Starling Oncology (STLN) Jefferies 2024 Global Healthcare Conference summary

Recent performance and strategic focus

• Achieved record growth in value-based contract signings in Q1, with momentum expected to continue through the year, driven by industry changes and payer pressures.

• Shifted focus from rapid geographic expansion to operational efficiency, aiming for profitability and sustainable growth.

• Restructured operations to reduce SG&A and eliminate cash burn, prioritizing long-term financial health.

• Entering third year as a public company, emphasizing value proposition to payers and medical groups.

Value-based contract expansion and market dynamics

• Signed seven new value-based contracts in Q1, a significant increase from previous years, with more deals expected in 2024.

• New contracts outside California offer higher per-member rates and utilization, especially in MA-heavy markets like Florida and Oregon.

• Product mix in legacy markets includes Medicare Advantage, commercial, and Medi-Cal, while new markets focus on higher-value MA contracts.

• Payers increasingly willing to delegate more oncology spend, including Part D and radiation oncology risk.

Industry pressures and contract economics

• Top-line pressure on payers accelerates the sales cycle for value-based contracts, making specialty cost management a top priority.

• Pricing remains benchmark-driven, but the company is now more selective in contract acceptance to ensure favorable terms.

• Early months of new capitation contracts are margin favorable, with steady-state margins achieved as utilization normalizes.

• Exiting a legacy California contract due to uncompetitive pricing, but overall portfolio growth offsets this loss.