A Unique Vision of Care Jefferies 2014 Global Healthcare Conference June 3, 2014
Cautionary Statement The following schedules and statements made in this presentation constitute forward-looking statements contemplated under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management s current expectations and are subject to known and unknown uncertainties and risks which could cause actual results to differ materially from those reflected, contemplated or implied by such forward-looking statements including, but not limited to, the following: Termination or non-renewal of contracts by customers Renegotiation of rates paid to and/or by the Company by customers and/or providers Higher utilization of behavioral health treatment services by members Delays, higher costs or inability to implement the Company s initiatives The impact of new or amended laws or regulations Acts of war, terrorism or other catastrophic events The impact of increased competition on ability to maintain or obtain contracts The impact of increased competition on rates paid to or by the Company The impact of share repurchase programs Governmental inquiries and/or litigation Interest rate increases Economic uncertainties Many of these factors are beyond the control of the Company. Any and all forward-looking statements made in this presentation are qualified in their entirety by the complete discussion of risks set forth under the caption Risk Factors in Magellan s Annual Report on Form 10-K for the year ended December 31, 2013 and on subsequent Forms 10-Q. Magellan undertakes no obligation to update any forward-looking or cautionary statements. 2
Agenda Magellan Overview Key Strategic Initiatives Magellan Complete Care Magellan Rx Management Financial Highlights 3
Magellan: History and Transformation Magellan Today Healthcare Company with a focus on special population management Multi-line Specialty Healthcare Management (2006 2012) Market Leader in Behavioral Health Management (up to 2006) Building on a strong foundation to transform for the future 4
Magellan Today - Building for the Future Managed Healthcare Specialty Solutions Pharmacy Management Full Suite of Integrated Specialty Healthcare Products for Targeted Populations Complete Care 5
Agenda Magellan Overview Key Strategic Initiatives Magellan Complete Care Magellan Rx Management Financial Highlights 6
Magellan Complete Care Strategy Focused on integrated physical and behavioral health management of special populations on a state-specific basis Pursuing on a state-by-state basis through: Partnership Joint Venture Acquisition Internally Developed 7
Target Revenue Magellan Complete Care Total medical spend for targeted populations in identified states: >$50B by 2017 Target: Presence in 5-7 states by 2017, managing no less than 5% of the total medical spend, either directly or in partnerships 8
Executing on our Magellan Complete Care Strategy Florida MCC of FL (100% owned) -General Medicaid HMO -Awarded contract for a SMI specialty plan Iowa Behavioral Led Health Homes (100% owned) -Comprehensive care coordination for SMI and SED population New York AlphaCare (65% ownership) -Medicaid Managed LTC plan and Medicare plans -Selected to participate in FIDA plan Additional States -Progress on a variety of JV s, partnerships, and wholly-owned capabilities -pursuing HMO licenses in IA, NE, PA, LA 9
Magellan Rx Management Capabilities Pharmacy Benefit Management Full service traditional PBM services Pharmacy Benefit Administration Specialty Pharmaceutical Services PBA services for State Medicaid and other government sponsored programs Dispensing operations, contracting and formulary optimization programs Total Drug Management Medical Pharmacy Management Managing the cost and quality of therapeutic interventions for complex conditions covered under the medical benefit 10
Magellan Rx Management Strategy Any Drug Pills, tablets, liquids Self-injectables Infused biologics Any Site of Service Self-administered Oral or injectable, purchased via mail order, retail or other location Provider administered Physician office, hospital (IP/OP), home infusion Any Benefit Pharmacy benefit Drugs paid under the medical benefit Combining our deep PBM expertise with industry-leading Medical Pharmacy and Specialty Pharmacy capabilities, we offer a suite of clinical and cost management solutions which provide a comprehensive approach to managing the quality and cost of pharmaceutical care, for any drug, at any provider site of service, under any benefit 11
Growing Magellan Rx Management $750.0 $700.0 $712.0 $650.0 $600.0 $578.0 $550.0 $500.0 $450.0 $446.9 $516.4 $400.0 $350.0 $300.0 $324.0 $250.0 $200.0 2009 2010 2011 2012 2013 Revenue Target Magellan Rx Management Revenue: $2.5B by 2018 12
Executing on our Magellan Rx Management Strategy Commercial PBM - Went live 1/1/13 - Expanded public sector PBM capabilities to include commercial capabilities TennCare PBM - Launched 6/1/13 Partners Rx Acquisition - Full-service commercial PBM acquired 10/1/13 CDMI Acquisition -Pharmaceutical rebate and clinical management company acquired 4/30/14 Additional Organic and Inorganic Growth 13
Executing on our Magellan Rx Management Strategy CDMI Acquisition -Closed April 30, 2014 -Base purchase price of $205M ($125M paid in cash & $80M reinvested in restricted common stock) -$65M contingent payment related to 2015 rebate retention targets -$100M potential earn out ($65M related to conversion to full service PBM lives & $35M in related to 2014 & 2015 gross profit targets) Strategic fit: -Offers proven, best-in-class clinical programs & outreach services to help manage chronic conditions -Enhances our rebate management capabilities -Adds customer relationships & ability to cross-sell our PBM capabilities Remainder of 2014 Expected Results -Revenue ~$28M -Segment Profit ~$23M -Stock Compensation Expense ~$20M -Depreciation & Amortization ~$9.5M -Dilutive EPS impact ~$0.14 -Excluding non-cash items, EPS will be accretive by ~$0.50 14
Agenda Magellan Overview Key Strategic Initiatives Magellan Complete Care Magellan Rx Management Financial Highlights 15
Financial Highlights 2012 2013 Original 2014 Guidance* 2014 Guidance Updated** Revenue $3,207M $3,546M $3.6B - $3.8B $3.6B - $3.8B Cost of Care & COGS $2,400M $2,689M $2.77B - $2.93B Segment Profit $267.4M $259.4M $215M - $235M $238M - $258M Net Income $151.0M $125.3M $57M - $73M $53M - $69M EPS (per diluted common share) $5.42 $4.53 $2.00 - $2.56* $1.89 - $2.46*** *As of 12/17/13; assumes no further share repurchases. **As of 4/29/14; assumes no further share repurchases and includes CDMI. *** 2014 EPS includes dilutive impact of approx. $0.64 related to amortization of acquisition intangibles & stock comp. exp. for the CDMI acquisition 16
Long-term Growth Targets Magellan Complete Care Expansion into new geographies Additional capabilities in other populations Growth in our current states (NY, FL, and IA) Magellan Rx Management Additional scale Capabilities such as Part D and mail order Growing our customer base Growth in Core Behavioral Health and Specialty Solutions Businesses Achieve through Organic and Inorganic Means Long-Term CAGR in both Revenue and EPS of 20% 17
Capital Deployment Strategy Invest in Our Businesses Product innovation New capabilities Changing markets and customer needs Disciplined M&A Achieve MCC and Pharmacy Initiatives Consolidation opportunities to strengthen existing businesses and products New capabilities to complement/enhance current products and services From 2006-2013, deployed >$565M of capital for 5 acquisitions Deployed additional capital in 2014 for acquisition of CDMI ($125M) Return Capital to Shareholders Routinely evaluate alternatives Current authorization is $300M and runs through October 2015 $143.2M repurchased through 4/25/2014 on current $300M authorization Returned $893.2M to investors since August 2008 at an average price of $44.21 Magellan has a strong financial position $292M in cash as of 3/31/14 (less $125M for CDMI on 4/30/14), $230M z Credit Facility, and strong cash flow to use for investments in growth and capital deployment 18
Strategic Priorities Operational Execution Organic Growth in Existing Businesses Execute on MCC and Pharmacy Initiatives Capital Deployment People Resources 19
Q & A