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Leerink Swann Equity Strategist Director John Sullivan explains why investors are excited by the Cigna, HealthSpring deal.
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Back with you later on in the out well emanate Monday giving markets a boost one of the biggest deals -- making a three point eight billion dollar play for health brain.
In an effort to expand its Medicare business John sold and is director of equity research and health -- strategist at Leary Swann and He joins me right now John Cigna and other health insurers.
All up on this announcement.
All why are investors cheering this new.
The good afternoon Chris.
It's an intelligent move for -- not.
I think that anything has a terrific business.
In traditional insurance lines including employer the managed care I think not has has a hole in their business in Medicare managed care helps bring has a great met Medicare managed care business and that's that's why this is a good fit for Cigna.
You know I mentioned some of the others in the space -- -- -- wellcare universal American and some others are there also holes in these companies.
In this Medicare space and could we see this continue throughout the entire industry.
Sure I mean this is a business managed care like most businesses is a business that are bigger companies can be more efficient and it certainly there's significant overhead in the managed care business so companies like Coventry health for example deviation assemble.
From -- -- -- Our would be attractive add -- to several franchises among the larger names in in in in managed care is a -- about the timing of this deal John it strikes you -- it makes it -- the moment.
Makes more sense now may be moving forward -- other deals might.
It's a great question I mean I think that big companies like Cigna.
Have lots of cash have lots of cash flow may be what they don't have as much growth as they want I think the growth by acquisition.
He's usually.
A a primary strategy of companies like this I think that they what the stock market and economy being so volatile and so -- certain for a lot of the year.
It's been delayed but now with the economy looking a little bit more constructive and and what the stock market looking quite a bit more reliable.
I think growth by acquisition is back on the front burner for S&P 500 company that's interest the you'd say at you because.
And a lot of investors out there are looking for -- -- a lot of companies with strong balance sheets and a lot of cash are looking they may put that He used to increasing dividends.
All buying back their shares to -- share value as well for their shareholders that you seem to think that may be particularly in this space and I help.
It does not to have a drawn out question here we've been looking at acquisitions in the drug space significantly do you think that expands -- all of healthcare and that's really how they're gonna use those big balancing.
Oh I think that you know drug companies have lots of cash and want to cash flow for short.
But across all of health care.
There are large companies with primary distribution channels that can benefit by adding more and more revenues in -- and complementary product.
What about some of those companies that could be attractive did you have any particular that you like that maybe take over targets.
I mean sure there are several effort for big therapeutics companies I think that smaller or mid -- therapeutics companies companies like United Therapeutics new companies like I -- in late in the news today cubist CBS T.
Those are interest -- smaller companies that can be added.
In the medical device based.
Companies that have attractive growth by growth profiles like in select stock symbol PO DD.
-- or new base by I think those are attractive.
Growth opportunities as well -- even in areas like life science technologies drug discovery tools are companies like broker stock symbol BR KER.
John sold in thank you so much sir appreciate it.
Thanks Chris -- not only do you have health spring up.
Obviously the 37% premium they're gonna be a big on the day but Cigna is up as well that's always a good sign that it's a positive -- -- that move.
In -- you know investors think sell when the acquirer is up on the day all right and.
