Retina-focused ophthalmology practices are increasingly using next-generation retinal drugs like Vabysmo® and Eylea HD®, which offer more effective and long-lasting treatments for retinal diseases and conditions. Compared to more established retinal therapies that often require monthly injections, Vabysmo and similar drugs use a dual-action mechanism that allows for less frequent dosing. With enhanced efficacy and the potential for cost savings, these innovative treatments mark a major leap forward in retinal disease management, improving patient outcomes and quality of life.
More patients are opting for next-generation drugs like Vabysmo for their extended treatment intervals, which allow them to go longer between injections. However, they also alter the timing and volume of injections that drive practice revenue. Each patient begins with a loading, or ramping, phase that requires monthly injections for four months before transitioning to a maintenance schedule: every eight to 16 weeks. These varying treatment phases create fluctuations in cash flow patterns that practices must plan for and potential investors should factor into their evaluation criteria.
Financial Statement Impact
The adoption of next-generation retinal drugs like Vabysmo and Eylea HD can have a significant impact on a retina practice’s cash flow experience. During the loading phase, which typically lasts three to four months per patient, revenue will experience a temporary uptick due to more frequent patient visits and the reimbursement differential to more established retinal drugs. This period creates an influx of billing opportunities, and the increased injections generally drive growth in both top- and bottom-line metrics for a practice.
As patients transition into the maintenance phase and require injections less frequently, the number of billable encounters per patient naturally declines, leading to reduced revenue per patient as compared to the loading phase. While fewer injections do lower operational costs, they also limit billing opportunities, bringing revenue back to a more stable, typically lower, baseline than experienced when a large cohort of patients are in the loading phase. Practices must carefully assess how these changes in treatment intervals will impact their overall revenue flow, especially when considering the high cost of these medications to effectively manage their cash flow and operational capacity.
Quality of Earnings Analysis Implications
In a Quality of Earnings (QoE) analysis, the loading phases of Vabysmo and similar next-generation treatment regimens present unique considerations that must be carefully assessed to understand their impact on a practice’s revenue quality and long-term sustainability. During the loading phase, the practice is likely to see higher-than-usual revenue per patient because of the increased frequency of injections. However, this revenue boost is typically short-lived. Understanding these fluctuations is key to evaluating how the practice’s revenue stream may stabilize over time and whether the practice can maintain its revenue levels once the initial ramp-up period is complete.
Normalizing a practice’s revenue during the loading phase can be challenging, as patients progress through different stages of treatment at varying times. For example, while a cohort of patients transitioning from the loading phase to maintenance may result in a decrease in revenue, a new wave of referrals could be entering the practice and starting their own loading phase. A thorough quality of earnings analysis would evaluate the cohort of patients migrating to the next-generation treatments to better understand where a practice stands in the cycle of revenue fluctuations. In the early stages of the transition, revenue will be above the long-term trend line as the practice reaps the benefits of the increased billing frequency for this subset of patients. Since the loading phase is temporary, the revenue normalization process should account for this peak by adjusting the revenues to reflect a more sustainable, long-term revenue pattern. Identifying, quantifying, and normalizing for these events is critical in planning for future operations.
Conclusion
In conclusion, while next-generation retinal drugs offer significant benefits for both patients and ophthalmology practices, such as improved treatment efficacy and extended dosing intervals, their adoption brings complex financial implications, particularly in the context of a transaction. The temporary revenue spikes during the loading phase, followed by the shift to less frequent maintenance injections, may alter revenue cadence and mix—requiring careful financial management and thorough analysis. Practices must navigate fluctuations in revenue, adjust for the temporary nature of the loading phase, and ensure long-term revenue projections reflect the stability of the practice post-transition.
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Contributor:
Jacob Mullen
