Notable Calls

UBS is out with an interesting negative call on athenahealth (NASDAQ:ATHN) saying they were disappointed to discover that CVS is planning to close about 90 of its MinuteClinics on a seasonal basis. They view the MinuteClinics as still a relatively young business model, and in light of a benign flu season and a weak economy they think CVS mgmt may be fundamentally reassessing the consumer demand for this service. Accordingly, they think this could be a negative read to the other retail clinic providers with which ATHN does business, such as RediClinics.

Scaling back of MinuteClinics may portend broader economic pressures
By itself, the firm does not believe this news requires a major reduction to their near-term earnings projections. They think the real downside for ATHN is more the general uncertainty about the prospects of the MinuteClinic model given the inconsistent statements by CVS mgmt over the past year regarding the ultimate prospects for this business. In early 2008 CVS mgmt targeted 700 clinics by year-end. InsteadCVS has rolled out 550 clinics of which only 460 will be open year around.

MinuteClinics are significant to ATHN on a marginal basis
UBS thinks that on a marginal basis the retail clinic space is key area of greenfield for ATHN. By their estimates, the MinuteClinc relationship explains over 10% of their top line growth projection for ATHN in 2009E. In order words, the firm thinks the MinuteClinic business should add about 423 basis points to ATHN’s 2009E top line growth rate -- i.e., increasing the 2009E growth from 33.0% to 37.2%.

Notablecalls: Not a huge negative for ATHN but something to keep an eye on.

FYI: As background, in May 2008 athenahealth announced that it had entered into a national enterprise contract with CVS Caremark to provide its athenaCollector service to CVS Caremark’s new retail healthcare clinics initiative called the “MinuteClinics.” These MinuteClinics provide affordable and convenient walkin healthcare for patients seven days per week. There are no physicians at a MinuteClinic; instead, each clinic employs about four nurse practitioners.