Sector Update: Health Care Stocks Lower in Afternoon Trading

(Updates to include UnitedHealth's response in the seventh paragraph.)

UnitedHealth Group and Amedisys agreed to extend the deadline of their proposed merger as the deal faces scrutiny from the US Department of Justice over competition concerns.

UnitedHealth, through its Optum subsidiary, agreed in June 2023 to acquire home health and hospice services provider Amedisys for $101 per share in cash. The deal requires regulatory approval to be completed.

Last month, the Justice Department, along with the attorneys general of Maryland, Illinois, New Jersey and New York, filed a lawsuit in Maryland against the planned transaction over competition concerns.

The companies have now agreed to extend the deal's completion deadline to 10 days after a final court decision is issued in the DOJ lawsuit or Dec. 31, 2025, whichever is earlier, Amedisys said in a filing with the Securities and Exchange Commission.

The companies previously expected the transaction to close by Dec. 27, Reuters reported.

The new waiver agreement includes a regulatory break fee of $275 million, which may increase to up to $325 million if the companies fail to divest certain assets to gain approval, the latest filing showed. "Certain closing conditions relating to government approvals are no longer conditions to the consummation of the merger," according to the filing.

UnitedHealth said in a statement to MT Newswires that the company had "nothing more to share" beyond the details mentioned in the filing. Shares of the health insurer edged down 0.4% in Friday trading, while Amedisys' gained 4.5%.

"We are challenging this merger because home health and hospice patients and their families experiencing some of the most difficult moments of their lives deserve affordable, high quality care options," US Attorney General Merrick Garland said in a Nov. 12 statement. "The Justice Department will not hesitate to check unlawful consolidation and monopolization in the healthcare market that threatens to harm vulnerable patients, their families, and health care workers."

Health care stocks were lower Friday afternoon, with the NYSE Health Care Index down 0.7% and the Health Care Select Sector SPDR Fund (XLV) shedding 0.8%.

The iShares Biotechnology ETF (IBB) fell 1.1%.

In corporate news, UnitedHealth Group and Amedisys agreed to extend the deadline of their planned merger as the deal faces scrutiny from the US Department of Justice over competition concerns. UnitedHealth shares were down 0.5% while Amedisys shares jumped 4.8%.

By Mackenzie Tatananni

Amedisys stock climbed Friday after the provider of home health care agreed to waive its right to terminate a merger agreement with UnitedHealth Group, bolstering expectations that the deal will succeed despite a government attempt to block it.

Shares of Amedisys were up 4.7% to $89.97, marking a fifth consecutive days of gains.

Amedisys agreed to be acquired for $3.3 billion, or $101 a share in cash, in June 2023, but the Justice Department filed a civil antitrust lawsuit last month, saying the proposal would eliminate competition in the hospice industry. The companies have been two of the largest home health providers in the U.S. since UnitedHealth acquired LHC Group in 2023, the department said.

Amedisys said in a securities filing on Friday that it and UnitedHealth would extend the deadline for the merger until the U.S. District Court for the District of Maryland rules on the lawsuit, or until the end of 2025, whichever comes first.

TD Cowen analysts led by Ryan Langston wrote that Friday's announcement was a positive development for Amedisys.

"Given the new timeframe the waiver also provides UNH the ability to engage with the DOJ under the new administration for a potential remedy, " the analysts said. "We believe today's announcement also implies reasonable confidence by UNH they will find a resolution and complete the merger."

The analysts rate Amedisys at Hold, with a target of $85.95 for the price.

UnitedHealth Group was down 0.4% at $508.98 on Friday, leaving the shares down about 3% so far this year. Shares tumbled nearly 10% in the aftermath of the Dec. 4 killing of UnitedHealthcare CEO Brian Thompson.

The stock price is among the highest of companies in the Dow Jones Industrial Average, which is weighted according to price, so UnitedHealth's struggles have dragged down the index.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

Vaxart said on Friday it secured a $4.6 million increase in funding under a project agreement supported by the Biomedical Advanced Research and Development Authority, raising the estimated ceiling for a mid-stage trial of its oral pill COVID-19 vaccine candidate to about $460.7 million.

Vaxart shares recently were more than 18% higher, maintaining their perch near an intra-day high of $0.72 per share. More than 4 million shares have changed hands during Friday trade compared with a daily average of about 1.3 million shares.

Grid Dynamics Holdings will replace Revelyst in the S&P SmallCap 600 index on Jan. 2, S&P Dow Jones Indices said late Thursday.

Shares of the technology consulting firm recently were ahead 9.3%, easing from a nearly 15% mid-morning advance to a new 52-week high of $24.16 a share. Trading volume also was running well ahead of its daily average of 576,000 shares, with investors already exchanging more than 1.7 million Grid Dynamics shares this afternoon.

UnitedHealth Group and Amedisys extended the deadline for completing their $3.3 billion merger agreement to the earlier of Dec. 31, 2025, or 10 days after a final decision in the Justice Department lawsuit seeking to block the deal, the companies disclosed in a regulatory filing on Friday.

Amedisys shares recently were climbing about 4.6% to $89.93 each, staying within close range of their intra-day high of $90 per share. Trading volume also was stronger than usual, with nearly 1.2 million shares changing hands by midday compared with a daily average of about 545,000 shares.

US benchmark stock indexes traded lower around midday on Friday, with the tech-heavy Nasdaq leading the losses as the biggest names in the sector fell.

The Nasdaq fell 2.2% to 19,589.5, with electric vehicle maker Tesla retreating 4.5% and chipmaker Nvidia slipping 3%, making them among the biggest decliners on the exchange. The S&P 500 slid 1.7% to 5,937.1 and the Dow Jones Industrial Average lost 1.2% to 42,799.7.

All sectors were in the red intraday, with consumer discretionary and communication services among the biggest decliners apart from technology.

In economic news, data released by the US Census Bureau showed that the US advance international trade in goods deficit widened to $102.86 billion in November from $98.26 billion in October, a bigger gap than the $101.2 billion deficit expected in a survey compiled by Bloomberg. Exports rose by 4.4% in October while imports increased by 4.5%.

In the same report, wholesale inventories fell by 0.2% in November after a 0.1% increase in October. Analysts polled by Bloomberg expected a 0.1% increase.

Retail inventories were up 0.3% in November, as expected, and followed a 0.2% increase in the previous month. Excluding a 0.4% drop in motor vehicle inventories, retail inventories rose by 0.6% in the month.

In its market and economic outlook for 2025, D.A. Davidson said it doesn't see weak economic conditions forming as the new year starts, paving the way for equities to post gains.

"But we should expect volatility and recognize that equity market corrections are common," D.A. Davidson said. "We continue to recommend broad sector diversification and frequent portfolio rebalancing."

In company news, Microsoft-backed OpenAI is looking at reorganizing itself to become a Delaware public benefit corporation to raise conventional capital while maintaining a nonprofit arm, according to an OpenAI blogpost Thursday. Microsoft did not immediately reply to MT Newswires' request for comment. Microsoft shares were down 2.6% in recent Friday trading.

A filing showed Friday that UnitedHealth Group and Amedisys extended the deadline for closing their $3.3 billion merger agreement as the US Department of Justice scrutinizes the deal. Amedisys' shares were up 4.7% and UnitedHealth shares were down 0.5% intraday.

The US 10-year Treasury yield rose 2.6 basis points to 4.61%. The two-year rate fell 1.8 basis points to 4.31%.

The US Dollar Index was little changed at 108.11.

West Texas Intermediate crude rose 0.8% to $70.14 per barrel.

Gold slipped 0.9% to $2,630.70 an ounce. Silver fell 1.5% to $29.93 per ounce.