Yahoo Lifestyle Centene (CNC) Divests Apixio to Boost Its Core Business
Centene Corporation CNC recently closed the divestiture of the well-established artificial intelligence platform, Apixio, which CNC had acquired back in December 2020 in a bid to enhance its data analytics suite.
Plans of selling off the healthcare analytics company to the investment firm, New Mountain Capital, were disclosed by Centene in May 2023. The deal was completed within slightly more than a month of the announcement. The divestiture is likely to be neutral to CNC's adjusted earnings per share of 2023.
The latest move bears testament to Centene’s intensified focus on growing its Managed Care business, which positions the health insurer well for long-term growth and profitability. The business witnessed year-over-year membership growth of 8.5% as of Mar 31, 2023. Efforts to boost the unit bode well since it remains the most significant contributor to the top line of the health insurer.
Also, pursuant to the Value Creation Plan, Centene makes sure that it identifies strategic alternatives for shedding non-core assets and subsequently optimizes its portfolio. CNC looks to divest its businesses to companies that would support its growth prospects. The same has been the case with Apixio as the divestiture is likely to boost its footprint as an artificial intelligence platform that facilitates value-based care programs across the United States.
Sell-offs are often a means for Centene to sustain its share buyback record, thereby reinforcing investors’ confidence in the stock. The same is also pursued to bring down the mounting debt burden and associated interest expenses. As of Mar 31, 2023, long-term debt increased 1.6% from the 2022-end level. Interest expenses escalated 12.5% year over year in the first quarter of 2023. As debts are repaid using proceeds from sell-offs, cash reserves of the health insurer can be directed to pursue growth-related initiatives.
Centene has been quite active on the divestiture front for quite some time. Last year, it sold PANTHERx, Magellan Rx as well as its Spanish and Central European businesses. In January 2023, the divestiture of Magellan Specialty Health was completed to Evolent Health.
Shares of Centene have gained 9.7% in the past three months, compared with the industry’s 7.1% growth. CNC currently carries a Zacks Rank #3 (Hold).
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Stocks to Consider
Some better-ranked stocks in the Medical space are Amphastar Pharmaceuticals, Inc. AMPH, Boston Scientific Corporation BSX and IRadimed Corporation IRMD. While Amphastar Pharmaceuticals sports a Zacks Rank #1 (Strong Buy), Boston Scientific and IRadimed carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
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