Medco 3Q Net Up 13%, Boosts 2009 Target; 2010 View Upbeat
DOW JONES NEWSWIRES
Medco Health Solutions Inc.'s (MHS) third-quarter earnings rose 13%, helped by
continuing strong demand for cheaper but more profitable generic drugs.
The nation's biggest pharmacy-benefits manager beat analysts' expectations and
again raised its 2009 earnings forecast to $2.80 to $2.82 a share from its July-
boosted view of $2.76 to $2.81. Medco said it expects "strong performance" to
continue for the rest of the year and projected 2010 earnings of $3.28 to $3.38
a share. Analysts' average estimate was $3.28, according to a survey by Thomson
Reuters.
Medco's results come as mounting unemployment leaves more Americans without
insurance. Medco's dominance is expected to face a challenge from Express
Scripts Inc. (ESRX), whose acquisition of WellPoint Inc.'s (WLP) drug-benefits
business is seen closing by mid-December. Medco is said to be interested in
acquiring either Aetna Inc.'s (AET) or Cigna Corp.'s (CI) PBM business, a deal
that would further reshape the landscape.
Medco's profit rose to $335.6 million, or 69 cents a share, from $295.7
million, or 59 cents a share, a year earlier. Excluding amortization costs
related to its 2003 spinoff from Merck & Co. (MRK), earnings rose to 75 cents
from 63 cents.
Net revenue jumped 18% to $14.8 billion.
Analysts polled by Thomson Reuters were expecting earnings, excluding items,
of 72 cents on revenue of $14.68 billion.
Gross margin fell to 7% from 7.4% on increased retail sales while more-
profitable mail-order volume fell 2.3%. Generic drugs made up what Medco called
a record 67.7% of filled prescriptions, up 3.3 percentage points.
Total prescription volume rose 14%.
Revenue and profit in Accredo Health Group, Medco's specialty pharmacy
segment, both rose 19%. Specialty pharmacy services can range from providing
injectable medications to one-day delivery of medications.
Shares closed at $57.58 Monday and were inactive premarket. The stock is up
54% for the past year and hit a post-spinoff high on Oct. 23.
-By Mike Barris, Dow Jones Newswires; 212-416-2330; mike.barris@dowjones.com
(END) Dow Jones Newswires
11-03-090720ET
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