NEW YORK (AP) – Pharmacy benefits manager Medco Health Solutions Inc. said its profit grew 10 percent in the first quarter as it started doing business with several large new clients.
Medco, the largest U.S. pharmacy benefits manager, said it handled 239.2 million prescriptions in the quarter. Its results got a boost from higher prices on brand-name drugs and from greater sales of cheaper, more profitable generic drugs.
Starting this year, Medco began handling drug benefits for retired Chrysler employees and won Coventry Health Care’s commercial insurance and workers’ compensation businesses. All three of those plans had been handled by one of Medco’s largest rivals, CVS Caremark Corp.
CEO Dave Snow touted Medco’s ability to handle Medicare drug benefits as one major reason for the client gains.
The Franklin Lakes, N.J., company said it earned $320.5 million, or 67 cents per share, in the three months ended March 27. That’s up from $291 million, or 58 cents per share, a year ago. Excluding costs from Medco’s spinoff from Merck and Co. in 2003, its profit totaled 73 cents per share.
Revenue rose 10 percent to $16.31 billion from $14.83 billion.
According to Thomson Reuters, analysts expected a profit of 72 cents per share and $15.95 billion in revenue. Analyst estimates usually leave out one-time costs.
The company said its new clients are filling more prescriptions by mail than it originally expected. Mail-order prescriptions are more profitable for the company and cheaper for its clients. Prescriptions filled by mail increased 5.8 percent to 27.2 million. Total adjusted prescriptions, which count 90-day prescriptions as three standard 30-day prescriptions, rose 6 percent from the first quarter of 2009.
Medco shares declined $2.11, or 3.4 percent, to $60.91 in afternoon trading. Jefferies analyst Arthur Henderson said the quarterly results were good, but investors were looking for news that could lift Medco stock. That would include a new share repurchase plan or news about a potential acquisition.
Medco’s competitor Express Scripts expanded its business in 2009 by buying NextRx, the pharmacy benefits management unit of health insurer WellPoint. Snow said Medco would consider a similar deal at the right price, but on Wednesday the company gave no indication that such a deal was in development.
The NextRx purchase made Express Scripts the second-largest pharmacy benefits manager, ahead of CVS Caremark.
Revenue from Medco’s Accredo Health business, which provides specialty drugs for chronic illnesses like diabetes, grew 17 percent to $2.7 billion. Specialty drugs require special handling and they are usually more expensive than other pharmaceuticals.
Medco said it has booked $4.3 billion in new business in 2010 and has renewed contracts with its largest clients. The company said it is too early to give specifics on contracts that will start in 2011, but it said it has won more contract revenue than it has lost.
Medco backed its annual profit forecast of $3.05 to $3.15 per share, or $3.28 to $3.38 per share excluding spinoff costs. On average, analysts expect $3.36 per share. The company said its second-quarter profit will be at least 5 percent greater than its first-quarter profit on a per-share basis. That implies a total of at least 77 cents per share excluding items, while analysts are expecting 81 cents per share, on average.
Date: April 28, 2010
Source: Associated Press