Q3 2019 Earnings Call
Forward looking statements.
These risks and uncertainties include the developing nature of the market for technology enabled healthcare products and services and potential changes to laws and regulations that may impact our clients.
For additional information on the risks facing Taboola Rasa healthcare, please refer to our filings with the SEC, including the risk factors section of our most recent Form 10-K filed with the FCC on March Onest 2019.
A recording of this call is accessible through a link on the Investor Relations page of our website.
And it will be available for 90 days.
Now I'll turn the call over to Dr., Calvin Knowlton, CEO , Chairman and founder of Taboola Ross for health care cow.
Thank you Kevin Good evening, Thank you for joining us for our second quarter third quarter, sorry, 2019 earnings call.
With me today are doctors, the Knowlton co founder Chief marketing and business Development Officer, who will provide an update on our markets and new business activities.
Mr. Bryan Adams, our Chief Financial Officer, who will provide our financial update on the third quarter as well as our latest outlook for year end 2019.
David Raso has delivered solid financial and operational performance to date in 2019.
Strengthen our core business and cohesion of our recent acquisitions gives us confidence in closing out the year on a high note.
While we have experienced a number of successes in the quarter I.
I do want to take a moment to call out that we are trimming our guidance range as a direct result of the abrupt termination of the medication adherence to our contract during the third quarter.
We had announced this contract earlier in the year and anticipated the majority of the work to be completed in the third and fourth quarters.
We continue to be engaged by this client for MTM and dose murex software.
But due to their recent merger and change in management the client terminated all adherence work not just that being performed by TR H.C.
This was a onetime agreement and not our core business offering.
While this is an unfortunate event it should not be interpreted as a weakness in our core business. We continue to see demand building for our novel solutions, which we will cover in more detail throughout the call Brian will discuss this further including the specific impact of this cancellation.
With that said, our third quarter revenue was 74.3 million, representing a 36% growth over Q3 2018.
And our adjusted EBITDA was 10.6 million, representing a 13% growth compared to third quarter 2018.
As a result of our recent reorganization process.
We now think about our company and that turn in terms of four distinct business units number one.
Care venture in healthcare.
Which is our pace unit.
Number two pharmacists.
Number three health plans and payers.
And number four patients and consumers.
All four business units have served to congeal the attributes of the acquisitions of Symphony Rx prescribed wellness and dose me.
As we had planned.
And I'd like to spend some time reviewing the quarterly activity through the lens of these four units.
First.
Our pace unit called care bench in healthcare is led by care for nieces team member Carlos per as.
Carlos has experience in each of our pace offerings, considering has extensive career in healthcare and pace organizational leadership.
We have seen an uptick in new pace organizations and an expansion of current pace organizations, perhaps in consideration of the pace 2.0 growth initiative Orsula, we'll get into the details shortly so I will move onto the other three business units.
Second business unit is pharmacists.
Led by Dr. Fair, Matt had who is also serving as the lead person of prescribed wellness.
Prescribed wellness has realized tremendous growth in their virtual pharmacists program in the last six months. This program allows a community pharmacists to higher centralized clinical staff to complement their internal team. The intent is to support the community pharmacies with the transition of their business model from product.
Service.
The strong growth of this program represents a significant investment and strong desire by the community pharmacies to enhance their practice model by offering more clinical services.
Two weeks ago, we launched our Medwise advisor conch years pharmacists initiative at the annual meeting.
Of the National Association of community pharmacies.
We had a pack house was standing room only.
And induced induced a tremendous demand to adopt this new concierge service.
We have initiated our pilot with prescribed wellness community pharmacies across the country.
This will test various marketing tactics, including pricing models and ROI over the next four months.
In addition to spreading the Medwise word to community pharmacists. Later this month, we are addressing the joint Commission of pharmacy practice, which is a gathering of the leaders of 13 associations within pharmacy, including boards of pharmacy colleges of pharmacy and others.
We were asked to address future trends in pharmacy, specifically, our novel multi drug simultaneous analysis network Medwise software and accompanying Medwise decision support tools.
Our Symphony MTN pharmacists are transitioning to Medwise advisor MTM MTM pharmacists incrementally.
Our dose meet targeting of hospital and infusion companies directors of pharmacy.
It's also gaining traction as evidenced recently by our contracting with one of the largest infusion pharmacy companies in the country.
As we continue to enhance our medication risk identification and mitigation matrix with injectable drugs, we expect to up sell medwise into the hospital pharmacists space in mid to late 2020. This is a tremendous opportunity.
We have worked hard on the development of our integration capabilities and this quarter marks the first opportunity we've had to demonstrate their value.
We are excited to shared the launch of an employee and great engagement model program with Cerner using medwise as a SaaS model for their employee clinics. This month.
Cerners employee clinics are generally viewed as the place where they pilot new product functionality.
So we see this as the first step toward greater collaboration with Cerner systems.
We have another client.
With whom we are discussing the same employee approach.
Lastly, in our pharmacists business unit. We are we also include our Medwise University edition, which continues to materialize sales to pharmacy schools in the us and Asia.
This provides thousands of student pharmacists knowledge and practice with the only multi drug interaction system medwise.
Turning to our health plans and payers business unit led by Symphony as lead Dr. Sondra Liao who is also incoming president elect of the American Pharmacists Association, we continue to see interest from large health plans and payers.
One of the largest use US health plans is engaging us for a pilot with commercial members and two of the largest symphony a clients have shown interest in our optimized opioid solution.
Another of their clients had us risk stratify, approximately 25 million of their patients last month.
Further intervention now in discussion.
Lastly, our patient consumer business unit is led by prescribed illnesses yesterday or hula, who is the lead it person at prescribe wellness.
In late October are prescribed wellness unit launched CRH. These first mobile app available for download in the Apple and Entre Android Apple store stores have stores. This first edition allows patients who enrolled was one of the 11000 prescribe wellness pharmacies to upload their medication data from their local.
Community pharmacy request refills and more.
Our next version expected to launch in Q1 early Q1 will allow patients to add additional medications, including over the counter medications.
The late Q1 early Q2 version will start showing the medwise risk score, where they push to talk connection and messaging with the local prescriber on this pharmacies.
For launch in Q1 in a target market.
We also will begin testing the effect of public service announcements raising awareness of the ubiquity of adverse drug events.
We will be prepared to support this with our medication safety centers until local prescribed bonus pharmacists become certified Medwise advisors.
Both of these tracks via prescribe wellness direct and via our centralized medication safety call centers assert our value proposition that describes the hazards and negative impact of multi drug interactions as well as TR HC possessing the only solution to this pandemic with its.
Medwise platform and certified Medwise advisor team of pharmacists and mostly.
Our proven outcomes.
We're seeing a lot of activity across all four of these business units and from our position today, we can confidently say that the future for 2020 in 2021 is very promising.
On a different topic.
Our newly formed sales team under Symphony as former CEO Dr., Kevin Boson, Who's our Chief sales officer has grown over the past nine months to more than 30 people.
First of the will also provide additional color on this topic.
So this year has been transformational for TR HC.
Laser focusing all aspects of the company or Medwise performances health plans payers and patients consumers as well as the care venture in healthcare sector for our pace of growth.
We have so much to offer humankind and now that we are ready to tell the world about adverse drug events for multi drug combinations.
And to leave behind this invisible shroud with this topic.
And for its become Discernibly visible in light of TRG HD novel solution to resolve this deadly pandemic.
We need to catalyze the conversation about the suffering and death directly due to preventable adverse drug events.
With that I will now as Dr. Orsula Knowlton, who is in charge of marketing sales strategy and implementation to opine from her point of view versa.
Thank you cow.
I'd like to add to what was just presented from the new business perspective provide an update regarding our pace market and share more about our sales team.
Starting with our health plan payer market as cow alluded. We are pleased with the number of first this quarter.
These include our first managed Medicaid program easing in our MTN model.
Magellan currently utilizing symphony our access MTM solution.
Supporting the Symphony Rx acquisition thesis. This represents our first it existing Stephanie Rx MCM customer to transition to our robust maglaj's platform.
Second we have our first national health plan that will be using our optimized opioid solution program, which is in process.
Third our first medwise risk stratification and medication risk mitigation collaboration for a commercial population lets a top national PBM to began during the first quarter.
For our first Maglaj's SaaS model license to 340 be organization, which has also and process and five our first national electronic health record client Cerner to pilot Medwise as a SaaS model and therefore large employee health clinics, that's five first which we will leverage for growth and too.
20.
In addition, we have interest from pharmacies, including a national pharmacy to incorporate teary medwise medication risk mitigation system.
With their system as a reminder, packaging to assure medication safety. This will also be at first.
As you May have read I wanted to mention that our partner remedy holdings and its new Division Humana's. Our acts recently launched Simpson has Rx contained software to the employer market in Canada under an exclusive agreement.
We are excited to begin these first.
Moving on to pace.
The National Pace Association annual meeting was held October 13 to the 16th in New Orleans.
As Kevin mentioned Terence's pace companies are now United under our convention healthcare pace brand.
The combined solution includes carry stays medication risk management electronic health record third Party administration, Medicare risk adjustment and pace consulting.
In addition to multiple new business in client meetings, our annual pace appreciation event attracted over 200 attendees.
And association update outlined that there are 130 pace organizations and 31 states as of September 1st States with the largest number of providers include California, Michigan.
North Carolina and Pennsylvania.
As of January 1st 2019 pace has grown to over 50000 participants a 42% compounded annual growth rate over the last five years.
A survey conducted by the national pace cessation identified that pace leaders remain consistently confident over time about their growth prospects and their fiscal health ratings are the highest in four years.
A pace client that was recently featured in the October issue of helping is let's clear to say that Terry Ses technology platform and pharmacists collaboration was directly related to a 16% decrease in areas and a 27% decrease in total hospitalization.
Which were realized within a short timeframe.
Also that tenant roster healthcare has added tremendous value to our organization.
We were very pleased that our clients are acknowledging the value of Terry see as a partner and believe that we are directly impacting the quality and financial stability pace organizations and support if their growth.
Approximately 85% of paced providers it use at least one Terry see service, but less than 20% news all four core service offerings.
The goal of combining these solutions is for ease of use by clients.
Integrating our service offering and in the feature data analytics.
Cross selling amongst the amongst the Carey mentioned healthcare companies accounted for approximately $15 million of revenue in the first nine months of 2019, which is ahead of expectations.
We cross sold into 20 of our pace customers. So far this year.
For medication risk management.
Our pipeline includes well be health pace.
One of the first private equity backed for profit pace organization focused on consistent growth of pace in the United States.
They are Stockton, California location, which is a partnership with Sutter health will begin with our medication risk mitigation services on December 1st.
Followed by their Pasadena location on January Onest, along with our third and fourth locations in March and July of 2020.
We will begin 2020 strong with three new pace clients, including Welby, along with two startups located in South Bend, Indiana and Jacksonville, Florida.
Our client expansion pipeline for 2020 is exciting.
With two startups to starting on January Onest over 15 planned openings, so far using multiple care Avention healthcare service lines.
The greatest visibility, we have ever had into a new year with signed agreements.
As a final note I'd like to expand on Tirasemtiv sales team formation efforts led by Dr., Kevin Boson, Chief sales officer.
In order to support our growth and fully capitalize on the opportunities in the market, we focused on leveraging a sales team and the company.
To give you additional perspective, we started 2019 with just a few direct salespeople.
Today, we have over 30 on the sales team, including 20 inside sales for the pharmacists provider prescribed wellness market eight payer sales for Symphony Rx and an ongoing effort by the teams of care Avention healthcare to cross sell and pace.
Other sales team members cover chain pharmacies pharma and sales operations.
We believe that we have made the appropriate additions and changes to our sales structure to maximize their efforts and continue to grow our organization.
To conclude my remarks.
We have a pan pandemic of simultaneous multi drug regimens that cause adverse drug events.
Tier H.C. has a unique and proprietary offering with documented outcomes a real sales team.
Just pipeline and strategy to have a positive impact on the situation.
I'd like to now turn it over to our Chief Financial Officer Bryan Adams.
Hi, Thank you are slow.
During the third quarter, we saw continued topline growth in all areas of our business as well as expanding gross margins a few highlights from the quarter include our pace business growing organically 23%.
The expansion of our call center support of the growing virtual pharmacists offering targeted for our pharmacy customers, which provoked the opening of our ninth call Center a trade University.
And dose me continues to grow including signing a national deal for infusion centers owned by one of our main MTM customers a nice evidence of our cross selling efforts.
Before I get into the details of the quarter I wanted to touch on the contract cancellation that Cal referenced earlier.
We had previously announced a new adherence contract with one of our MTM customers, we expected that contract to generate approximately $10 million of revenue in 2019, and contribute $4 million to $5 million of adjusted EBITDA to.
The majority of this work was to take place in the third and fourth quarter.
The contract was cancelled during the third quarter and at that time. The contracts was canceled we have generated about $2 million of revenue.
We were expecting another 2 million in third quarter, and 6 million in the fourth quarter. As a result, we are adjusting our guidance accordingly.
Now turning to financial results for the third quarter of 2019, we generated total revenue of $74.3 million, an increase of 36% compared to a year ago.
Product revenue of $35 million increased 25% year over year and represented 47% of total revenue as compared to 52% last year, a purposeful decline we expect to continue in the near term.
Service revenue of $39.3 million increased 49% the strong year over year growth in our service revenue was driven by both contributions from acquisitions as well as organic growth within our service offerings.
Gross margin, excluding depreciation and amortization expense in the third quarter of 37.5% compared to 35.6% in the third quarter of last year.
The increase was primarily the result of the continued shift in our revenue mix as service revenue comprises a greater percentage of total revenue compared to last year in particular SaaS revenue now makes up 18% of our revenue base compared to 4% last year.
We plan to continue focusing on diversifying our revenue streams in order to meet our long term growth margin target of 40% to 45%.
Product gross margin, excluding depreciation and amortization was 26% in the third quarter compared to 25% in the third quarter of last year.
As we expected we're seeing a modest uplift in margins as the results of our recent transition to a new prime vendor.
Service gross margin, excluding depreciation and amortization was 48% compared to 47% a year ago. The increasing service gross margin resulted from the prescribed wellness acquisition completed earlier this year.
Operating expenses as a percentage of total revenue were 48% in the quarter.
When you exclude depreciation and amortization stock compensation and the impact of the change in fair value to the acquisition related contingent consideration.
Operating expenses would have represented 24% of total revenue in the quarter up from 20% in the third quarter of last year.
The increases in line with our expectations and reflects expenses associated with the launch of our precision Pharmacotherapy Research and development Institute investments, we're making to integrate recent acquisitions as well as built out our sales infrastructure.
As previously stated we expect improvement in our operating leverage to begin to materialize over the next two to three years as we capitalize on expanding our salesforce executing on synergies, resulting from the acquisitions and continuing to integrate our platforms and infrastructure.
In terms of adjusted EBITDA, we generated $10.6 million in the quarter compared to $9.3 million a year ago.
Adjusted EBITDA margin for the third quarter of 2019 was 14.2% compared to 32 excuse me compared to 17% in the third quarter of last year.
This was inline with our expectations based on investments I, just reviewed research and development costs, excluding stock compensation increased 5.2% of revenue compared to 4.5% last year. Additionally, sales and marketing costs, excluding stock compensation were 7.7% of revenue compared to 4.2% last year.
This is not only reflective of some of our recent investments to build out the sales infrastructure, but also includes costs related to an intense conference quarter for our pharmacists business unit.
Our GAAP net loss of $8.1 million compared to a GAAP net income of $10.4 million in the third quarter 2018.
GAAP net loss per diluted share for the third quarter was 39 cents compared to GAAP net income per diluted share of 47 cents for the same period last year, the net loss per diluted share calculation.
Our based on diluted share count of 20.7 million for the third quarter 2019 versus 22.3 million for the third quarter of 2018.
Adjusted net income per diluted share for the third quarter of 2019 was 22 cents compared to adjusted net income per diluted share of 26 cents in the third quarter of 2018.
Net income per diluted share calculations are based on a diluted share count of 23.1 million for the third quarter 2019 versus $22.3 million for the third quarter 2018.
Turning to the balance sheet as of September 32019, we had $47.3 million of unrestricted cash compared to $20.3 million at the end of 2018.
We currently have $60 million available on our line of credit with nothing drawn.
To wrap up my comments today I will provide an initial outlook for the fourth quarter and an update to our full year expectations.
For the fourth quarter of 2019, we anticipate revenue to be in the range of $71 million to $74 million adjusted EBITDA to be in the range of $6 million to $7 million, a net loss to be in the range of $12 million to $11 million.
As I stated earlier, the majority of the impact from the loss of the adherence contract will occur during the fourth quarter and as a result, we have trimmed our guidance to reflect the cancellation.
For the full year 2019 were updating our outlook as follows we anticipate total revenue to be in the range of $282 million to $285 million adjusted EBITDA to be in the range of $36 million to $37 million as we've discussed in the past we are expecting full year adjusted EBITDA margins to be slightly behind 2018.
Engine due to expected losses in 2019 attributable to the dose mi business as well as costs related to the launch of precision Pharmacotherapy research and development.
With Taboola Ross's performance this quarter. Despite the contract cancellation, we ended the quarter within our guidance range for both revenue and adjusted EBITDA and beat estimates for EPS.
In addition.
As we've all mentioned the momentum in the markets. We serve is building and the work we have done to realign and build out the Salesforce I believe are going to pay dividends in 2020 and beyond.
With that I would like to turn the call back over to Cal for his closing remarks Cal.
Thank you, Brian as I think were slow Brian and I have all stressed on this call. We're incredibly pleased with everything Tegra rasa accomplished thus far in 2019.
And where we are going.
And has been the case every quarter, we did not have delivered these results without the ongoing hard work strategic vision and dedication of all of our team members as well as the trust in collaboration of our clients.
We have touched on our sites and tactics for 2020 certified Medwise contours pharmacists will gain local attraction.
Use of our science should begin to in and begin integrating into hospitals.
As well as to yet to be public significant initiatives that are pending.
I want to thank you for listing and sincere thanks to our sophisticated team members, who have enabled us to continue to propagate are disruptive medwise medication safety solutions.
At this point operator would you. Please open the call two questions.
Thank you as a reminder, you asked a question you will need to press star one on your telephone.
Question Brad.
Please standby wildly composites you any roster.
Our first question coming from the line of Ryan Daniels.
Your line is now open.
Thanks. This is Jerry how soon for Ryan This evening, thanks for the questions.
I guess, maybe first just looking at the guidance if I look at the midpoint.
The new adjusted EBITDA guidance, it looks like margins down maybe about 70 basis points are so from the prior guidance range. So just curious why there was kind of that sizable margin carry through was that purely associated with the last of the adherence contract or is there anything else going on there that's worth noting.
No. There is that that is the only thing that is impacting our adjustment to guidance at this point so.
The loss of that contract is is the sole factor.
Got it okay, great and then I guess with your contract structure is it typical that clients are able to cancel abruptly in this fashion or was there kind of a unique sort of specific provision in place for a change of control.
So with this contract it's not like our typical medication therapy management contracts, where we are doing the qualification and.
Developing the population on which we're going to target interventions.
This was one where the client was giving US an estimate early on in the year for the volumes that they expected to pass us for the adherence interventions.
And so there was no specific commitment on volumes.
Was in understanding at the beginning of the contract and so.
They had the ability to to terminate.
And no longer send us opportunities to perform these interventions I'm going ask Kevin both in if he's got anything addition that he wants to add there.
Thanks, Brian .
Brian covered it well with these contracts, particularly the ones that are related to hear adherence with on some of the large health plans on there's there's an estimate that don't make in terms of how many patients they want to target to achieve certain star benchmarks in some cases, we do have good on estimates good down.
Highest protections and good guarantees but in this when we did it.
And just to build just a couple of comments on staffing related to that during the third quarter, we were able to reposition the staff that was dedicated to this adherence project to focus on the virtual pharmacists support.
So why you didn't see huge impact in third quarter, we were not staffing up to support this contract in Q4 so.
You're not seeing a huge decrease.
In our costs in the fourth quarter, because we had not stepped up to support this contract.
In Q4.
Okay, great. Thank you.
Thank you next question comes from the line of Jamie Stockton.
Sir Your line is now open.
Okay.
Yeah. Thanks for taking my question I mean, maybe just to follow up on that Brian as we think about the cost structure in Q4 is there anything.
He just said like Hey, we weren't staffing up a lot.
For this contract it seems like Theres going to be some sequential cost growth. So are there specific areas within the income statement that we should be thinking about as kind of capturing that cost growth.
Yes, so while we weren't specifically staffing up or we hadn't started the process yet to to staff up to support the.
The significant effort that was going to be required in the fourth quarter.
There is.
Some seasonality in the Symphony a business I know we've touched on this a little bit in the past.
But as you progress throughout the year.
The number the.
The folks that are qualified at this point to receive MTM services are much more difficult to complete the comprehensive medication reviews on so.
We don't have the same leverage that we had earlier in the years. So if you're looking for a place where you're going to continue to see consistent.
Costs it would be in that in that labor line.
Where we're going to have a consistent level of people and effort to deliver fewer CMR is in the fourth quarter than we had delivered in the third and second quarter.
Okay.
And then on.
Some of the pace commentary that you guys had.
Hi, I think.
You said that you you've got 15.
Locations already contracts for 2020 should we think about that as as 15 organizations that are all taking kind of the core institutional pharmacy.
You know offering or is that.
One of the.
Three or four main offerings that you guys have and the pace market.
And then maybe my other question on pace would just be.
Can you give us some sense for the number of locations that you guys are going to end this year with.
You know that we should be thinking about that became thats growing from a base standpoint.
Sure.
So the thanks, Jamie for your question.
15 pace organizations are for medication therapy management, they because some are startup and we do successfully cross sell they could also bring in other services along with them.
As far as the number of locations will be about 80 at the end of this year.
Okay. Thank you.
15, or actually starting as care continues with the.
Medications the medication risk mitigation.
And they may have understood. Thanks.
Hi.
Okay. Thank you.
Thanks, Jim.
Thank you Jamie next question from the land Sean Whalen. Your line is no open.
Hi, Thanks, So on this lost client again, I'm just a little confused.
You can you use the word adherence to describe pretty much every one of your product line I'm guessing. This is a key use other lingo was it MTM client list as Bonnie Rx.
Instead of legislation or not.
Yes ill take that so if you look at the Symphony a business the and thanks for the question and and clarification requests, but if you look at the MTM programs. There's two key components of the program. One is doing comprehensive medication reviews for your MTM qualified group.
And so thats, our symphony a core business it's predictable.
It's grown year over year, which is great. There is another component to the MTM service, which is we call. It adherence because it's tied to star ratings and star improvement. So if you look at the patients you don't qualify for and MTM programs are usually about 15% qualify in order for plans to hit some of their star benchmarks.
Related to the part D Star measures.
Theres three different adherence component, so adherence that blood pressure medications adherence to diabetes medications.
And inherence to stop medications are cholesterol lowering medications. So those that program was specific to doing outreach to patients as lot of it reminder, calls to take blood pressure diabetes cholesterol, Matt. So it's a different component of the MTM program.
Okay, and so it it doesn't sound like it was prescribe weldments that either right.
No no correctly, it's on the Symphony ESI correct.
Okay and did you anticipate Blair.
Yep.
The other types of contracts that we have that are similar are very minimal that our structure to the same manner and significantly smaller.
So this was by far the largest parts one it looks.
Looks like this.
And prior to the cancellation had you anticipated revenue to be generated in 2020 when this contract.
No. It was at single year year to year contracts, we hadn't done any forecasting for 2020 relative to that.
Okay, and this is going to come at a services revenue.
That's right.
Got it how much your services last question promised how much of your services revenue percentage wise are tied to these kind of onetime contracts.
It's very small.
So this was by far the largest I would say the rest of the the service contracts that looks like this or maybe maybe it's a million dollars, yes in aggregate yes.
Okay. Thanks, so much thanks, Sean Thank you.
Yes.
Thank you and next question comes from the line of Matthew Gilmore.
Sir Your line is now open.
Thanks for the question I had one follow up on this contract.
Brian I think you said you had generated $2 million off of it.
For 2019, so I just wanted to confirm that so as we're thinking about the headwind from when it's obviously pretty small for next year is that right.
Thats correct okay.
Well first of all talked about some of the medwise contracts with payers on thank you said Magellan will be using sort of MTM like capabilities for some of their Medicaid populations. I think you also mentioned a national PBM, we'll be using medwise for commercial population I was hoping you could talk about sort of how how the model's working with.
With those payers as a sort of both services and software as a software and then is there any way to kind of frame up.
The the size of these contracts are these pilots that are built that will build or are they more meaningful out of the gates on any details there will be great.
Now this is Kevin I'll take that question. Thanks, so much. It. It's we're very excited about that these programs and the use of med why is one of the goals has been to talk to people about the Medwise science, how unique it is the opportunity for it to truly reduced total cost of care and improve patients lives and so we're.
Wanted to do the first managed Medicaid program with Magellan and it will be a services component our goal would be that transition that to more of a software support as we train pharmacists in the geography that those will be in leveraging our prescribe on this network so that will launch in Virginia.
And then secondarily in Florida.
It's about it's between.
500000 to a million dollar and total contract size.
On the other programs that we're excited about in 2020 as as a traditional Medicare program on that is launching and adding the medwise component to their traditional MTM model.
It's very similar in terms of it will start as a service contract, while we have the opportunity to train and and certify their pharmacists.
To use that technology. So it will transition to a SaaS. It's similar in size in that 500000 to a million dollars range and then the the PBM.
That's looking to implement the program on the commercial side and it's very very similar in size.
To that program as well and the same type of thing it will be a service model with the goal of transitioning that to a SaaS. So in all those components. The managed Medicaid plan the Medicare the commercial they're very much interested in measuring reductions in adverse drug events that result in hospitalizations emergency room visits.
So we're very excited to launch those programs track that success and build on it.
And by service I I take that to me in sort of its on EM TM like model, where you are doing the interventions and I think what you're saying is there's a there's a pathway for the plan to perform the interventions overtime is that correct.
Correct exactly so initially it will be our.
Essentially based call center pharmacists that will do the interventions with the patients with a transition to either the health plan pharmacists doing it or are prescribed wellness network pharmacists completing those.
Got it and then.
Hey, Brian if you could I know, you're probably not in a position again.
Formal guidance around 2020, but it sounds like the visibility into pay side, it's pretty good you've got this pipeline with payers should we still be thinking about 20% growth as as what you're targeting or should we be orienting around something else.
No I think that that that's a pretty reasonable expectation at this point, obviously, we'll refine that as we get into into 2020.
Get closer to announcing.
Our end results, but I think that at this point, that's an appropriate expectation.
Okay, great. Thank you.
Thank you Matthew.
Next question from the lend them Steve.
Your line is still open.
Yes, hi, two questions. So just as a housekeeping item was the organic.
Revenue growth in the corner and any update on the MTM pilot with CMS.
I can take the organic growth.
Updates Steve just.
It was just about 20% organic growth in the quarter.
Okay. Thank you.
There was a announcements coming from CMS the came out last week on.
It was actually a 470 page document.
Reviewing the MTM program from the last two and half years, but it was a very it was very unlikable enlightening and showed some good stuff, but it was mostly all quantitative but.
But the Missouri interesting thing about it was that.
When they target traditional MTM.
Targets or in engages about 7.9% of beneficiaries that meet the requirement, whereas MTM.
According to CMS.
They found its 71.7%.
Beneficiaries were engaged so it's it's been a huge.
Uptick one on the the number of people who were engaged in this and.
It did talk a little bit about 10 rasa one of the pages.
Back on page 126, 127, others of the article, but again it wasn't quantitatively comparing it was it was qualitative you, saying here's what this person here's what this group that here's what this group.
Yeah. It was prescriptive, yes, we actually with the only once it did the the prospective medication risk.
Identification and mitigation.
Great. Thanks.
But.
Thank you next question from the line of Baby investment.
Sir Your line is now open.
Great. Thank you.
Just one last quick question on on the contract cancellation is.
The it had appeared fairly significant impact on the margins in the fourth quarter, which brings obviously you're down as well.
Again without necessarily provider guide for next year, how do you want us to think about the ability.
For margin expansion next year, particularly given that the base. This year is going to be solo would you still want that to be the starting point for your.
Target of 150 basis points or is that kind of been thrown off by the loss of those contracts.
So I don't know that I'm ready to respond to that question, just yet, but I think at a minimum you could expect a 150 basis points.
Would be my comment.
Okay. Good thank you for that and then.
Going into pace I mean, obviously at some pretty favorable pace metrics.
To disclose this quarter and some new wins.
How should we think about the growth.
So that business, because I know that the pace organization itself was expecting an acceleration.
Or back to more levels that they saw maybe was three years ago is that realistic or do you expect to see that flow through to your business or do you think that the wins that you are getting given the scale the business where it is today just a lot you to sustain the growth rate that you've been experiencing.
Yes, I mean, I think right now.
Yes, we would anticipate.
Slight uptick in growth going into next year based on our current customers and what personal was describing earlier with the number of new centers that we have.
Weve.
Forecasted in the past about 20% growth on the pay side. So I think that would be consistent with our expectations right now.
As we get a little bit more visibility into.
The growth rates in some of those plans I think that that might be able to increase a little bit but.
I think right now still comfortable at around 20% growth for pace.
Got it and just one last question now that the sales force is up to 30 people and you're reaching critical mass do you have any metrics to share for example on pipeline and bandage Medicaid or other activities that may give us a sound so.
Just kind of how the pipeline or the backlog building on the productivity of those 30 people.
Yes. Thanks for that question, we do so as we put together that Brian and I work together on I'm, putting the forecast together for 2020, we can probably provide some additional specifics, but we do have.
A sales team and the payer space that is generating a lot of interest in our core markets, which are Medicare Medicaid and then that commercial plans that the pipelines are if you look at the total market in that in those areas, it's quite broad and with the interest that people are having and really tackling total cost.
Karen not necessarily chasing metrics.
We said perfectly for that.
We've given each one of that sales folks are pretty aggressive target and I think theyre all optimistic that even though its aggressive it's it's the opportunities there.
Great. Thank you very much.
Thank you Dave.
Thank you next question from the London.
The Pony Taco.
Hello.
Hi, This is Jerry thank all four Stephanie thanks for taking my question.
It sounds like the loss of the contract is due to changing client strategy does it impact how you position your adherence programs going forward.
Specifically on what you'd be able I can't make any tweaks to enhance the value proposition.
Yeah, I don't think with this one case and that's a great question I don't think in this one case there was anything.
Relative to that was program specific in meaning that I don't know than anybody thought that the program was in effective.
I don't know that theres been any change in adherence being an important metric for health plans and so I do you think it's just it's isn't it's truly an outlier even though it was at a pretty large dollar amount we see it is really an outlier.
In our business and like house that it's not core to what our business as we do support some adherence programs that.
Community pharmacies, Ron and those are successful we don't anticipate any of those changing I think the other things as Kevin. The other thing is that this particular client.
What is undergoing a tremendously large.
Assimilation of another company right now and if you look at the star ratings to add this year for this client draw.
Less they've achieved less than did last year. So there really was an incentive for them to continue doing this but I think there just.
Really busy we're trying to get this.
The Malaysian done on this acquisition, but Theres star ratings shows they really should have stayed with it but they I think they made that decision.
Got it that's good to hear and looking into next year, how should we think about your interest revenue growth rate until this contract losses Daniela.
Yes, so I would I would think about it.
Being consistent with what we've communicated to the past I think 20% overall growth rate organically for Tavita Ross's.
Kind of an appropriate place for us to be and thinking about for next year.
I don't think that this contract would.
Encapsulation this year would would impact that.
Got it thank you.
Thank you.
Thank you Stephanie again, that's a question. Please press star one on your telephone.
Next question from the line of Franco Sarto Casino.
Your line is now open.
Hi, guys I'll try to be quick.
On the prescribed.
Is that tracking to plan for 2019 ahead below.
Hey, Frank This is Brian yes, right now, they're tracking exactly where we expected them to be.
Through the first six months or so that we built.
And secondly.
Or so you talked a.
Give a list of a number of new initiatives or.
Tracks in the works and I'm curious if you.
To rank order, maybe just the top one or two that you think have the degree to short term opportunity and.
From a revenue standpoint, it maybe from a Tam standpoint as well.
Yeah.
In terms that are you asking and this is Kevin I'm jumping in are you talking in terms of that first that she went through.
Those opportunities.
Yes, I mean, I think I know the opioid opportunistic is relatively small, but maybe some of the 340 PVA and some of the other thing so that that'd be the first list Kevin Yes.
Yeah, the opportunities on the payer side or the more significant opportunities. So that the Medicaid launched that Medicare launch and then there's one that's pending relative to a new opioid program. So using that are medication decision science.
Simultaneous multi drug analysis and opioids in and managing that for that the large national payer that that that's probably the top three rank the others on where were havent opportunity getting to the F. QHC space, It's a unique opportunity for us to go into that provider network, but.
Also use in ECM, our integration that we developed so thats more of a smaller opportunity.
But creates a good learning experience for us as we work with.
Centers like that that have innovative clinical pharmacy programs oftentimes they have an onsite pharmacist he's managing on a difficult patient population and oftentimes in a safety net area.
So coordination of care is critical.
And so being able to be in that market and see how netwise performs Z how the he EMR integration performs is smaller but very important.
I would.
I agree, but it's very hard to say all this.
So one might be have a greater traction than another for instance on the PBM. Our discussion is around their largest commercial health plan. So well look to see where we are this is almost like a new candidates for really.
Great. Thank you guys.
Thanks, Thanks, Mike.
Thank you I'll now turn the call over Q Speaker. Please continue.
Well. Thank you very much for joining the call. We appreciate that and with that I think we'll say good night.
Thank you. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you everyone for participating you may now disconnect.
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