care
Total medical
spend for targeted
populations in
identified states:
>$50B by 2017
Target: Presence in 5-7 states by 2017, managing no less than 5% of
the total medical spend, either directly or in partnerships
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Executing on our Magellan Complete Care Strategy
Florida MCC of FL
Iowa
New York
(100% owned)
Behavioral Led
Health Homes
(100% owned)
AlphaCare
(65% ownership)
-General Medicaid
HMO
-Awarded contract
for a SMI specialty
plan
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-Comprehensive
care coordination
for SMI and SED
population
-Medicaid
Managed LTC plan
and Medicare
plans
-Selected to
participate in FIDA
plan
Additional States
-Progress on a
variety of JV’s,
partnerships, and
wholly-owned
capabilities
-pursuing HMO
licenses in IA, NE,
PA, LA
Magellan Rx Management Capabilities
Pharmacy Benefit
Management
• Full service traditional PBM services
Pharmacy Benefit
Administration
• PBA services for State Medicaid and other
government sponsored programs
Specialty
Pharmaceutical
Services
Medical Pharmacy
Management
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• Dispensing operations, contracting and
formulary optimization programs
• Managing the cost and quality of therapeutic
interventions for complex conditions covered
under the medical benefit
Total Drug
Management
Magellan Rx Management Strategy
Any Drug
• Pills, tablets, liquids
• Self-injectables
• Infused biologics
• Self-administered
Any Site of Service
• Oral or injectable, purchased via mail order, retail
or other location
• Provider administered
• Physician office, hospital (IP/OP), home infusion
Any Benefit
• Pharmacy benefit
• Drugs paid under the medical benefit
Combining our deep PBM expertise with industry-leading Medical Pharmacy and
Specialty Pharmacy capabilities, we offer a suite of clinical and cost management
solutions which provide a comprehensive approach to managing the quality and cost of
pharmaceutical care, for any drug, at any provider site of service, under any benefit
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Growing Magellan Rx Management
$750.0
$712.0
$700.0
$650.0
$578.0
$600.0
$550.0
$516.4
$500.0
$446.9
$450.0
$400.0
$350.0
$324.0
$300.0
$250.0
$200.0
2009
2010
2011
2012
Revenue
Target Magellan Rx Management Revenue: $2.5B by 2018
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2013
Executing on our Magellan Rx Management Strategy
Commercial
PBM
TennCare
PBM
Partners Rx
Acquisition
CDMI
Acquisition
- Went live
1/1/13
- Launched
6/1/13
- Full-service
commercial
PBM acquired
10/1/13
-Pharmaceutical
rebate and
clinical
management
company
acquired 4/30/14
- Expanded
public sector
PBM
capabilities to
include
commercial
capabilities
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Additional
Organic and
Inorganic
Growth
Executing on our Magellan Rx Management Strategy
CDMI Acquisition
-Closed April 30, 2014
-Base purchase price of $205M
($125M paid in cash & $80M
reinvested in restricted common
stock)
-$65M contingent payment
related to 2015 rebate retention
targets
-$100M potential earn out
($65M related to conversion to
full service PBM lives & $35M in
related to 2014 & 2015 gross
profit targets)
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Strategic fit:
-Offers proven, best-in-class
clinical programs & outreach
services to help manage chronic
conditions
-Enhances our rebate
management capabilities
-Adds customer relationships &
ability to cross-sell our PBM
capabilities
Remainder of 2014
Expected Results
-Revenue ~$28M
-Segment Profit ~$23M
-Stock Compensation Expense
~$20M
-Depreciation & Amortization
~$9.5M
-Dilutive EPS impact ~$0.14
-Excluding non-cash items, EPS
will be accretive by ~$0.50
Agenda
– Magellan Overview
– Key Strategic Initiatives
• Magellan Complete Care
• Magellan Rx Management
– Financial Highlights
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Financial Highlights
2012
2013
Original 2014
Guidance*
2014 Guidance
Updated**
Revenue
$3,207M
$3,546M
$3.6B - $3.8B
$3.6B - $3.8B
Cost of Care & COGS
$2,400M
$2,689M
$2.77B - $2.93B
Segment Profit
$267.4M
$259.4M
$215M - $235M
$238M - $258M
Net Income
$151.0M
$125.3M
$57M - $73M
$53M - $69M
$5.42
$4.53
$2.00 - $2.56*
$1.89 - $2.46***
EPS
(per diluted common
share)
*As of 12/17/13; assumes no further share repurchases.
**As of 4/29/14; assumes no further share repurchases and includes CDMI.
*** 2014 EPS includes dilutive impact of approx. $0.64 related to amortization of acquisition intangibles & stock comp. exp.
for the CDMI acquisition
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Long-term Growth Targets
Magellan
Complete Care
Magellan Rx
Management
• Expansion into new
geographies
• Additional capabilities in
other populations
• Growth in our current states
(NY, FL, and IA)
• Additional scale
• Capabilities such as Part D
and mail order
• Growing our customer
base
Growth in Core
Behavioral
Health and
Specialty
Solutions
Businesses
Achieve through Organic and Inorganic Means
Long-Term CAGR in both Revenue and EPS of 20%
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Capital Deployment Strategy
Invest in Our Businesses
• Product innovation
• New capabilities
• Changing markets and customer
needs
Disciplined M&A
• Achieve MCC and Pharmacy
Initiatives
• Consolidation opportunities to
strengthen existing businesses
and products
• New capabilities to
complement/enhance current
products and services
• From 2006 - 2013, deployed
>$565M of capital for 5
acquisitions
• Deployed additional capital in
2014 for acquisition of CDMI
($125M)
Return Capital to
Shareholders
• Routinely evaluate alternatives
• Current authorization is $300M
and runs through October 2015
• $143.2M repurchased through
4/25/2014 on current $300M
authorization
• Returned $893.2M to investors
since August 2008 at an average
price of $44.21
Magellan has a strong financial position – $292M in cash as of 3/31/14 (less
$125M for CDMI on 4/30/14), $230Mz Credit Facility, and strong cash flow –
to use for investments in growth and capital deployment
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Strategic Priorities
Operational Execution
Organic Growth in
Existing Businesses
Execute on MCC and Pharmacy Initiatives
Capital Deployment
People Resources
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Q&A