Starling Oncology Q3 2026 Earnings Call Transcript

Starling Oncology (NASDAQ:STLN) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Starling Oncology reported record Q3 2026 revenue of $169.8 million, a 24% increase year-over-year, with adjusted EBITDA of $3.4 million, exceeding guidance.

The company highlighted the successful launch of Starling Nexus, a utilization management portal, which has shown strong initial results in improving compliance and efficiency.

Capitated revenue increased by 40% year-over-year, with a medical loss ratio (MLR) improving to 81%, indicating effective cost management.

The specialty pharmacy division saw a 44% increase in revenue to $109 million, driven by a higher capture rate of prescription fills and a gross margin of 24%.

Starling Oncology expanded its delegated capitation model to Oregon, covering 40,000 Medicare Advantage lives, and plans for significant growth in capitated revenue in 2027.

Management reaffirmed full-year adjusted EBITDA positivity for 2026 and provided guidance for 2027, expecting continued strong performance and growth across its business segments.

Full Transcript

OPERATOR

Hello and welcome to today’s Starling Oncology third quarter 2026 earnings call. At this time, all participants are in a listen-only mode. Later, you’ll have the opportunity to ask questions during the question-and-answer session. To register to ask a question at any time, please press star 1 on your telephone keypad. Please note that this call is being recorded, and I’ll be standing by should you need any assistance. It is now my pleasure to turn the meeting over to Min Merchant.

Please go ahead.

Min Merchant (Chief Legal Officer)

Thank you, operator, and good afternoon, everyone. Welcome to Starling Oncology’s third quarter 2026 earnings conference call. I’m Min Merchant, Chief Legal Officer, and joining me today are Dan Bernick, our Chief Executive Officer, and Rob Carter, our Chief Financial Officer. The press release announcing our results for the third quarter of 2026 is available in the investor relations section of our website, starlingoncology.com. A replay of this call will also be available on our website following its conclusion.

Before we get started, I’d like to remind you of the company’s safe harbor language included in our press release for the third quarter of 2026. Management may make forward-looking statements, including guidance and underlying assumptions. These forward-looking statements are based on expectations that involve risks and uncertainties that could cause actual results to differ materially. For a further discussion of risks related to our business, please see our filings with the SEC, including our most recent Form 10-K and subsequent Form 10-Q. This call will also discuss non-GAAP financial measures such as adjusted EBITDA, MLR, and free cash flow. A reconciliation of these non-GAAP measures to the most comparable GAAP measures is included in the earnings release furnished to the SEC and available on our website. With that, I’ll turn the call over to Dan.

Dan Bernick (Chief Executive Officer)

Thank you, Minh. Good afternoon everyone, and thank you for joining our third quarter 2026 earnings call. I’m excited to report that we delivered another quarter of record revenue of $169.8 million, an increase of 24% year over year, and adjusted EBITDA of $3.4 million, meaningfully above the top end of the Q3 range we provided on our last call. This is our second consecutive quarter of positive adjusted EBITDA, and we are reaffirming full-year adjusted EBITDA positivity in 2026.

In addition to our strong financial performance, we have a number of positive updates today on our performance including growth in capitated relationships, performance of our pharmacy, as well as strong data on utilization management effectiveness we are seeing from Starling Nexus, our recently launched provider portal. We continue to make meaningful progress in what is a pivotal year for our company as we deliver profitability, realize operating leverage from our growth and growing scale, and stabilize our balance sheet.

Let me start with an update on Starling Nexus, our proprietary utilization management portal that we announced the launch of in early August. Starling Nexus is now live for our network providers who practice in all markets where we have delegated capitation arrangements, and is the interface through which prior authorizations are submitted for UM review. This currently includes contracts previously announced on prior calls in Florida, as well as our first delegated capitation contract outside of Florida which went effective October 1, 2026, with a health plan in Oregon where we have a statewide contract for Medicare Advantage with approximately 40,000 incremental lives. We are encouraged by early data on how effective Nexus will be for implementation of our UM program for non‑employed providers.

Currently, over 300 network practices have the ability to access the platform, and we are seeing over half of first‑pass submissions adhering to our therapeutic pathways, with over 90% formulary adherence on authorizations which require substitution after initial review. In addition, our data shows we are implementing highly compliant and fast UM operations at scale, with over 99.2% compliance on over 4,000 authorizations in Florida this year alone and an average UM decision time of 13 hours after submission, which is incredibly fast by health plan standards and aligns with our mission to provide better access to care for the populations that we serve.

A major strategic goal of Starling Nexus in upcoming years is to increase access to ancillary services for our network providers to drive value for the patients they manage, as well as help grow revenue and profitability from these important services for our investors. As noted on our last call, we are now live with the first ancillary service enhancement, which is access to Part D electronic prescribing in the portal for practices that wish to select Starling Oncology as pharmacy of choice.

We’ll be engaging with network practices to help drive awareness of this fast and convenient service in Q4. This will be an incremental growth channel for our Part D business going forward. Other services on the roadmap for integration in the upcoming year include centralized clinical trials, access, and care navigation. Stepping back from Nexus, I also want to call out the performance of our capitated business. Overall capitated revenue grew 40% year over year in the third quarter, and our medical loss ratio, or MLR, improved sequentially to 81% from 85.5% in the second quarter, slightly better than we had anticipated. We believe this is yet another proof point of our ability to effectively manage oncology cost of care at scale for our patients and payer partners.

Turning to our Part D specialty pharmacy business, continued increases in the capture rate of fills written by Starling Oncology physicians was the primary contributor to year‑over‑year revenue growth in the specialty pharmacy, as the team has implemented technology‑ and human capital‑driven workflows to operationalize the ease and benefit of Starling Oncology providers and patients utilizing our captive pharmacy for their specialty medication needs.

Additionally, Starling Oncology is seeing more new patients for treatment planning services, particularly as a result of growth in capitated lives pursuant to new contracts, which is driving first‑time sales into our pharmacy as we deliver on our customer service model and overall value proposition of specialty pharmacy as a core part of our integrated care model. Revenue from Part D in the third quarter was $109 million, up 44% year over year, and gross margin was an incredible 24%.

We are in a unique position to manage drug margin through our scale procurement, robust internal analytics on pricing, and active utilization management efforts. Rob will provide more detail on these efforts in a few minutes. While this was an exceptional quarter for Part D margins, we expect margins to likely normalize in the high‑teens percent range long term. Turning to our pipeline of new contracts, we have a number of positives to highlight. Capitated revenue and capitated lives are both up year over year, 40% and 10% respectively, driven by the growth we’ve experienced in both our narrow and delegated relationships across states. On October 1st, we celebrated a milestone for Starling Oncology by starting our first delegated capitation contract outside of Florida in our Oregon market through a statewide health plan relationship covering approximately 40,000 Medicare Advantage lives.

In Florida, we now have a fully contracted statewide provider network ready to serve any payer that we partner with, and we have several additional opportunities in our pipeline with new health plan partners as we look to 2027. We continue to serve three anchor health plan partners through delegated capitation across five counties as of this call and, for reasons unrelated to Starling Oncology performance, will not be immediately expanding statewide with these partners.

Looking forward, we continue to anticipate capitated revenue growth of 100% in 2027 versus 2026, and known addressable opportunities in our current 2027 pipeline exceed $1 billion in annualized spend, including several high‑quality opportunities outside of our current five states. While we will not execute on 100% of the addressable pipeline, it highlights the increasing demand for our services and ongoing capability of Starling Oncology over the next several years while mitigating customer concentration within any one market or health plan partner.

To wrap up, in our third quarter we exceeded our guidance on adjusted EBITDA and set new records for total revenue and Part D growth for our business. We expanded our delegated capitation model to a new state while continuing to reduce MLR towards the lower end of our guided range, and we are well positioned to deliver on full‑year adjusted EBITDA positivity for 2026 within our prior guidance. We are seeing tremendous early results from Nexus in terms of network provider performance on formulary adherence, and we are just starting to tap into other ancillary service opportunities in the network with integration of e‑prescribe that will position this platform well to drive tremendous value for Starling Oncology and our investors in upcoming years.

With that, I’ll turn the call over to Rob to discuss our financials in more detail.

Rob Carter (Chief Financial Officer)

Thanks, Dan, and good afternoon everyone. On the call today I will review our third quarter financial results, touch on our balance sheet and cash flow, and close with our guidance and outlook. Total revenue for the third quarter was $169.8 million compared to $136.6 million in the prior‑year period, representing 24.3% year‑over‑year growth. Patient services revenue, which includes both our capitated and fee‑for‑service arrangements, was $60 million, representing 35.4% of total revenue.

Within patient services, capitated revenue increased 39.5% year over year to $28.7 million, while fee‑for‑service revenue decreased 21% to $31.3 million. I’d like to provide additional context on the decline of fee‑for‑service. While our platform continues to grow organically, as demonstrated by a 9% increase in underlying visit volumes from the prior year, in the third quarter we have experienced a shift in segment economics. Historically, our narrow network capitation contracts included a downside risk mitigant that carved out certain drugs based on their FDA approval dates. These drugs were billed on a fee‑for‑service basis and accordingly reported as fee‑for‑service revenue in our public disclosures.

Over time, this billing process became administratively burdensome for both Starling Oncology and our partners. In 2026, as we expanded several of these partnerships, we took the opportunity to eliminate the carve‑out construct and replace it with PMPM escalators and, in some instances, increase the PMPM rate to cover the previously carved‑out drugs. These contract changes account for approximately 40% of the year‑over‑year decline in fee‑for‑service revenue, along with the more conservative reserve methodology we’ve discussed previously.

Specialty pharmacy revenue was $109.3 million, representing 64.4% of total revenue compared to 55.6% a year ago and growing 44% year over year. The growth in pharmacy is primarily the result of improving the attach rate of prescription fills to visits occurring in Starling Oncology clinics across both fee‑for‑service and capitated populations. Additionally, we saw modest growth in the number of overall clinic visits for treatment planning, particularly among newly branded and capitated populations, which contributed to more opportunities to capture oral and subcutaneous treatment plans within our pharmacy.

Total gross profit for the quarter was $30.7 million compared to $18.9 million in the third quarter of 2025. Overall gross margin was 18.1% compared to 13.9% in the prior year, an improvement of roughly 420 basis points, primarily driven by our specialty pharmacy business. Taking a closer look at specialty pharmacy, gross profit was $26.4 million, more than double the $12.8 million in the third quarter of last year. Gross margin was 24.2% compared to 16.9% a year ago and 21.6% in the second quarter.

The quarterly margin performance is reflective of year‑over‑year and consecutive incremental progress in procurement and drug utilization management, and also included certain rebates and favorable drug‑specific price movement that we do not expect to reoccur in future quarters. As such, we project pharmacy gross margin will normalize in the high teens going forward in the fourth quarter of 2026 and beyond. Looking ahead, Phase Two of the Inflation Reduction Act will impact both costs and reimbursement for an additional number of oral drugs in 2027 relative to one primary drug in 2026. Overall, we expect a reduction in specialty pharmacy revenue of less than 5% and a reduction of gross margin of less than 50 basis points from all IRA‑related pricing activity, consistent with the minimal gross profit impact we observed in 2026 from the single impact drug.

Our ability to manage any pricing volatility introduced by the IRA is enhanced by multiple factors including our overall scale and diversification across multiple therapeutics and payor types in our specialty pharmacy; our tight control over pharmaceutical formulary and ability to implement clinically appropriate substitution among disease states; our limited drug inventory and tightly managed supply chain which allows us to maneuver quickly in reaction to market pricing changes; and finally our overall analytical and operational pace which allows us to optimize decisioning and time to market in the pharmacy landscape. As a result, we expect consolidated specialty pharmacy margins for the full year 2027 should be consistent with the guidance provided earlier on this call. We do not expect any incremental IRA impact to capitation or fee‑for‑service as the IRA has not yet expanded to include the Part B medications on which we take risk or buy and bill in our patient services segment.

Turning to patient services, gross profit was $3.8 million, or 6.3% of patient services revenue, compared to $5.6 million, or 9.3%, a year ago and up from $2.1 million in the second quarter. The year‑over‑year decline reflects the higher MLR on our growing capitation business and lower fee‑for‑service revenue driven by the conservative accrual policy in 2026 which I had previously commented on. MLR in the third quarter was 81% compared to 85.5% in the second quarter and 67.8% a year ago, slightly better than we had anticipated.

As we guided, we do expect some movement in this metric quarter to quarter as utilization and accrual patterns can have some variance, particularly when we have contracts in various states of ramping. The reduction in the third quarter is related to the expanded narrow network contract we mentioned earlier, the workflow efficiency we gained through the Nexus portal, as well as our centralized UM protocols. We expect some improvement next quarter and a return to 85% to 90% MLRs in 2027 with the onboarding of new lives.

As a reminder, Starling Oncology does not take risk for care that does not flow through our own UM authorization process or is delivered at one of our own clinics. This gives us significantly more real‑time insight and control over our utilization patterns relative to many other value‑based arrangements in the market, particularly those that cover total cost of care or include shared savings driven across wide and less‑coordinated networks. Adjusted EBITDA for the third quarter was a positive $3.4 million compared to a positive $0.2 million in the second quarter of this year and a loss of $3.5 million in the third quarter a year ago. The increase over prior year and outperformance relative to guidance was primarily driven by direct margin of specialty pharmacy, including the benefit from our growing scale, increased buying flexibility in part afforded by a recapitalized balance sheet, deployment of increasingly sophisticated supply chain analytics, as well as several extraordinary rebates and economic windows that we were able to recognize in the quarter.

We ended the quarter with $36.9 million in cash and cash equivalents compared to $41.1 million at the end of Q2 and $33.6 million at year‑end 2025. As we discussed on our last call, in July we completed our refinancing with EverMed, replacing the senior secured convertible note with a new $75 million term loan. In August we also issued a $25 million asset‑based revolving credit facility with FLR Healthcare, against which $5 million was drawn at the end of the third quarter.

This revolving facility is secured by our accounts receivable and is intended to provide low‑cost liquidity for general corporate purposes including working capital usage, including our quarterly drug buy‑in activity. Both of these debt facilities appear for the first time at the end of the third quarter on our balance sheet, the EverMed facility appearing under long‑term debt and the revolving facility under short‑term debt. At quarter end, long‑term debt was $72.5 million compared to $77.4 million at year‑end.

Operating cash flow for the nine months was positive $19.9 million compared to a use of $27.8 million in the same period last year, reflecting stronger profitability and favorable working capital including an increase in accounts payable resulting from an approved supply agreement we signed with our primary wholesale distributor earlier in 2026. Free cash flow for the third quarter was approximately $10.7 million, bringing free cash flow for the nine months to $20.2 million compared to a use of $26.9 million in the same period last year.

Turning to guidance, for the full year we have updated our previous guidance and now expect revenue of $650 million to $660 million, including approximately $110 million of capitated revenue, gross profit of $107 million to $110 million, adjusted EBITDA of $4 million to $6 million, and free cash flow of $5 million to $10 million. We expect adjusted EBITDA in 4Q of $3 million to $5 million. I’m pleased with the third quarter results and the progress we have made across the company so far this year. Going forward, we are focused on continuing to prove out the promise of our delegated model in multiple markets and populations, continuing to manage MLR within our expected range, and progressing towards sustained positive adjusted EBITDA and free cash flow. Turning it back to Dan for his closing remarks.

Dan Bernick (Chief Executive Officer)

Thank you all for joining us this afternoon. In summary, in our third quarter we exceeded our guidance on adjusted EBITDA, set new records for total revenue and Part D growth for our business, and continue to demonstrate strong MLR performance on our capitated relationships even amidst significant year-on-year expansion. We expanded our delegated capitation model to a new state and we are well positioned to deliver on full-year adjusted EBITDA positivity for 2026.

We are seeing tremendous early results from Nexus in terms of network provider performance on formulary adherence and are just starting to tap into other ancillary service opportunities with integration of ePrescribe that will position this platform well to drive tremendous value for Starling Oncology in upcoming years. This was a quarter of real progress for Starling Oncology with higher revenue, a stronger pharmacy business, a strengthened balance sheet and positive adjusted EBITDA.

Our focus is now on building on this momentum as we head into 2027. Before I turn it over to the operator for questions, I want to thank our patients for putting their trust in us, as well as our clinicians and teammates across Starling Oncology for their continued dedication to excellent patient care. With that, operator, we’re now ready to take questions.

OPERATOR

Thank you. If you’d like to ask a question, please press star one on your keypad. To leave the queue at any time, please press star two. Once again, that is star one to ask a question. We’ll pause for just a moment to allow everyone the chance to queue. Our first question will come from Matthew Shea with Needham. Your line is open.

Matthew Shea (Analyst at Needham)

Hey, good evening. Thanks for taking the questions. You know, it seems like a lot of positive things going on here, but I think unfortunately people are kind of hung up on the change in the capitated revenue outlook. So correct me if there’s anything other than just immediately not expanding statewide with partners that drove the delta. And then I guess if we take a step back, like what did you learn from this year’s launches that are now part of the standard implementation playbook?

And how does that impact how you forecast capitated go-lives going forward?

Dan Bernick (Chief Executive Officer)

Yeah, hey Matt, thanks for the question. You are correct. I mean, that was the change in the capitated revenue guide for this year. However, again, we’re still guiding to 100% growth in 2027 versus 2026 in capitated revenue and did prove that we can expand the delegated capitation model outside of Florida with a new contract start in October of this year. So overall, I think capitated revenue continues to be a huge strong point in terms of growth for this business going forward.

In terms of the Florida expansion not going statewide this quarter, again, that was mainly due to an operational issue that was kind of out of our control, not a care model or savings-related issue. So just a contract timing thing more than anything. So, you know, I think going forward again we’ll proceed, you know, conservatively and cautiously in terms of guiding to contract start dates, but, you know, unforecast things happen.

Matthew Shea (Analyst at Needham)

Okay, makes sense. And then I guess if we think about now the target for capitated revenue next year being 220 versus the 300 prior, is that still just the same not getting that statewide expansion or any increased conservatism built into there? And then as we think about that delta, is that 80 million difference still on the table and it’s just moved out a couple quarters or how should we think about getting to that 300 number over time?

Rob Carter (Chief Financial Officer)

Hey Matt, it’s Rob. We plan to issue full guidance in Q1 and, similar to prior years, our guidance philosophy is to only include signed or imminent contracts. The nature of the business is that the pipeline is constantly in flux and, as Dan called out in his prepared remark, the pipeline is incredibly robust and so ultimately we don’t expect at a high level a significant departure from current consensus for 2027.

Matthew Shea (Analyst at Needham)

Okay, got it. And then, all right, a couple more fun ones I guess talking on Nexus. So sounds like a lot of good things there but wanted to hit on e-prescribing when this goes live this quarter. So does every network provider get it automatically or is it opt-in by practice? And really what I’m trying to get at is many independent oncology practices, to our knowledge, kind of run their own in-office dispensary so routing Part D scripts to you could take away revenue for them.

So curious what’s the incentive for them to participate? And then if we think longer term, could participation in Nexus, including the e-prescribing component, become a requirement in network contracts as they renew? Or do you view that as too disruptive to the network?

Dan Bernick (Chief Executive Officer)

Yeah, so I guess starting with the first questions, you are right. As we previously commented on, the initial addressable portion of the network will be practices that do not have their own in-office pharmacy, although any provider in the network has access to it if they wish through access to the portal. But that’s the practices we expect would be the targets for utilization of Part D fills. We believe over time there is expanded opportunity both through access to things like limited distribution drugs as well as expanding market channels that practices might not have access to.

But those are things that we’ve not guided to in terms of timing of integration on. So there will be additional use cases over time. But for this initial first quarter, those are the practices that we’re targeting for fills. I don’t think, related to the second question, I don’t think it’s something that could be mandated for network providers at any point in the future. But again, we see it as incremental growth and there are other ways that, just to comment on that, we can expand opportunities for practice economics on it over time.

Matthew Shea (Analyst at Needham)

Okay, that’s helpful. And then last one for me, just thinking about the other side of the dispensary business and obviously you don’t take Part D risk today, but as we think about oncology innovation shifting towards orals and self-injectables, are any plans asking you to take Part D risk? Is that an idea you would even entertain? And if so, what does that do to your current fee-for-service business? And how do you kind of think about the potential change in the margin profile if you were to go about that?

Dan Bernick (Chief Executive Officer)

Yeah, I would say that regarding the first question, in general, no, we don’t frequently get asked to take Part D risk. And I think that’s because some of our customers themselves do not take Part D risk that are not plans. And then for the health plans, a lot of them work with PBMs and so this is not something that appears to be an urgent ask on their part. That being said, do we have the ability to take Part D risk over time? Absolutely. And, you know, there’s the same levers of control there that you would have on Part B as far as being able to provide value-based solutions to patients.

So, you know, will we ever take Part D risk? Possibly at some point in the future it becomes more of a priority for our payer partners. And could you read the second question please?

Matthew Shea (Analyst at Needham)

Yeah, no, I mean it sounds like it would be a long ways out anyways. But just like how you think that would ultimately impact the fee-for-service business? Like does that get cannibalized? And then would taking Part D risk result in a dispensary business that carries a lower long-term margin or do you think margins could hold in line with what you’ve been producing?

Dan Bernick (Chief Executive Officer)

I think margins would hold in line. And this wouldn’t cannibalize our fee-for-service revenue because it’s broken out separately. So I don’t see it as a cannibalization issue.

Matthew Shea (Analyst at Needham)

Okay, great. Appreciate all the color, guys.

OPERATOR

Thank you. Our next question comes from David Larson with BTIG. Your line is open.

David Larson (Analyst at BTIG)

Hey, congratulations on the good quarter here. So for the capitated revenue, that’s entirely timing, is that correct? And when we say like operational things, I would imagine there’s something potentially on the health plan side where there are delays in implementing, but that relationship with that plan is great. And it’s just a timing thing, right?

Dan Bernick (Chief Executive Officer)

Yeah, this is all timing-related and again it’s such that, as Rob reiterated earlier, we don’t see it as meaningfully changing what we would expect 2027 to look like from a consensus perspective at this point. And again, I think the other key message here is continue to grow the model outside of Florida; we don’t have significant customer concentration. So, you know, I’m sure this is not great news for a lot of investors. At the same time it’s something that is not meaningfully altering our growth prospects or financial performance.

David Larson (Analyst at BTIG)

Great. And then Rob and Daniel, nice work on the EBITDA. Should we expect continued progression there, like continued growth in EBITDA in 4Q and beyond in 2027?

Rob Carter (Chief Financial Officer)

Yeah, we give a range of positive 3 to 5 in the fourth quarter as we described. We had a particularly strong pharmacy margin in the third quarter, some of which is specific to in-quarter rebate performance from the buy-ins that we do. There’s also some pricing movement that we took advantage of and so we don’t expect it to stay quite at 24%. But still, even without those timing-related items, we would still be north of 20% and so yes, you can count on that going forward.

We also have a couple of contract launches in the fourth quarter. Dan mentioned earlier one that went live in October specifically. And so yes, there will continue to be progression.

David Larson (Analyst at BTIG)

Okay. And then I know we’ve talked a lot about this in the past, but for some listeners, can you talk about your visibility into the claims data? How current are your, like, I guess costs that you’re booking in your COGS? And how is trend? Thanks very much.

Rob Carter (Chief Financial Officer)

Yeah, so it’s nearly real time. And again this is one of the beauties of the delegated model is that we own the claims processing process. And so the only time we’re in a position where we need to accrue IBNR, if you will, is at the start of a new contract for the first several months. So there is an element to our accrual process that includes that. And of course there’s going to be fluctuation up and down as real-time claims are processed, but it’s not a significant portion of our claims expense like you would experience perhaps with some of our competitors or at a managed care plan.

So the overall trend right now is quite positive, down to 81% overall MLR for the quarter. That is a fantastic result. I think it’s evidence that the model is working, that Nexus is playing a role, and so we’re excited about that direction.

David Larson (Analyst at BTIG)

That’s great. Then how is trend relative to your expectations?

Rob Carter (Chief Financial Officer)

Yeah, it’s coming in below the expectation. The 81% that we saw in the third quarter was a little bit below our own expectation—below in a positive way. I just want to clarify below meaning better than expectation of 85%.

David Larson (Analyst at BTIG)

Okay. And then just one last quick one. The dispensing revenue growth—fantastic. Phenomenal. Please do not ever bear risk in Part D. Nobody does. No plan expects you to ever. And it’s fantastic growth. Just how sustainable do you see that? Please. Thank you very much.

Dan Bernick (Chief Executive Officer)

We see that as incredibly sustainable. As we’ve talked about over the past couple years, you’ve had a couple of stepwise increases in growth related to medical recapture and certain mitigation of leakage, which is reflected in our investor deck in terms of the scripts filled per thousand encounters continuing to improve. And as I mentioned earlier, I think there’s a couple of really exciting opportunities as we go into 2027, both with improving the channels through which we fill with PBMs, which we’re working on, as well as additional use cases for our MSO providers in terms of value we can provide to them on Part D. So that all follows on the ePrescribe integration from this quarter. So that will continue to be a core part of our business and growth story as we go forward.

Ed

Okay. Congrats on a great quarter. I’d like to say I was surprised at the good results, but I sort of wasn’t. So nice work and I’ll hop back in the queue.

Rob Carter (Chief Financial Officer)

Thanks, Ed.

OPERATOR

Thank you. Our next question will come from Yuan Xi with B. Riley. Your line is open.

Yuan Xi (Analyst at B. Riley)

Thank you for taking our questions. The first one is in your corporate deck you talked about this 30% capitated revenue in 2028. With this updated capitated revenue guidance for 2027, is that still your current thinking of this revenue mix in 2028?

Rob Carter (Chief Financial Officer)

Yeah. Really no change to that. So that 30% represents the percent of total revenue and no, this doesn’t have any meaningful impact on that.

Yuan Xi (Analyst at B. Riley)

Got it. And then if a healthcare insurance company has developed their own or internal utilization management platform, would they still sign a capitated contract with Starling, especially in a delegated network model?

Rob Carter (Chief Financial Officer)

Yes, absolutely. I mean that is the core part of the delegated term. It’s delegation of utilization management, claims, and network. The utilization management piece being the use of our services for utilization management, including the portal. So that would no longer require the health plan to have their own platform for that.

Yuan Xi (Analyst at B. Riley)

Got it. Does that constitute as a conflict that they already have a utilization management platform? Do they still need to use yours?

Rob Carter (Chief Financial Officer)

Yeah, I mean that’s part of the value we bring is obviously superior adherence to value-based pathways and savings for both patients and our payers through utilizing our utilization management program. And then there’s obviously efficiencies as well for a payer by working with us in the sense that they don’t have to manage their own staff and platform around utilization management.

Yuan Xi (Analyst at B. Riley)

Got it. And maybe just to clarify, for this capitated revenue in 2026 and 2027, currently for 2026 it’s $110 million. Do you anticipate to double to 220 in 2027, or still on track to reach this $300 million capitated revenue in 2027?

Rob Carter (Chief Financial Officer)

Yes. So again, we plan on issuing full guidance in Q1. Again, the philosophy will not change, and I think the overarching message here is that we don’t expect a significant departure from our current consensus.

Yuan Xi (Analyst at B. Riley)

Got it. Thank you for taking all questions. I will take.

OPERATOR

Thank you. Our next question will come from Ben Hayner with Lake Street. Your line is open.

Ben Hayner (Analyst at Lake Street)

Good afternoon, gentlemen. Thanks for taking the questions. First off for me, just on the billion-dollar pipeline being obviously quite robust, is that all delegated Medicare Advantage, or what’s sort of the mix there? And then how is that pipeline figure tracked? What did that look like at the beginning of the year?

Dan Bernick (Chief Executive Officer)

Yeah, so in regards to the first question, I mean that pipeline exists across almost every market and is a mix of primarily delegated—that’s health plan-related capitation contracts—as well as some opportunities with medical groups that take risk and have an RKK. So it’s a mix, but I’d say it skews towards delegated capitation opportunities, again given the much larger TAM and opportunity that exists in all markets for that product. And then you broke up a little bit at the end there, Ben.

Can you repeat the second question?

Ben Hayner (Analyst at Lake Street)

Just how is—you know, it’s a billion dollars now—what did it look like at the beginning of the year? You know, how has it tracked over the course of 2026?

Dan Bernick (Chief Executive Officer)

I see, yeah, that’s a great question. So I’d say that overall how we would comment on that is that it continues to increase, and I think that’s proven out by the fact that we now have our second market with a delegated cap contract. That pipeline has continued to grow and become more robust over time, and that’s the total addressable opportunities that we’re currently in conversation with. Again, just to level set, a portion of those will actually become effective in 2027, not 100% of the billion. But I think the point is that the opportunity set across all of our markets and in new markets as well continues to grow.

Ben Hayner (Analyst at Lake Street)

Okay, great. And then on the specialty pharmacy side, you know, it’s at least a couple quarters now where you’ve called out being able to take advantage of favorable price movements and rebates, and that’s had the benefit on the gross margin there. I mean, it would seem like there would always be those sorts of opportunities—that they won’t completely go away. So, I mean, yeah, I understand the high teens being where you would like things to be at, but I could also see it consistently coming in ahead of that.

I mean, how should we be thinking about that?

Rob Carter (Chief Financial Officer)

I don’t dislike the way that you frame that. So there are generally always opportunities for us both on the buying side and, you know, particular windows of price movement for us to take advantage of. What we can’t predict more than, you know, I would say a quarter out are the magnitude of those opportunities. And so certainly there is an opportunity to have upside to that high-teens percentage. But that’s certainly where we’re comfortable guiding going forward.

Ben Hayner (Analyst at Lake Street)

Okay, that makes sense. Just wanted to check on that. I’ll take the rest of them offline. Thanks for taking the questions, gentlemen. Congrats on the quarter.

Rob Carter (Chief Financial Officer)

Thank you.

OPERATOR

Thank you. That does bring us to the end of our Q and A session. I’d now like to turn the conference back over to our presenters for any final or closing remarks.

Dan Bernick (Chief Executive Officer)

Thanks so much. Just wanted to thank all of our analysts for the thoughtful questions, as well as investors for continuing to follow our story, and the patients that we serve for continuing to trust us with their care. We’re really excited about this past quarter and the results that we showed, and look forward to providing further updates on growth of the business as we move forward into 2027. Thanks.

OPERATOR

Thank you. That brings us to the end of today’s meeting. We appreciate your time and participation. You may now disconnect.

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