Tivity Health Shares Slammed Amid Competition Concern

Tivity Health Inc TVTY plunged more than 30 percent Monday after its largest customer, UnitedHealth Group Inc UNH, expanded its competing Optum fitness benefit program for seniors on the Medicare Advantage plan.

The program is seen to rival Tivity’s SilverSneakers for clients on Medicare Advantage, Medicare Supplement and Group Retiree plans, striking the firm’s core business tailored to 50-and-up clients.

However, SilverSneakers will remain the exclusive fitness program provider for groups in the 11 affected markets, and Tivity will retain its partnership with UnitedHealth on its Prime Fitness facility access program, according to a mid-day note by Piper Jaffray.

“Per TVTY management, this represents no change to the terms of the UNH agreement recently negotiated, and the relationship remains excellent,” Piper Jaffray analysts Sean Wieland and Nina Deka wrote. “In our view, this news does not impact FY18 numbers; however, it does represent an incremental risk to TVTY's pricing power in the market.”

Although UnitedHealth didn't react much to the news, about 2.5 million shares of Tivity traded by early Monday afternoon, a rate nearly six times that of an average trading session. At time of publication, shares were valued at $30.95.

Notably, the stock had rallied 20 percent on Oct. 27 on strong guidance despite weaker-than-expected third-quarter results.

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